Newberg school district budget report: Much remains to be done

The state of Newberg-Dundee Public Schools budget for this year and the next took center stage at the school board’s Aug. 13 meeting, with the theme that although much of the news is dire, there is some room for optimism.

Gayellyn Jacobson, appointed interim finance director following the resignation of Heather Bixby , testified that the 2023-24 numbers show an ending fund budget of negative $1.7 million, barring any additional yearend amendments required by auditors in late October.

In response to last school year’s finding that the district was overstaffed, Jacobson said the district has implemented a new staffing allocation model that dedicates teachers at individual schools based on enrollment, except for specialists, who are not based on student population but rather on the number of teachers that are needed. In addition, future allocations will be based on changes in programs at various schools as well.

“This model helps us to rightsize the staffing at schools. All positions at departments were also adjusted to fit the reduced staffing needs as well,” she said.

Jacobson then highlighted alterations made to the upcoming budget that will reflect the recent contract negotiations with the district’s employee unions, including revised cost of living adjustments, amended benefit amounts and the addition of eight furlough days. Once all that is inputted into the system, the district can calculate projected salary and benefit expenses for the year, as compared to the current budget. The district also needs to adjust several other budget categories, including purchase services for contracts and the district’s mounting legal costs.

“After this is done, we’ll have a clear picture of whether further budget reductions are needed in order to balance the budget,” Jacobson said.

Reductions in force in the district

Board Chair Deb Bridges shifted the discussion, asking for a report on the recent and ongoing reductions in force in the district.

“All told between the initial RIF process and to get to our adopted budget and then from the adopted budget beyond — the actually adopted budget in line was definitely closer to 60-plus. Before that we had at least 15 to 20 …,” Jacobson said.

She explained that the number was for full-time equivalents (FTE), which means the number of actual people that were laid off or saw their hours reduced was as high as 80. The district tried to keep as many district employees in place as possible, then as many contracted employees as was feasible, she added.

District bond rating downgraded

Jacobson shared with the board that on Aug. 9, Moody’s bond credit rating service downgraded the district’s bond rating from A1 to A3.

“Although this was difficult, it was expected due to the financial difficulties the district is experiencing,” she said.

Jacobson said the district can take steps to restore its bond rating via improvements in operating reserves, including creating an ending fund ratio of more than 15% and a cash ratio closer to 25%, as well as seeing a stable increase in student enrollment.

Conversely, should the district end the budget cycle with an insufficient ending fund balance, see a significant decrease in student enrollment, an increase in debt beyond what it is now and an inability to make adjustments in operations to address the current deficit, it could see a further downgrade in its bond rating.

However, Jacobson said she is confident the district is on the right path financially.

“I would say we have definitely made necessary adjustments to mitigate our current financial situation, but there will be more in the future based on the things such as the fact we have eight furlough days expected for this next year — which is a one-time expenditure — and we will have to make further reductions in future years to accommodate for that. But we don’t know exactly how much that will be yet as we will see an increase in the next biennium overall, as long as haven’t lost more enrollment,” she said.

In answering board member Sol Allen’s query as to what effect the bond downgrade will have on the district, Jacobson said if the district were to entertain seeking another bond now, it wouldn’t receive the favorable interest rates it has enjoyed in the past. But that’s not all:

“It’s also how we are seen generally by the public — to have a good bond rating means you’re a stable district and you’re looked at … possibly by vendors … as are you able to pay,” she said. “But it’s more in the market for when we go out for another bond.”

Finance Advisory Committee taking shape

Bridges lightened the mood in the room with a status report on the formation of a district finance advisory committee. She characterized the response as “amazing” from folks who wish to be named to the committee. The committee will be a blend of board members, budget committee members and two community volunteers. An interview process shepherded by board directors Allen and Jeremy Hayden is nigh and will be open to the public.

“This is going to be a critical committee for our board moving forward, but also for our community moving forward because this is really where we are going to start identifying where some of the anomalies have been identified and what does that mean,” Bridges said. “How is it that we’ve gotten to the point where we are today with our finances? And also I really hope that this is an opportunity for clarity for everybody in the community to understand our financial situation.”

Along those lines, board member Trevor DeHart said he was trying to make sense of what went wrong with the budget and added that he would like to see a public repository of information on the major contributing factors and the root causes.

“Is it possible to get that so the public can see, so I can see … it would be nice to have one place to go and learn information,” DeHart said. “My desire it that we understand what the root cause of each one of them are and that we don’t repeat them in the future.”

Jacobson responded that the district’s annual audit of financial processes will give more insight on the causes of the budget shortfall. While the audit is not yet completed, the findings could be posted online and she could comprise a summary with the help of Interim Superintendent Paula Radich.

Preliminary findings, mentioned in previous budget discussions, have indicated a few important factors in tanking the budget.

“Hiring … was I would say excessive, and that led to having a much heavier payroll then we could afford,” Jacobson said. “There were no checks in the system currently to stop that from happening, so it went overbudget considerably. There were also no blocks on non-salary type expenditures, and those are pieces we are looking at currently right now to get those blocks in place in our financial system.”