Live Oak School District likely to implement layoffs in spring to address more than $700,000 budget deficit

After the Live Oak School District community endured months of confusion and surprises from a financial crisis last spring, its new superintendent is working to close a budget deficit of as much as $1 million amid a widespread and long-expected “fiscal cliff” for school districts across California this year.  

Superintendent Pat Sánchez said the district is going through a financial stabilization plan process that will again include layoffs. But this time, it’s happening on a voluntary basis and on a slightly longer timeline. 

With help from a consulting firm, the Santa Cruz County Office of Education (COE) and a budget advisory committee made up of school officials and community members, Sánchez said he’s bringing transparency to the process and following the advice of county officials. 

“[The prior administrators] had a plan that they were supposed to execute to start making these cuts happen. They didn’t fully execute the plan,” he said. “So I recommend that we just start over, and that we work with the County Office of Education. We’re developing the new plan now, and we are trying to target the right number to stop deficit spending going forward, and that’s part of what we’re going to be studying with the advisory committee.” 

Sánchez said the district will have to implement layoffs next spring, but he doesn’t believe they’ll include people at school sites or people who work directly with students, as staffing is already tight at LOSD schools. He said they’re looking at cuts to the central district office, and added that needed cuts are stemming from a $700,000 to $1 million deficit. 

“At the end of the day, we have to cut about seven to 10 [full-time-equivalent positions],” he said, adding that he doesn’t believe that will be the total amount of people losing their jobs. He said some people could just see reductions and others might fill vacancies. 

Lauren Pomrantz, co-president of the teachers union, said teachers are concerned.

“We did just experience a spring with a lot of cuts and losses to our membership. So we are nervous,” she said. “We are committed to being informed and working with Mr. Sánchez. We are very encouraged by his leadership. He’s very transparent, honest and answers our questions in a very timely and understandable way.” 

During an Oct. 16 board meeting, Ryland SBC consultants gave a review of the district’s finances and said that the district – like many across the state – is in fiscal distress and described some of the reasons the district is projecting budget deficits for the next few years. 

This year, more school districts are seeing what education officials had anticipated for the past several years – the “fiscal cliff” from impacts of the expiration of one-time funds from the pandemic, declining enrollment and the cost of living adjustment (COLA) increase in state funding to districts dropping to 1.07%. The lower COLA this year doesn’t cover the increase in costs from last year to this year, further stressing districts’ budgets. In the past two years, the COLA was 13% and over 8%. 

The consultants describe these circumstances as the “perfect trifecta.”

“Many districts that haven’t had fiscal challenges in the past are now facing them, and districts that have had challenges in the past are facing huge hurdles in balancing their budgets,” they wrote in an Oct. 9 review of the district’s finances. 

Live Oak School District faced months of unrest starting in February. Community members were shocked to suddenly learn about the financial crisis while the district rushed to balance its budget quickly to avoid a state or county takeover. The district initially proposed cutting more than 51 full-time equivalent positions, including teachers, yard duty supervisors and maintenance staff. In the turmoil, the district also saw a wave of resignations – including its former superintendent, Daisy Morales, who disagreed with recommendations from the County Office of Education and fired the district’s chief business officer.

In the end, Sánchez said, the district cut just seven full-time-equivalent positions: “Six of those were positions that were laid off, and I believe only three or four people lost their jobs.”

“I think it was not implemented as recommended by the county,” he said. “It was implemented as recommended by my predecessor. That’s a big difference. I tend to want to listen to the county.”

Sánchez said he thinks the district will have a concrete plan to combat the deficit soon. He said staff will bring a rough draft of a recovery plan to the board in the coming month or two.  

“I think this is definitely salvageable, and I think we’re on our way with that,” he said during the Oct. 16 board meeting. “I think it just took us a little bit of help to get clarity.”

How schools are funded

School districts receive the majority of their funding from the state. The amount is determined primarily by a formula called the Local Control Funding Formula, or LCFF. The formula includes a base grant calculated by average daily attendance (ADA) and also provides additional funding for students with extra needs such as foster youth, English learners and low-income students.  

Because Live Oak School District’s enrollment is declining, its funding is also declining. 

ADA is the portion of students who attend school daily on average and is presented as a percentage of total enrollment. At the district, it’s been about 93.5% and is expected to stay around there for the near future, the review says. During the pandemic, attendance rates declined sharply and have been gradually improving since. 

California school districts have been facing declining enrollment for years. In a report released last year by the state Department of Finance, Santa Cruz County had the steepest projected enrollment decline of the state’s 58 counties for the next decade, at more than 21%. Local officials say the majority of the decline is due to families leaving for more affordable parts of the state and country. 

The Ryland SBC report says LOSD is projected to see enrollment decline of 1.5% to 2% through the 2026-27 school year. 

The state gives school districts general fund budgets through the LCFF using one of three calculations: the higher among current year ADA, prior year ADA or a running average of the prior three years’ actual ADA. LOSD, like many school districts, has been using the three-prior-year average for the past several years.

LOSD’s projected enrollment and ADA are 1,481 and 1,376, respectively. However, the district is being funded for an ADA 62.6 higher than it currently is, for a total of 1,439 ADA, because in the prior three years, the enrollment was higher. 

In addition to the loss of funding linked to declining enrollment, districts are seeing the end of COVID-era one-time funds and also incurring increasing costs to fund special education programs. 

Under the prior superintendent, Sánchez said, about $1.3 million in one-time COVID funds were used to fund ongoing staff positions. 

“That is allowable,” he said. “But what usually happens in normal practices, if you’re going to do that, you have to have a plan to move those people off of those one-time dollars into more permanent funding so you don’t lose the positions.” 

As for special education programs, district officials say they are underfunded by the state and costs are rising. The adopted budget initially approved $200,000 in special education costs, and an additional $200,000 or so in contracts was later added, for a total of $400,000. 

Next steps

Sánchez said the County Office of Education, Ryland SBC consultants and the budget advisory committee are working on how to reduce costs and where to make cuts. 

For example, he said he’s in talks with the COE to see if district students can receive special education services within the district as opposed to getting some services outside of the district to cut costs. 

“We are engaging with Superintendent [Faris] Sabbah from the county to talk with them relative to special education,” he said during the October board meeting. “Specifically looking at how we could do a different approach with some of our center programs, as well as some of the programs that our students are in getting service from the county.”

The budget advisory committee will meet starting Nov. 6, and once they’re done meeting in December, Sánchez said it will bring its recommendations for reductions to the board. Then, he hopes the board will vote on reductions no later than February, because state law requires that people be notified of layoffs by March 15. 

During the Oct. 16 meeting, when the financial consultants from Ryland SBC shared their review of the district’s finances with the board, trustee Tammy Summers asked if they’ve seen districts emerge “on the sunny side of things.” 

Consultant Terri Ryland said while the district faces challenges, it’s taking the necessary steps to remedy them. 

“You have made a lot of big decisions, and I must commend you for that,” she said. “I frequently do not see districts as far along as you guys are down the right path.” 

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