Carlsbad Schools:Budget Crisis

“… it's easy to cut education because it's a latent form of value -- it pays sometime in the future -- just like our children. Innovation requires the development of new capabilities. Imagine taking your kid out of second and third grade because you're cutting costs and expecting him to do well in the fifth grade. Isn't that what we are doing?”

- Jeff DeGraff, professor, University of Michigan

Current CUSD Status• As of First Interim report, current funding deficit is $7.8M• 83% of CUSD revenue comes from single source - local property taxes• Lower property values have reduced CUSD revenue 20%• Student population has grown 6% since 2005 but has stabilized at 11,040

First Interim Report for 2011-12

Lowest CUSD Funding Levels since 2005

• CUSD revenues have declined since 2008. Current projections on par/below 2005 funding levels, while student population has grown 8%.• Expenses and cost of doing business have increased in correlation with API increases.• Budget reserves have been exhausted leaving no ability to bridge future deficit.

CONCLUSION: 2013-14 projection indicates draconian expense cuts leading to a potential catastrophic drop in service levels to students. These cuts will jeopardize future API growth, graduation rates and student competitiveness.

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14Revenue ($M) 71.6 81.5 86.1 89.3 84.1 82.6 73.2 71.7 68.8Expense ($M) 72.1 78.4 81.6 82.5 83.4 84.9 83.1 81.8 68.8Students 10,178 10,268 10,479 10,290 10,404 10,593 11,044 11,100 11,100

60.0

65.0

70.0

75.0

80.0

85.0

90.0

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

Revenue ($M)

Expense ($M)

Projected $13.8M in cuts!

Revenue per student

• Note: CUSD revenue per student is on average 8-10% lower than Oceanside and Vista school districts. Those school districts receive more revenue for federally-funded programs.

Year CUSD California Unified Average

California All School Districts

Average

2009-10 $8,084 $8,717 $8,801

2007-08 $8,216 $8,984 $9,115

2004-05 $6,659 $7,569 $7,658

Per Student SpendingYear CUSD California Unified

AverageCalifornia All

School Districts Average

2009-10 $8013 $8,885 $8,955

2007-08 $7,782 $8,937 $9,045

2004-05 $6,707 $7,431 $7,523

• CUSD spending/student has been in alignment with other schools in California

Average Teacher Salary

Over a 20-year period earnings are lower in Carlsbad than in Capistrano, Saddleback, Irvine, Valley Center-Pauma, and San Marcos.

Budget Cuts• CUSD has cut $2.8M. As of Feb 8th, trustees approved addt’l $1.4M in cuts. Leaving

current deficit of $6.4M to balance budget.

District has weathered storm on reserves for last 3 years.

• Cuts have included: increased class ratios in 1st - 3rd grades, 37 staff reductions (temporary contracts not renewed, retirements & leaving open positions unfilled), cuts to administrative positions, increased class ratios in high school, reduction of special education staff, cuts to travel and conference, and more.

• School closure advisory committee has been formed. Currently reviewing the impact of closing Buena Vista Elementary and Carlsbad Village Academy.

• Admin layoff notices have begun to be sent. Projected 116 teacher layoff notices would be necessary to close budget gap. (513 teachers currently employed)

CUSD restricted in ability to diversify revenue streams

• Unlike other public government entities or private businesses, when the cost of doing business grows, schools are unable to increase fees for their services.

• The California Supreme Court wrote, "Under the California Constitution … access to public education is a right enjoyed by all — not a commodity for sale," they ruled in Hartzell vs. Connell in 1984. "Educational opportunities must be provided to all students without regard to their families' ability or willingness to pay fees…. This fundamental feature of public education is not contingent upon the inevitably fluctuating financial health of local school districts. A solution to those financial difficulties must be found elsewhere." (ACLU of Southern California is currently pursuing legal action for charging student fees for extracurricular programs.)

What exactly does it cost to have “world-class” schools?

CUSD *Academic Performance Index (API) Growth follows Revenue

$M 2005-6 2006-7 2007-8 2008-9 2009-10 2010-11

Revenue $71.6 $81.5 $86.1 $89.3 $84.1 $82.6

CUSD API 828 831 846 858 859 867

* API – Measurement of academic performance and progress of individual schools in California

Similar API Trending In Neighboring Districts

District 09-10 Rev $M 2009-10 API # of students Rev/Student

Cardiff Elem $7.4 931 749 $10,342

Coronado Unif $24.8 888 3,236 $8,307

Del Mar Elem $40.9 961 4,072 $10,034

Rancho Santa Fe Elem

$10.8 946 664 $16,203

Encinitas Union $47.0 905 5,275 $8,907

Oceanside Unif $157.2 773 19,006 $8,273

Poway Unified* $241.9 875 32,556 $7,430

Vista Unified $187.6 785 21,559 $8,701

Ramona Unif $49.1 809 6,074 $8,080

Carlsbad Unif $84.1 859 10,404 $8,084

*Poway Unified is the only exception .

• A 1996 study of the Dallas Independent School District, by Kathy Hayes and Lori Taylor (both of the Federal Reserve Bank of Dallas), suggests that “property values reflect student test scores but not school expenditures. In other words, consumers in this study valued the outcomes and not necessarily the inputs.”

• From an Oxford Journals study published in the Quarterly Journal of Economics. Author

Sandra E. Blacks of the Federal Reserve Bank of New York states: "I find that parents are willing to pay 2.5 percent more for a 5 percent increase in test scores.“

• A 2006 study abstract titled, “Educational Outcomes and House Values: A Test of the Value

Added Approach” by David Brasington and Donald R. Haurin, ends with this conclusion: “An increase in test scores by one standard deviation…raises house prices by 7.1 percent.“

• According to the 2010 National Association of REALTORS Profile of Home Buyers & Sellers, 25% of home buyers listed school quality and 19% listed proximity to schools as deciding factors in their home purchase.

API Growth & Home Values

Regional & Business Impact“In general, tax rates have little effect on innovation investment, the growth engine of economies, while education levels have a strong correlation,” Jeff DeGraff, professor of Mgmt & Organizations at the Ross School of Business at University of Michigan.

Source: “It’s Education, Stupid (Not Taxes), November 28, 2011, Huff Post Education bloghttp://www.huffingtonpost.com/jeff-degraff/its-education-stupid-not-_b_1111398.html

Theoretically, what effect could having underfunded and under-performing schools have on local businesses?

•Poor performing schools would be a direct hindrance to hiring out of area employees:

• Undesirable classroom ratios - 32:1 (grades K-3) 36:1 (grades 4-8) 38.5:1 (grades 9-12) • Declining API scores

•Property values would be negatively impacted by a weakened school system, thereby creating a greater inventory of less desirable neighborhoods.

•Existing employees would leave for better school districts.

•Carlsbad education would not be seen as competitive.

• Entrepreneurs and corporations would not give Carlsbad serious consideration for establishing business locations.

Regional & Business Impact

CUSD Parent & Community Budget Task Force

Founded October 2011

Our Mission

The CUSD Parent & Community Budget Task Force was formed to educate the Carlsbad community on the on-going Carlsbad Unified School District budget crisis.

Our mission is to identify new non-traditional revenue streams to prevent further class size increases and enable our students to receive a high quality education in world class schools.

Task Force StrategiesBusiness/ Revenue Committee• Meeting with local industry leaders to create

awareness of the crisis• Soliciting ideas to identify potential non-

traditional revenue streams for CUSD– Advertising/Corporate Naming Rights/Sponsorships– Revenue-sharing events– Explore building apps

• Collaborating with Carlsbad Educational Foundation

• Soliciting in-kind donations to replace purchases

• Exploring ways to maximize “human capital” in CUSD

City Committee• Meeting with local civic leaders to create

awareness of the crisis• Helping foster stronger relationships between

local government and schools• Soliciting ideas to identify potential non-

traditional revenue streams for CUSD– One-time loan– Transient Occupancy Tax– Parcel Tax

• Exploring departmental synergies for possible cost-savings

• Exploring real estate opportunities

Social Media• Creating content relevant to the mission• Educating our community on current events• Providing a forum for discussion• Offering calendaring of events for members• Promoting possible revenue-sharing

opportunities• Selling merchandise related to the mission, e.g.,

I(heart)Carlsbad Schools buttons• Soliciting tax-deductible donations for the

restricted fund established at Carlsbad Educational Foundation

Legislative Committee• Meeting with political action groups to gain

understanding of ballot initiatives for members• Helping to coordinate:

• Signature gathering• Holding rallies• Holding informative house parties to

inform community how to organize for elections or possible measures

• Preparing phone banks, letter writing campaigns and petitions

“There are two important tenets that I’ve learned in my career: First, always face reality, meaning don’t do business on hope. Second, in business, it’s all about having great people and building a culture and environment where talented people can come, stay, and perform well.”

Gregory Lucier, CEO, Life Technologies

Let’s keep Carlsbad a culture and environment where talented people will

come to live and work, stay, and perform well!