Newberg school budget passed, but amendments likely going forward

The Newberg-Dundee school board has adopted a budget for the 2024-25 school year, but that doesn’t mean its work is done.

Interim finance director Gayellyn Jacobson reported to the board at its June 24 meeting that the district would end the 2023-24 fiscal year with a negative $1.7 million ending fund balance, a stark departure from previous years when the district had positive balances in the millions of dollars.

She added, however, that the district is anticipating a “positive adjustment” of roughly $2 million from the State School Fund. Unfortunately, that money won’t be realized until May 2025, so it is of no help to this school year’s budget and will be received next year just a few weeks before the 2025-26 budget must be finalized.

“So, there’s some wash there that will be good for us next May,” Jacobson said.

Although the board adopted the 2023-24 budget, Oregon law allows it to be amended to allow for cost-saving measures and adjustments to expenditures, which would ostensibly reduce the $1.7 million shortfall.

Jacobson laid out for the board the details of the district’s budget and how it came to be in deficit. The total projected revenue as of June 24 is $60.3 million, expenditures are $62 million, encumbrances (which she characterized as solid) are $1.37 million and the ending fund balance is projected to be negative $1.71 million.

The path toward the deficit was aggravated by over-expenditures in myriad programs and departments, Jacobson said, topping $3.17 million for the 2023-24 school year. They include expenditures over budget in instruction/professional/tech services at $1 million, instruction program improved services at $145,000, services $344,048, electricity $152,784, reimbursements for student transportation $684,692, legal services $179,363, general professional services $582,695 and classified substitutes $75,739.

“As you can see, we have some pretty extensive expenditures in professional services contracts,” she said.

She provided as an example the contracts for speech language pathologists and occupational therapists, “For pieces that we don’t have employees in the district that can provide those services, so we’ve gone outside to contractors to provide those.”

The implications for the '24-25 budget include looking closely at professional services contracts to see if they can bring some of those positions into the district as full-time employees or if those services they can be accessed through the Willamette Education Service District for less.

Other over budget expenditures caught Jacobson’s attention as well, including building maintenance, utility costs and student transportation. She took heart that, at least for building maintenance and recent work at schools to improve HVAC systems, that will put the district in a good position going forward.

“Most of that is setting us up for, hopefully, not having as many repairs in the next few years,” she said.

The cost of keeping the lights on in those buildings, however, is severely impacting the budget. The district’s bill is exponentially more than what was budgeted, even though more money was allotted this year, and has spurred such ideas as cordoning off areas of some schools to save on electrical costs and janitorial services.

Student transportation budget was well under budgeted, as was general professional services contracts, while the expenditures for legal services have not been determined yet as a number of lawsuits have yet to be decided. Those costs could carry over into next year’s budget as a result.

The 2024-25 budget will need to be increased to account for upticks in repairs/maintenance, electric bills, to reimbursable student transportation, for legal services, general professional services and classified substitutes.

“That’s saying that these will probably increase the estimated shortfall by $1 million to $1.5 million that we’ll need to find other areas to decrease because we can’t not pay our electric bill,” Jacobson said.

The district is implementing a staffing allocation model to equalize classes in response to the decrease in enrollment. It will also identify permanent reductions to replace a one-time reduction in 24 to 25 school days next year, engage the community in identifying further budget reductions and consider the possibility of increasing local school revenue via a local option levy.

“That’s something that’s been done in other districts,” she said. “It takes a lot. It’s a heavy lift, but that’s something that should be on the table.”

How great will the shortfall be in 2024-25?

Projections are that the district will have a $12-$13 million shortfall in the 2024-25 school year, which Interim Superintendent Paula Radich equated to 57 school days, 171 Ford Expeditions or 20 $600,000 homes.

“Sometimes we just have a hard time grasping what those numbers really look like and the reality is when it comes to children and services it’s much more than that,” she said. “We laugh, but it’s really the reality of how it’s impacting our classrooms and our staff and students.”

The district recently hosted a meeting with leadership, union representatives and others to determine criteria for budget reductions in the future, which included maintaining core academic programs, legal compliance, contract compliance, equitability, preserve school safety for all, and based on what’s good for students and staff.

Radich said she is recommending the district streamline its negotiations and consultation process with the unions and associations, which includes reducing the bargaining team from seven to eight people to only her and somebody from the district’s human resources department.

Jacobson raised the “extraordinary” number of contract services and how the district must get a handle on that — many of those services are costing more than if they had full-time staff fill those spots.

Radich has suggested the district consider establishing new class size ratios, new ratios for specialists, renegotiating contracts, looking at expanding furlough days and engaging the community to find volunteers for some duties within the district. As part of that, she has met with George Fox University President Robin Baker to determine how GFU students might be able to help in classrooms and in other capacities in the district.

What’s next?

In the context of accountability and due diligence, Radich said she will recommend the board order a forensic audit going back three years to gain perspective on the budget.

“I am not satisfied that we know all the answers,” she said.

Radich added that she has produced a list of suggested reductions in the budget but has yet to finalize the list.

“I want to inform the community, at this time, I am not recommending any program cuts,” she said. “I am only recommending that we apply our ratios and see what that yields in terms of programs. However, this hole is very deep. We may need to go to program cuts at some point. I’m hoping not, but I don’t know. But initially, that is not on my list.”

Work groups within the district have begun discussing savings, changes in contract services and support from the community. The first of two listening sessions was held June 27 at Newberg High School; a second one is slated for July 1. Contract negotiations with the unions and associations that represent teachers and classified personnel are ongoing but are sure to result in reductions in force (RIFs), Radich said.

Communication plan taking shape

The district, according to current Communications Director Jillian Daley and past Director Claudia Stewart, has been hard at work getting the word on the budget crisis out to school patrons, particularly via online platforms like the district’s website and social media pages.

“Engaging with our stakeholders is a key part of a good communications foundation,” Stewart said.

She added district management has sat down with school leaders and others to seek suggestions for further budget reductions.

“I’m drowning in their feedback,” Stewart said. “We’ve got hundreds and hundreds of emails from entire staffs — principals went back and engaged their staff, individuals are writing in, community members are writing in.”

Input received so far has tended to center on staffing, student transportation and adjusting school days and hours to reduce the budget.

“Savings? Lots of suggestions about savings. They run from saving paper, getting copier passwords so you don’t use so much paper, to energy savings — you know, turn the AC down, dim the lights, get solar panels, unplug the coffee pots. They’ve got lots of granular and lots of big ideas.” Stewart said.

Asking staff and parents how to reduce the budget was revealing, she added, “because not everybody knows there is a terrible budget crisis — some people are just becoming aware of that.”

District voters could pass a local option levy

Radich acknowledged that the district could resort to adopting a local option levy, which is voted on by the electorate and allows school districts to tax property owners at a set rate for up to five years, then are withdrawn unless extended on by the voters.

“I have strong feelings about being very careful with that,” she said. “I want to look at the tax burden. I want to go out and get community input.”

The last time the district looked at passing a levy, administrators found that the amount of money the district would receive was “minimal, it was a drop in the bucket,” Radich said, adding “So, we need to be careful, I want to be mindful that people are already suffering in this community and we don’t want to add to that burden.”

Should the district decide to go the route of a local option levy, it could not be voted on until the May 2025 primary for lack of time to assemble the information and get it on the November ballot. Radich also noted her experience with a local option levy in Washington, which had a sunset in four years and had to be voted on again.

“There’s no guarantee once you plug a hole with a levy, that the community will continue to support that,” she said.

A call for civility

Radich ended her presentation with a plea to the citizenry: “There has been in this community an ‘us’ and ‘them’ mentality. And I’ve only been on the job a short time, but I’ve been privileged to be portrayed in social media in all manners possibly. … We have to stop this divisiveness and my way of doing that — we all need to put our nose down and go to work for our kids and do it together. I would hope we could get to ‘we’ in this community.”