The fiscal year of July 1, 2020, to June 30, 2021, dealt a blow to Orange County’s 28 school districts thanks to the COVID-19 lockdown by California Gov. Gavin Newsom. The coronavirus was unique in that very few school-aged children were impacted by the pandemic, but schools were closed all the same. The pain was not only felt by kindergarteners to senior high school students, but by their parents as well.
And the Zoom school experience also had an impact on the financial status of the districts. Overall, the total unrestricted net deficit (UND) for all 28 districts rose by $366 million. Assuming a population of 3.2 million, this works out to $114 per person in new debt for Orange County’s residents.
Santa Ana Unified increased its UND by $337 per capita, digging deeper into the last place position. The only districts to come close to such a drop were Huntington Beach Union High at $215 and Los Alamitos at $208.
Only six of the districts were able to improve their fiscal status by actually lowering their unrestricted net deficits. Magnolia Elementary reduced its UND by $19.4 million, the largest of the upward movers, nearly five times the movement of the average for the other five districts. But it did so by reducing its net investment in capital assets by $25.4 million, while there was only a reduction in the actual assets of $9.2 million and no corresponding increase of $16.2 million in new borrowings. The jump up of eight places is currently a mystery which most likely is due to a reporting error in its financial statements.
Like many school districts, Fountain Valley is experiencing declining enrollment. So, its board identified specific new items to fund, such as hiring behavior intervention aides and counselors and physical education teachers for its elementary schools to complement a solid funding of literacy, math, writing, and science. It also knew the COVID one-time monies were expiring while there was a higher expectation for cleaning and sterilizing of its facilities. And pension costs continued escalating.
The big change? Fountain Valley School District reclassified as restricted some $79.5 million in the net position section of the financial statements with the goal of increasing outcomes for its students. A total of $76.3 million was allocated toward the mentioned priorities and future capital projects. This accounting adjustment created an unrestricted net deficit of nearly $49 million and generated a reduction of $1,018 in the per capita amount. This is news, as Fountain Valley has maintained a positive unrestricted net position for years. This management decision made it drop nine places, from first to tenth.
Laguna Beach Unified is still one of the best financially situated districts in Orange County and the state. It is a basic aid district, which means it is dependent on real estate tax revenues versus average daily attendance (ADA) funding per student from the state. It helps when the December average value for a home in this city was 236 percent above the OC average of $933,500, at $2.2 million.
Newport-Mesa Unified School District, which also elected to be a basic aid district, continues to be a bottom dweller, dropping by $187 per resident.
The defined benefit pension and other post-employment benefit liabilities represent the bulk of the negative per capita amounts for all 28 districts. Philip K. Howard’s recently released newest book, “Not Accountable: Rethinking the Constitutionality of Public Employee Unions,” notes that these huge debts, incurred largely because of teacher union demands, will be paid by our children, the very students currently enrolled in our school system. Let’s hope the school districts do not experience any additional financial setbacks, coronavirus or otherwise, in the years ahead.
