The $1 Million Problem – Temporary or Ongoing? 

• Part 1:  A $1 Million Problem – Temporary or Ongoing?
• Part 2:  Piedmont Parcel Tax Facts
• Part 3:  Piedmont Schools Face a Quandary
• Part 4:  PUSD Deficit – $1 million or potentially $2.5 million

Piedmont schools face a $1 million deficit in 2013-14.  The hope has been that recent Piedmont school financial shortfalls would be brief – a temporary problem created solely by an unexpected 2009 economic downturn.  Instead, Piedmont Unified School District (PUSD) budget deficits may represent a longer-standing issue poised to extend into the future.

Prior to 2009, Piedmont school revenues grew every year, but the District’s expenses were growing faster.     State Average Daily Attendance (ADA) funding increased each year until 2009. Total revenues also grew each year (35% in the 5 years prior to 2009, according to the Citizens’ Advisory Committee; see p. 45-46 and 19-20.)

Between 2002 & 201o, expenses rose from $20 million to almost $30 million, according to the Budget Advisory Committee chart (shown below). While other budget expenses remained relatively constant (at around $3 million per year), PUSD salaries, benefits and pensions expanded to 90% of the annual budget.

Parcel Taxes Rise to Cover a Growing Gap

Faced with growing expenses, the Piedmont Board of Education requested a substantial increase in school parcel tax rates from voters in 2006.  In 2009, a sudden reduction in state revenue led to another request to increase Piedmont’s school parcel taxes.  In both 2005 and 2009, voters were asked to allow the Piedmont School Board to levy additional annual 5% increases in interim years between the 4-year city-wide votes.  

(The figures shown below do not include bond assessments, which are separate levies.  See How do School Bond assessments fit into the picture (updated). Ranges reflect the minimum and maximum levy, based on parcel size.)

• 2006 base parcel taxes approved by voters in 2005 (Measures B & C:   $1559-$2647
  • 2006/07 – maximum 5% imposed by School Board:  $1559-$2647
  • 2007/08 – maximum 5% imposed by School Board: $1637-$2779
  • 2008/09 – maximum 5% imposed by School Board: $1719-$2918
  • 2009/10 – maximum 5% increase imposed by School Board: $1804-$3064

• 2009 flat temporary emergency tax approved by voters for 3 years (Measure E)
  • $219 to $372 from 2009/10 to 2011/12 – no increases permitted
    

• 2010 base parcel tax approved by voters in 2009 (Measure B)                        $1804-$3065
  • 2010/11  – 0% increase permitted  (no increase)
  • 2011/12  – maximum 5% imposed by School Board:  $1895-$3218
  • 2012/13   – maximum 5% imposed by School Board:  $1989-$3378      (current rate)
  • 2013/14 – if maximum 5% imposed by School Board:  $2088-$3547    (potential)

  Note:  Measure B figures do not include the temporary Measure E levies of $219 to $372.
  

In 2009, Measure B & E supporters argued an increased emergency parcel tax was necessary to offset state revenue reductions, and Measure B taxes would not increase.  Opponents objected that parcel tax increases were funding uncontrolled spending growth in addition to making up for revenue reduction:

“While the district faces a cut in state funding (equaling about 3% of the budget), total income will be about the same next year. The real problem is an uncontrolled budget. In the last three years, spending has increased by about $5 million, or about 20%. The average annual increase has been over 6% or about $1.6 million.   The problem is historic. In this decade, employee compensation has gone up by almost 60% + in some individual years as much as 9% to 11%. To cover these extraordinary increases the district has more than tripled the parcel taxes.”  (See here; emphasis added.)

The 2009 Measure B campaign literature emphasized there would be “no increase in your taxes.”  However, the Measure B guarantee of no increase applied only to the first year of the measure and did not extend to future years.  Measure B also combined the prior 2005 voter-approved parcel taxes (Measures B & C) with 3 past annual increases imposed by the School Board between 2006 and 2009 (16% total).  A total of 6 increases of 5% have been included since 2005, compounding to a 40% increase.  The annual increases before and after the 2009 vote, while less transparent and less widely recognized than the 4-year ballot measures, nonetheless contribute to  parcel tax growth.  Homeowners do not receive annual written notice of the School Board increases.  

Measure B was approved, as well as Measure E, a temporary emergency flat tax of $1 million for a period of 3 years, to bridge state revenue reductions.

The 2009 vote by residents was significant in 3 ways.  First, the voters ratified past annual increases imposed by the School Board.  Second, voters did not provide a mandate for future Measure B levies above the 2009 level (since the campaign was based on the assertion “your taxes will not be increased.”)  Third, approval of the 2009 rate was followed by a February 1, 2010 Citizens’ Advisory Committee Report which noted adjustments to school programs and personnel were still required to increase cost efficiency – adjustments to create a stable “long-term financial plan” first requested by the School Board in 2006.

Read More in this series of articles examining Piedmont School Finances:

• Part 1:  A $1 Million Problem – Temporary or Ongoing?
• Part 2:  Piedmont Parcel Tax Facts
• Part 3:  Piedmont Schools Face a Quandary
• Part 4:  PUSD Deficit – $1 million or potentially $2.5 million

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