Sunday, June 18, 2023

Questions from the Press, Friday, June 16, 2023.

Margaux Kelly and John Kelly.
2023, at Kindergarten Flyaway (Graduation).

As usual, I have answered questions I received from the Sonoma Index-Tribune about this week's Sonoma Valley Unified budget, and post the same here for the public. 


1. The board approved the budget by a 3-2 vote, with you and Celeste Winders dissenting. Why did you vote against it?

My decision was based on a thorough analysis of the district's historical budget data. It is rooted in long-standing discrepancies that I believe we need to address.

Since 2010, a persistent issue has been the consistent underestimation of actual revenues versus our budgeted predictions, exceeding the generally accepted 5% margin of error, averaging 10.5% error up until the pandemic, and now approaching nearly 20% for several years since then. Our staff have presented a variety of arguments ranging from changes in revenue streams to federal funding reductions and projected decreases in future revenue to explain this discrepancy. However, after closely examining these arguments, I found that they do not address the core issue at hand.

Specifically, arguments relating to stable federal and state program revenues, projected revenue decrease for 2023-24, enrollment decline, and federal funding reductions do not clarify the root cause of the repeated underestimation. In fact, logically, some of these factors should lead to overestimations, which is not the case. While the shift in revenue streams following the Local Control Funding Formula implementation and the increase in property tax revenue could potentially explain underestimations for a year or two, these points also do not adequately explain the persistent underestimation of revenues for more than a decade.

These discrepancies not only undermine the trust and reliability in our budgeting practices, but also have tangible impacts on our district. They exacerbate our staffing challenges, particularly in supporting English Learner students and the special education department, as the distrust of our finances deters good employees from joining our District. Furthermore, they create misleading narratives of deficit spending through documents like the Budget Adoption Letter and First and Second Interim Letters from the Sonoma County Office of Education, further eroding staff and community trust.

The continuous underestimations underscore the urgent need for a balanced budget that accurately reflects our district's revenue predictions. This is why I voted against the budget: to draw attention to these issues and to insist that we address them. I believe we need to adjust our budgeting practices to better reflect the true financial status of the district.

By doing so, we can better align our resources, improve our staff recruitment efforts, enhance our professional development programs, and restore the trust of our staff and community. In short, we need to ensure the accuracy of our budget to support the effective fiscal planning of Sonoma Valley Unified.

2. You made a strong appeal for the board to approve only balanced budgets. Why is that important?

The significance of a balanced budget lies in its fundamental role in effective fiscal planning and overall district operations. A balanced budget properly represents our revenue and expenditure projections. It provides a reliable foundation from which we can make strategic decisions, allocate resources efficiently, and plan for future development. This helps in maintaining a healthy fiscal environment, which is essential for the smooth operation of our educational services.

When the budget is not balanced, or in our case, when revenues are consistently underestimated, it creates a skewed picture of our financial situation. This can lead to misconceptions about our district's fiscal health, such as misleading narratives of deficit spending. These misconceptions can impact our district's operations, decisions, and overall reputation. This inaccuracy can also result in eroding the trust of our staff, parents, and the broader community, as they may not have confidence in our financial planning capabilities. Such misinformation undermines accountability and only serves to polarize opinions, rather than allowing the creation of mutual understanding.

Furthermore, persistent budget underestimations have had tangible impacts on our district. They have exacerbated staffing challenges, particularly for supporting English Learner students and the special education department. These errors have also hampered our recruitment efforts due to perceived instability, further straining our resources.

By insisting on a balanced budget, we aim to rectify these issues. A budget that accurately mirrors our financial reality can eliminate false narratives of deficit spending, restore trust within our community, and better inform our strategic planning. Moreover, it can provide a more stable foundation for staff recruitment and resource allocation, thereby improving the overall quality of our educational services.

In short, approving only balanced budgets is an essential step towards transparent and effective fiscal planning, thereby fostering a stronger and more trustworthy Sonoma Valley Unified.

3. Both you and Winders referred to VMTA’s complaints during negotiations last year that the district’s projected revenues were inaccurately low. Do you think that the projections, which indeed turned out to be low, influenced the negotiations?

The unreliability of the District's financial documents was a frequent topic during our negotiations with VMTA, and at the same time with SCOE. On October 31, 2022, following the start of Adrian Palazuelos extended absence, the District acknowledged an additional $7 million in revenue and promptly resolved its contract with the teachers' union. If the June budget had accurately projected our revenue trends, we could have avoided that protracted dispute leading to an impasse and factfinding.

Furthermore, due to the imbalanced budget, the District provided inaccurate information to SCOE. This led to a series of automatically generated letters from SCOE to SVUSD suggesting the District might receive a "qualified" or "negative" status. That is simply ridiculous for a District like Sonoma Valley that has robust revenue growth and reserves that have been growing at an average pace of over a million dollars a year for the past five years. These SCOE letters, which created an impression of financial mismanagement amongst our constituents, were based entirely on SVUSD's estimates, not an independent analysis by SCOE.

Throughout the process, I consistently raised concerns about the inaccuracies in our financial documents. Indeed, I regularly pointed out that at least four million, and probably seven million dollars were missing from our financial statements. Notwithstanding that accurate criticism, we still received a proposed budget this year that, again, given the assumptions with which it was built, requires deficit spending.

4. Do you feel that the board and school district administration make decisions based on a budget with revenues projected to be significantly lower than they turn out to be? If so, can you cite some examples of important decisions in which this is the case and how they negatively affected the district?

Our labor relations have been strained for over a decade due to this consistent under-projection of our revenues. The proposals extended to our teachers and staff often draw understandable disbelief from our union partners, who, at this point, are fully cognizant of the recurring underestimation of revenues. The credibility of our District Office, our Board, and the institution itself is justifiably questioned due to budgets that serve more to misinform than enlighten.

The repercussions of such consistent misinformation have led to divisiveness within the educational community, diminished accountability, and eroded trust in our schools. Consequently, talented teachers, staff, and administrators, frustrated with the routinely dysfunctional financial statements that glaringly do not reflect reality, leave the District. Furthermore, once the trustworthiness of the documents detailing revenues is undermined, the essential trust for implementing educational reform suffers an immediate blow, hampering the enhancement of outcomes for our students.

5. As I understand him, Josh Braff feels that even though after the budget is approved, the district receives additional funding during the course of the year, he can’t put that into the budget because he doesn’t know how much the money will be and what category it will fall under. Is that your understanding of his position? If so, what is your response to his position?

The issues we are facing significantly predate Mr. Braff's tenure with the District. It's unjust to lay the blame on an individual who appropriately recognized additional revenue after changes within the Superintendent's office last year. In fact, the comprehensive analysis I carried out over the past two weeks, which I shared with Mr. Braff, provides data that he acknowledged could be used to construct a budget addressing these concerns in the future.

Though it is not customary for a trustee to dedicate such a significant amount of time to perform this type of work, my decade-long experience with these issues meant I knew where to go to find the necessary data. I cannot see how this persistent underestimation, which has happened for more than a decade and has veered toward double or even triple the acceptable level of error in recent years, can continue. I do not foresee future budgets being presented to the board that rely on inaccurate assumptions.

As a trustee, I plan to propose changes to our board bylaws as a trustee agenda item. This would require deficit spending to be approved by a four-fifths vote in the future and require that the permitted level of expenditure align with accurate revenue projections. Consequently, this would necessitate a balanced budget, unless a supermajority is willing to continue to deficit spend

6. Do you feel that the trustees will do anything to resolve this situation in the future?

The finance office now has the historical data clearly presented to illustrate the issue. After comprehensive discussions among the trustees, who largely recognized the problem, it would be surprising to see a readiness to approve further deficit spending in the future. All the trustees understand that our constituents expect us to approve a balanced budget, particularly given our significant revenue growth and steadily increasing reserves. I can't envision them being willing to vote for such a budget again.

As for my part, I plan to propose changes to our board bylaws as a trustee agenda item. This would require deficit spending to be approved by a four-fifths vote in the future and require that the permitted level of expenditure align with accurate revenue projections. Consequently, this would necessitate a balanced budget, unless a supermajority is willing to continue to deficit spend.

7. What do you feel should be done?

For now, the issue is settled; the unbalanced budget with deficit spending has been approved. 

Our Board of Trustees plays a critical role in our District, serving as the center of financial decision-making. The Board is structured to foster communication between the government and its citizens, conveying public opinions, desires, and complaints to our staff, and justifying the actions taken and decisions made by the same to the public. Our voters have clearly communicated to us as a board, that they expect responsible financial management and balanced budgets, particularly given our strong growth in revenues and steadily increasing reserves, and our Valley deserves nothing less.

We must break the cycle of repeated misinformation and deception that our budgeting process has placed at the heart of our relationships with our teachers, staff, and community. Only then can we rebuild the trust necessary for effective educational reform, reform that our Valley deserves.

8. Would you like to say anything else?

No, thank you.