The Palo Alto Unified School District (PAUSD) will be facing a $7 million budget shortfall over the course of the next two school years as a result of California’s $24 billion deficit.

Although PAUSD is a basic aid district, meaning it is funded almost entirely by local property taxes and is therefore usually minimally affected by state budget cuts, California recently passed a budget bill stating that all basic aid districts must make “fair share reductions” to help resolve the budget deficit. Thus, a $2.6 million reduction will be implemented this year, and a $4.4 million reduction implemented for the 2010-2011 school year.

The reductions are being made to categorical funding, which is money the state allocates to districts for specific uses in certain programs. Due to the cuts, each program supported by state money currently has 20 percent less funding than it did in the 2007-2008 school year. For Gunn, this affected the class size reduction fund, which had previously been used towards minimizing class sizes in freshmen math classes and freshmen/sophomore English classes. “The class ratios were increased from 22 students to a teacher to about 25 students to a teacher,” Principal Noreen Likins said.

Despite the reductions, the overall effects of the cuts have been mitigated by stimulus funding from the federal government and money from the district reserves. The enrollment for the current school year is also lower than what was predicted earlier this spring. “Actual enrollment is never known until around the second week of school, especially for the kindergarten and freshmen grades, because some people use the public school system as a space-holder and enroll concurrently in a private school,” PAUSD Co-chief Business Officer Cathy Mak said. “The fact that the enrollment numbers ended up being lower than what was projected was definitely helpful.”

The number of class options at Gunn has also increased due to increased outside funding. “Two new classes have been added this year, a digital electronics class and an animation class, which were made possible with funds from the Palo Alto Partners in Education (PAPiE) organization,” Likins said. “We’re lucky to actually have been able to add on to student options while other schools are cutting back.”

According to the Budget Update for the 2009-2010 school year, however, a structural budget problem of about $5.7 million faces the 2010-2011 school year. “Next year will be the challenge,” Superintendent Kevin Skelly said. “We’re looking at property tax growth of almost zero, loss of federal stimulus funds and enrollment growth.” The district team, however, is prepared with a general approach to the budget issue, which, according to Mak, was anticipated as early as last fall. “We need to reduce expenditures and increase revenue,” she said. “One way to go about doing this is to staff the classes tighter. We will try to fill up the classes as best we can.”

The district will also make use of its “soft-hiring” system, in which a position is evaluated before it is filled. “We’ll take a look at every opening, see if we can make any changes to the tasks or reassign the responsibilities, and ask ourselves if we really need to fill the position,” Mak said. “So far, there have been two positions that were held off.”

Another aspect of the budget deficit concerned the possibility of reopening Garland Elementary School, which the board members recently decided against. According to an interview with Skelly on Palo Alto Online, there is a $1.4 million delta between opening and operating a school versus renting the school out. In the same article, the other members of the school board agreed that they preferred to take the “fiscally conservative approach.”

Specific actions have not yet been cemented to cope with the issues for next year, but the district team, PAPiE, PTA and employee groups will be working together in the coming months, making sure to place the avoidance of layoffs as a high priority. Likins stressed that the goal of the school administration was to cut without necessarily hurting programs. “In the coming year, as a school, we will decide where to make cuts and how to make them as painless as possible,” she said.

Skelly agreed and remains optimistic. “We’re a smart team, and we’ll get our arms around it,” he said.

Budget At a Glance:

This year's fair share reduction: $2.6 million

Next year's fair share reduction: $4.4 million