Budget Questions and Answers

The following questions were submitted to Rick Hausman, the CUSD interim district business manager. His response is prefaced by:
    ''This is a response to your April 17th email. As I am sure you are aware there are some subjects that are appropriate to be dealt with in a meeting between management and the bargaining units during negotiations. A number of the issues that you raised are more appropriate to be handled at the bargaining table. When I agreed to answer questions about the budget, it was not my intent to debate philosophical and political issues that are more properly the role of the board of education. I will, however, attempt to answer those questions that fall under my budget purview.''

Key: Background Information, Question, Answer

    A. Base Revenue Limits for elementary schools in our area varied between approximately $4,200 and $4,400 per student for the
2000/2001 school year. We were at the bottom end. $200 per student is equivalent to approximately $4000 per teacher that some
other districts had available to hire and retain better teachers.

1. What was the corresponding variation for the 2001/2002 school year?

The corresponding variations for 2001/2002 have not been published and, therefore, we do not have access to that information yet. However, we expect that the variations will be very similar this year.

2. What is our Base Revenue Limit for the 2001/2002 school year?

Our Base Revenue Limit is $4374 for this year.

3. Do the 2001/2002 figures include the equalization monies from the state?

The equalization funding was one time and not guaranteed next year. Therefore, it is listed separately and not a part of the revenue limit.

4. What does the district project our Base Revenue Limit to be for each of the next three years, both with and without a continuation of the equalization funding from the state?

We are projecting that the Base Revenue Limit will increase by 1.8% in each of the next two years. We are not including equalization funding in next year’s budget, but are including it in the subsequent year as specified in the current legislation. All of these calculations are preliminary and are, of course, subject to the Governor’s upcoming May revise and eventual legislative negotiations as the budget adoption process is completed. We don’t project beyond the current and two additional years as the uncertainties are too numerous.

B.Other districts, with higher local taxes per student, receive more from their local tax base than the base revenue limit minus basic aid guaranteed by the state, and in addition, they still receive $120 per student in basic aid from the state. Some of these districts have more than an extra $200 per pupil ($4000 per teacher available) to hire and retain better teachers. 


5. How much is Cupertino Union School District currently receiving in Local property taxes and fees?

I believe that your Statement #2 relates to the fact that several surrounding districts are funded through the “basic aid” formula and, therefore, receive significantly more funding per pupil. An excellent full explanation of this formula appears as item #6 in the district’s March 12th negotiations update. The district received $4190 per pupil in local property taxes this year.

C.Other districts have parcel tax income. They use this to improve teachers' salaries/benefits and to reduce class sizes. 

6. (a). If we add a parcel tax, will this reduce our state aid if our current local Property taxes and fees are still otherwise less than the Base Revenue Limit minus basic aid?

(b). If our state aid would not be reduced, when will the district make a motion to the board for it to place on the ballot a parcel tax for the CUSD?

The question of a potential future parcel tax and how it will be used is a matter to be dealt with between the board of education, the bargaining units, and the public. Since it is not in place today and cannot be assured of passage in the future, it should not be included now in this year’s or projected future budgetary calculations.

7. How will benefits from any such parcel tax be earmarked to classroom size and teacher salaries / benefits so that the teachers can realize a gain without having to negotiate a new contract?


D.Unified school districts have higher base revenue limits than elementary schools. They can use the extra monies to hire and retain excellent teachers at all grade levels. They do need extra monies for high school labs and athletic programs, so there is a limit to how much additional is available for the elementary schools. 


8. (a). Should the CUSD look to merging with Freemont Union so it can take advantage of being in a unified school district in exchange for providing them with well educated students and bragging rights to the Cupertino school reputation? 

(b). Similarly, should the CUSD look to merging with Sunnyvale, so as to take advantage of their corporate tax base and their rental incomes in exchange for bragging rights to the Cupertino school reputation and the cost savings of merged districts?

As I’m sure you are aware, the potential unification of school districts is extremely complex, emotional, and highly political. Further, it involves issues that extend far beyond the budget process. Again, this is a subject for board and community discussion. 


E.Some teachers are leaving because of working conditions, squabbles with the district office, and lack of respect by the district in addition to salary and benefit problems. These issues have included class scheduling at the middle schools, and participation in committees where teachers spent many hours in deliberation,only to have the agreed on results contradicted at the last minute by edict (this occurred at least on the facilities committee and the report card committees.) 

9. What is the district willing to do to correct this situation? 

10. Are they willing to acknowledge that not all of these teacher requests are cost items in the budget?

The statement that precedes these questions includes a number of presumptions that are not substantiated. Further, these issues are not budgetary in nature.

F.Some districts have other sources of local revenue, for example, property rentals, donations, and so forth that bring additional revenues that are also useful in providing higher salaries and benefits. 

11. What is the district doing to increase these other revenue sources?

The district has been and will continue to be aggressive in pursuing all revenue sources. We have maximized all of the mentioned areas and continue to investigate new revenue opportunities.


G.Some other districts are getting more compensation for mandatory programs than Cupertino. 

12. Is Cupertino getting all that it has coming to it?

I am unable to tell what mandatory programs are referenced and, therefore, why you believe other districts are receiving more funding. If you are referring to mandated cost claims, we believe that we receive all of the funding to which we are entitled. We continue to work with all the staff to ensure that all mandated cost areas are well documented.

H.Medical insurance premiums are being raised precipitously next year by 17% to 40% (or in some rumors 50%.) This is a matter of $1,500 to $5,000 per teacher and for each other worker in the district. If we ask the teachers and district workers to make this increase up out of pocket, it is asking them to take a salary cut of this magnitude. 

13. What can the district do to help manage this outrageous demand by the medical and pharmaceutical communities?

As I am sure everyone has seen in the media, medical costs are escalating rapidly. Even the largest national purchaser of health plans, CALPERS, has been unable to leverage significant cost containment this year. Our district Health and Welfare Committee, comprised of representatives from all bargaining units as well as management, is meeting weekly in an effort to explore every means to contain costs in our program. We expect to produce recommendations on how best to control our own costs. But the fact still remains that cost increases are a national issue.

14. Can the district not use its budget reserves to accommodate this bubble in medical expenses and postpone, as long as possible, and not reduce district workers' salaries by subjecting them to covering unbudgeted premium deficits out of pocket?

Again, I am not sure what “budget reserves” are being referenced, but the portion of the district budget that is devoted to escalating H&W costs is a subject of negotiations.

I. Teachers have been leaving the district. Experienced teachers are being replaced by inexperienced teachers. The district is saving hundreds of thousands to millions of dollars each year by this exchange. 

15. Is this salary/benefits savings being properly accounted for in the budget negotiations?

Yes, the cost differential between departing teachers and new hires is considered each year in the budget development process. I should also clarify that of the total of 459 certificated teachers that have departed the district from 1996 to 2002, only 55 (12%) indicated that they were leaving to take other employment in the local area. The three largest categories are retirement, relocation out of the area, and personal reasons.


J.The district offered the CEA scattergrams in different formats for March of 2001 and January of 2002. In the March 2001 scattergrams, the teachers column times the salary column equals the teachers times salary column. In the January 2002 scattergrams, the teachers column times the salary column does not equal the teachers times salary column. 


16. Why does the district not offer the CEA information by which the CEA can directly compare the number of teachers at each pay grade and overall district salary expenditures from one year to the next?

Every record that the district has is always made available to anyone who wishes to see it, including CEA.

17. Is the district planning to not hire so many teachers next year as fewer students are anticipated?

We have initially budgeted for fewer teachers based on a decline in ADA. That decline could be offset by increasing the number of inter-district transfers.

18. Is the district making an effort to hire experienced teachers each year or does it plan to always replace experienced teachers with inexperienced teachers?

The district’s recruiting efforts target teachers with all levels of experience, not just new teachers. However, the statewide teacher shortage results in new teachers being the most likely source of new hires.


K.The CEA says it does not have enough visibility into the budget, past income and expenditures, and current and future conditions, in order to determine what is a reasonable request for salary and benefit increases. 


19. Without having to wait for fact finding, cannot the district on a line item by line item basis openly reveal its expected income and expenditures justified by historical income and costs, as modified by changes in current and projected conditions?

The district budget is always available on a line-by-line basis. It is not held as a private document and is available on request. Four times a year, a formal presentation regarding the budget status is made to the board and the public. These are at adoption, first interim report, second interim report and at year-end close. On each of these occasions, a complete detailed budget is distributed. Additionally, as required by law, there is an annual external audit conducted by a private accounting firm to validate the district’s accounting of the funds. This, too, is publicly presented to the board and available on request. 

20. Why does the district communicate the loss in revenue posed by the loss of 100 students next year in its FAQs but does not communicate the gain to be achieved in reduced costs?

The unexpected loss in students this year resulted in a loss of revenue, but no savings in costs since we did not layoff any teachers. However, for next year  we are indeed factoring the potential for fewer students into our hiring target so that the need for fewer teachers will result in a savings.


L.The state has not committed to a permanent equalization program. 


21. Can the district not make an offer to the teachers that has one provision if the equalization program is continued and another if it is not?

This is a matter for negotiation and should be handled in that arena.


M.Berryessa Elementary school is retaining their experienced teachers. They have the highest average salary for local school districts even though they lag CUSD in benefits and salaries in all steps and classes. The Berryessa teachers just do not want to leave their district and the Berryessa district has in the past drawn some excellent Cupertino school teachers from our better paying district. 


22. What is our district management planning to do for our teachers based on what it has learned from the Berryessa district management about teacher retention?

Statement 13 that preceded this question is not clear. The corresponding question is a management and not a budget issue.


N.The district says almost all of the millions of dollars which it has in reserve are all dedicated to some expenditure or another. 


23. Why has the extra energy money from the state not been applied to current energy expenses and still finds itself in reserves which are not planned to be spent either this year or next?

This year the district received a one-time, unrestricted energy grant from the state in the amount of $137,000. It is included in all of our budget presentations as unrestricted available funding for any general fund needs, including salaries. The reason it shows in the current budget presentations as not being spent is because we have not yet included in this year’s budget any costs for salary increases. Once a negotiated agreement is reached, the associated costs will be factored into the budget for this year and in the out years.

O.A. Base Revenue Limit for this year was a combination of Base Revenue Limit for last year plus COLA plus equalization funding plus the PERS reduction buyout.

24. Will we continue to build on this Base Revenue Limit, thus making the equalization funding and PERS reduction buyout for this year a permanent part of our revenue stream?

Equalization and PERS Reduction were not a part of our Prop 98 base revenue limit this year. As I noted in my response to your first round of questions, they were one time "augmentations" and are not funded in next year's proposed state budget. In other words, they were not ongoing dollars and certainly are not a permanent part of our funding stream.

P. The district has stop loss insurance to cover itself if any individual has health claims over $100,000.

25. How much does the district know that it will receive from its stop loss insurance for this year?

Our stop loss insurer provides us reimbursement on an ongoing basis. Each quarter's Fund 62 (Health and Welfare) accounting includes the reimbursements received thus far for the year. As of the last quarter report, there was only approximately $50,000 in anticipated stop loss reimbursements outstanding.

Q.Fund 62 is funded also by retirees and others who pay their own premiums. It is also probably funded from other funds which employ staff.

26. What percentage of the funding of Fund 62 comes from the general fund and what percentage comes from other funds or revenue sources?

The breakdown of the $8.2M in funding is roughly 96% unrestricted general fund and 4% restricted (categorical). Retirees are separate.