Pajaro Valley Unified School District

 

In order to receive a ‘Positive Certification’ from the Santa Cruz County Office of Education and the California Department of Education, school districts must show that they can meet the minimum reserve for economic uncertainty (REU or Reserve) in all three budget years from the unrestricted general fund’s fund balance. For PVUSD, the minimum required Reserve by the state is 3% of total expenditures in the general fund. However, financially stable districts must maintain a higher reserve. In a 2024 update from the California Department of Education, the average unrestricted Reserve levels for a unified school district throughout the State is 23.74%. Currently, the district’s projected 2024-25 unrestricted reserve level is 14.3% or just under $56 million. Given the uncertainty at the national level with the U.S. Department of Education and, the still undetermined CA state budget for K12 Education, we strongly recommend holding the PVUSD general fund Reserve at approximately 15%. 

 

As PVUSD continues to experience declining enrollment and corresponding funding levels, the district is projecting deficit spending in the multi-year projection if no action is taken to right-size our budget. This means that in 2025-26, the district is projected to spend $12 million dollars more in the unrestricted general fund than incoming revenues. This pattern of deficit spending is projected to continue in each subsequent year. It should also be noted that this multi-year projection does not yet include any negotiated salary increases, which if they happen, will further exacerbate the deficit spending. At the current rate of spending, and with the potential impacts of negotiated salary increases for teachers and classified staff, the district is right on the precipice of not being able to even meet the 3% Reserve for the 2027-28 school year. As stated in the February 9th FAQ, the district is required by law to submit a multi-year budget projection that spans three budget years. The district will need to include 2027-28 for the first time as part of the 2025-26 budget in June 2025. Inaction to reduce the budget will shift us from “Positive Certification” to “Qualified Certification” status for next year which raises deep concern by the Santa Cruz County Office of Education and California Department of Education.

 

Additionally, in the last few years, PVUSD has experienced several situations that illustrated the importance of reserves, including damage across the district (Pajaro Middle School included) due to historic floods and the large cash deferments that occurred during the COVID years. PVUSD has still not yet received any cash reimbursements from FEMA for all these flood damages and has utilized our Reserve while navigating the complex and multi-year FEMA process. 

 

At the 1st Interim budget period, the general fund projected an unrestricted ending fund balance of $56 million dollars. However, several important factors need to be considered:

 

1.  The district has seen the loss of (3,378) students, or (18%), between 2013-14 through 2024-25. According to projections from the CA Department of Finance, Santa Cruz County is expected to see a further enrollment decline of approximately (18%) in the next decade. Due to declining enrollment, the district will receive less LCFF revenue, which is the main “bread and butter” of schools. LCFF funding pays for the general education program, including general education teacher salaries.

 

In 2024-25, PVUSD will receive approximately $10 million less in LCFF funding than the prior year. These decreases will continue as enrollment and average daily attendance (ADA) continues to decrease. At the same time, expenses continue to increase.

 

2.  Due to the loss of LCFF revenue projected in the multi-year projection, the district is projecting to deficit spend ($12.4 million) in 2025-26 and ($12 million) in 2026-27. Without course correction, this deficit spending will continue in each subsequent year and cannot be sustained.

 

3.  The multi-year projections do not include any negotiated increases for any of the bargaining units. The district has not settled for the current 2024-25 school year or any future years. Once these projected costs are included in the budget, the district will not meet the minimum REU in 2027-28. Due to the legal requirement to have a multi-year projection that spans three years, the district will need to include the 2027-28 fiscal year for the first time in budget projections at the 2025-26 Proposed Budget period this coming June 2025. If the district cannot meet the minimum REU in all three years, the district will receive a ‘Qualified Certification’ next year.

 

4.  The fund balance is not the same as the cash balance. The fund balance includes accruals such as accounts receivables, which are receipts and revenues that are considered measurable and collectible within a certain time span. Often the cash balance is lower than the fund balance. In 2024-25, the total expenditures projected from the general fund is over $386 million dollars. The monthly payroll expenses alone are upwards of $24 million dollars. The district must maintain a cash balance in the bank to be able to maintain monthly payroll and expenses. 

 

Reducing the number of CTE teacher positions in our CTE offerings is in alignment with, and part of the overall reduction related to, rightsizing staffing levels to reflect proportionate declining enrollment. Enrollment decline is present in all subjects including CTE, therefore the CTE reductions are similar to all content areas. 

 

CTE grant awards come to PVUSD as restricted funds received from the grantors with specifically-outlined actions, approved expenditures, and  are by majority,  one-time funding that PVUSD applies for to build, expand, and/or update and enhance our existing CTE programs and pathways.

 

CTE grants are typically offered to grow specific types of pathways and programs based on the unique requirements of each particular grant source, emerging high-wage high-skill high-demand jobs, and student inputs. The CTE program pursues grants that are aligned to PVUSD CTE program development strategies. The grant awards are restricted funds to be used based for the approved proposals and are required to conform to specific financial and activities’ guidelines and timelines. CTE grants, even those that are multi-year, are one-time funding sources. The use of one time funding, due to the lack of sustainability, is not used to fund CTE teacher positions. CTE pathway development work includes, on occasion, extra work hours for teachers which is used to provide for the development of new curriculum, field and work-based learning experiences for CTE students, teacher training and professional development related to the grant-specified pathway. 

 

PVUSD believes in the importance of standards-based instruction in all content areas, as well as coaching and professional development to support our teaching staff.  The Instructional Coaches in the Curriculum and Instruction division will continue to be able to support teaching staff on standards-based instruction and research-based instructional practices. Our Coaches, along with our STEAM Director and our Lang Arts/History Director, are able to provide targeted guidance, professional development, and resources to Math, Science, and VAPA teachers, ensuring they continue to grow and effectively support student learning. 

 

The district has been reviewing contracts and has started making reductions in 2023-24. The district will continue to re-evaluate contracts as they expire or come to the end of the contract period.

 

The total 2024-25 unrestricted general fund expenditure budget is $40 million dollars for the category called services and operating expenses. This category is wide-ranging and encompasses standard operating costs such as utilities (PG&E, gas, water, garbage), insurance premiums, leases for buildings and portables, facility and vehicle repair costs, and legally mandated reporting and monitoring services such as independent third-party auditors and actuarial services.

 

As well as services that directly support students and staff such as field trips, athletic costs such as referees, league fees and uniforms, all software and technology licenses, professional learning and development, special education agency hires, non-public school fees, parent engagement and school site council expenses, and much more. The 2024-25 1st Interim Budget Binder has a detailed breakdown of the general fund budget in Section Three. 

 

All school districts in California are funded based on Average Daily Attendance (ADA) which is driven by both enrollment and the attendance rate of students. The district has seen the loss of (3,378) students, or (18%), between 2013-14 through 2024-25. We are projecting a decline of another 600 students for next year, 2025-2026. According to projections from the CA Department of Finance, Santa Cruz County is expected to see a further enrollment decline of approximately (18%) in the next decade.  Due to declining enrollment, the district will receive less LCFF revenue, which is the main “bread and butter” funding source for public schools. LCFF funding pays for the general education program, including general education teacher salaries.

 

In 2024-25, PVUSD will receive approximately $10 million less in LCFF funding than the prior year. In 2025-26, an additional $3.3 million decrease is projected per the last budget update at 1st Interim in December. These decreases will continue as enrollment and average daily attendance (ADA) continues to decline. At the same time, expenses continue to increase.

 

Many other state and federal restricted grant programs are also funded based on enrollment or ADA. The district will see impacts to funding in many grant programs as well.

 

In order to align to the decreasing enrollment, and corresponding loss of revenue, the district must right-size staffing and expenses accordingly. 

 

 

In 2019, PVUSD purchased the Towers building at 294 Green Valley Road to house the District Office and many of the departments that provide centralized services throughout the district. The District Office also houses several departments that are either 100%  funded or majority funded by restricted grant funding such as Food & Nutrition, Migrant Education, Migrant Seasonal Head Start, Expanded Learning, Early Childhood Education, and Adult Education. Currently, the District Office also houses Pacific Coast Charter School.

 

The annual debt service payments were structured to correspond to the existing annual rental payments that the district was paying prior to the purchase of the Towers building. A Certificate of Participation (COP) was issued, which is a form of financing available to school districts for facilities, and the district is on track to pay off the debt in 2034 with an average interest rate of 1.86%. The 2025 total debt service amount is expected to be $1,183,200. 

 

The "right-sizing" of positions is an annual process. This process, simply put, is the alignment of the number of students enrolled to the number of staff needed to teach the students. From this school year, 2024-25, to 2025-26, the district is projecting a loss of approximately 600 students which will reduce the number of classrooms and teachers needed.

 

The staffing ratios are set in the Education Code and in our Collective Bargaining Agreement with the teachers’ union. The District will and must follow staffing ratios and class size.  There are no plans to make any changes or adjustments to class sizes.  Our current class sizes per contract will remain the same for the next school year.

 

Resolutions to close positions are a legal requirement. Using advice of legal counsel, and in the utmost commitment to full transparency, we have brought forward the Exhibit in Open Session. This Exhibit indicates each position recommended for reduction.  Sharing the Exhibit in Open Session has not been a past practice and is further testimony to our commitment to transparency.

 

To be clear, the 80.8 certificated positions and 19.75 classified positions are inclusive of all known reductions proposed for the 2025-2026 school year.  This list includes both the reductions approved by the Board due to one-time funding (35.5 positions) and necessary reductions due to enrollment projections for the 2025-2026 school year. Of the 80.8 positions, 7.5 positions are administrator (management) positions.

 

When evaluating certificated teacher reductions, the district first looks at seniority and credentialing. Per CA Education Code the district is obligated to consider the following categories of non-permanent staffing listed below before making reductions to permanent staffing. Additionally, the district has 14 known teacher retirements that are part of the 80.8 certificated number and will likely receive more retirements as part of the early retirement incentive program going in front of the Board for approval on February 12th.

●  39 unqualified teachers (legal term meaning not credentialed and on temporary one year contract)

●  7 teachers on temporary status

●  11  intern teachers

 

To further clarify, 35.5 positions of the total were reduced due to the loss of one-time funding as per the recommendations of the Sustainable Budget Team and Board approval on January 15, 2025.

 

In comparison, last year's Exhibit included 60 certificated staff. 

 

Following the January 15th decision, PVUSD has proposed these reductions:

 

●  Mental Health Clinicians: Currently 15 Full-Time Equivalent (FTE) positions; proposed reduction of 3.0 FTE (Resolution for 2/12/25).

●  Social Emotional Counselors: Currently 18 FTE; proposed reduction of 6.0 FTE (Resolution for 2/15/25).

○  PVUSD has a total of 47 counselors: 29 academic counselors and 18 social emotional counselors (some middle school counselors serve in both roles).

 

How will students continue to receive support?

 

In 2025-26, 12 FTE Mental Health Clinicians and 12 FTE Social Emotional Counselors will be on staff to support students across our district. As a result:

 

●  Mental health and social emotional support will continue through our Multi-Tiered System of Supports (MTSS) to identify student needs and align to staff and community partner services accordingly.

●  Students with IEPs requiring mental health services will continue to receive them as written in their IEPs.

●  SRO and Mental Health Clinician pairings at the high school level will remain in place.

●  Community partnerships will continue to supplement PVUSD services, expanding access to mental health resources.

●  Restorative practices training for all staff will continue.