redqueeninla ~ a musings locality

This essay was first published April 3, 2017. It concerns persistent LAUSD budgeting chicanery, and the narrative extended to surround it.

Nothing has changed; not the past numbers or their variance from future projections, not the unfolding reality which reveals how conservative planning shortchanges immediate needs. Suffused with fear and doubt, stakeholders are distracted from the means to realize the democratic entitlement of a truly public education. It is the responsibility of educators and their managers, to spend funds designed to educate children on educating children:

¿¿Is LAUSD REALLY Going Bust??

Not at the moment. Have a look at this table:

All of the recent years for which final (“actual”) budget data are published show every single annual budget has finished in the black. This graph tracks the inflow of revenues (sum of dark and light grey bars), which have outpaced the outflow of expenditures (blue bar) in the LAUSD General Fund (GF) over the last eight years. While the entirety of the LAUSD budget includes various capital and internal funds, for the purposes of tracking the actual operating budget, these GF revenues and expenditures are of most importance. The amount unspent every year is represented by the green bar, and labeled in green. “▲” green figures indicate that the net (what’s left after expenditures come out of revenues) is ‘positive’; the GF was operating without a loss. Both “restricted” (e.g., Federal Title 1 (low income) funds) and “unrestricted” (e.g., discretionary funds available to address school-site-specific priorities) funds are included here. Prior to 2007 GF expenditures were reported a little differently so the trend isn’t comparable, but those budgets were also balanced.

So recent school board candidate’s statements casting shade on LAUSD’s current solvency are just wrong.

But what about the future, is the District simply swirling that bankruptcy toilet, circling inevitably toward the abyss? Even if currently flush, how well can past financial performance predict the future?

The District’s Chief Financial Officer (who just resigned after 10 years of constitutional, if not justifiable, worry), publishes a projected budget for one and two years beyond the current operating year. That current operating year’s budget is finalized in June prior to the start of the upcoming schoolyear. And there’s a big accounting midyear to check up on things.

So that means there are four forecasts for any given year, snapshots of how budget forecasts stack up against the fact of what actually come to pass: (i) at mid-year, (ii) right before the start of a new fiscal/school year, (iii) one year out from that year and (iv) two years out from that year.

Each one of these sets of guesses is expected to have different tendencies. They will vary by how far in the future the forecast projects, by what sorts of monies are considered, revenue or expenditure. And each can be assessed for accuracy, what direction these forecasts trend for any given point, etc.

The forecasts are key in assessing whether the “sky is falling” – the origin of the claim that LAUSD is sinking financially, whether it’s accurate, what has been and what should be done about it.

Here are two sets of bars clustered by the type of forecast (e.g., Mid-year, Two-years out) for Revenues and Expenditures. The series of bars within each cluster are successive fiscal years between 2010-11 and 2014-15 (the last year where actual figures are available); only the last two years, 2014-15 and 2013-14, have comparable comparisons at two years out because of the change in reporting. Each bar represents the forecast’s accuracy. It is the percentage that forecast differs from reality, its (accounting) “variance”. If the forecast is positive, it overshot reality; if negative it undershot it. What’s complicated is that for revenues and expenditures what’s considered “good” flips. Plus, perspective matters (see below). Presuming the goal is to ultimately balance the budget, under-predicting revenues (positive variance) and over-predicting actual expenditures (negative variance) is “good”.

Revenue projections, especially with increasing time in the future (by two years out), have been conservative, or favorable to the bottom line; less has been anticipated and planned for coming in, than wound up coming in when all was said and done. That’s responsible and it makes for good planning. The relatively small percentages of unfavorable, negative variance for the upcoming year’s final budgets (second cluster of bars in the upper chart) was always offset by underspending, as seen in the previous figure. Every successive year has maintained a positive carryover (depicted above in green).

It is in the expenditures that the district has carefully offset the volatility of state and federal monies so vulnerable to political caprice. LAUSD has consistently, favorably, underspent their budget in every year. What is clear is that the pessimistic, Henny-Penny terror of projecting a future so influenced by vagaries, is hedged through persistent projections of underfunding and overspending … which don’t then come to pass in reality.

That’s OK, sort of. Life happens.

But what isn’t OK is insisting that forecasts – particularly this sort which are inherently conservative – are blueprints of tomorrow’s future. Because that’s the partisan agenda furthered by the voice of corporate Democrats and school privatizers in the guise of “Charter Reform”. That voice is prophesied by LA School Report and The 74 (“partners” of: Broad, CA Community, DeVos, Gates, Gen Next, Karsh, Simon, Triad and Walton Foundations; Bloomberg Philanthropies, Carnegie Corp., Fisher Fund, Park Ave Charitable Trust, Sackler and Strauch), and by the California Charter School Association-sponsored school board candidates Gonez (LAUSD6) and Melvoin (LAUSD4). And it’s asserted religiously, without ever cross-checking how past projections compare with future reality once it actually comes to pass.

The data actually show two things: (1) Careful projections and husbandry of its funds has actually served LAUSD well fiscally. Despite tumultuous financial circumstances in our city, state and at the federal level, LAUSD has managed to keep a laudably steady keel. Its administrators have done themselves proud.

However, (2), that fiscal responsibility in the face of predictive doom-saying has come at the expense of the District’s very own Commons. LAUSD’s students and staff cinch their belts every year on cue to defend the institution from the fallout of partisan’s fake outrage at the risk of deficit. LAUSD has balanced the books every year despite tumultuous swings in funding, because the institution extracts an enormous carryover buffer from every year’s operations.

During each of the five years in question LAUSD’s carryover has been on average 12.5% of that year’s eventual actual revenue intake. In 3 of these 5 years the carryover was never broached because revenues wound up larger than expenditures. In the two years when the carryover was tapped, 9% was used in 2011-12 and 17% was used in 2012-13.

But that translates to hundreds of millions of dollars due our students and teachers, that year after year is never realized. Far from overspending our way to insolvency, there’s an important case to be made that LAUSD underspends each year.

For example, for want of less than 2.5 million dollars in 2012, then-Superintendent Deasy summarily cut all Title I funds to schools of middling diversity overnight, causing enormous financial hardship to schools of poverty percentage between 40%-49% (the burden was partially mitigated through a one year “hold-harmless” fund that has since been discontinued). Twenty three of these high-functioning schools weathered the unforeseen shortfall via privatization, converting their schools to “fiscally dependent” charters.

And yet $687m remained that year to rollover into the following year’s budget. That amounts to 12% of 2012-13’s eventual $5.7b revenue. That carryover could address so many worthy needs; it could lower LAUSD’s vital teacher:student ratio, for example – certainly more effectively than eventually came to pass. There is no shortage of important needs to address, but one of these should be the size of the accounting cushion itself, because every dollar spent politically mollifying appearances, is a dollar not spend substantively at the school-site.

It’s not clear what amount of carryover is optimal for a large government agency, or even whether there is any. Certainly every budget is a political document and collateral choices are forced by the way it is designed. But they are also implied in the way it is interpreted.

LAUSD isn’t going broke and the institution should have the courage to stand up to those who would wish to paint it so, as furthering a narrative of churn and disaster that only leaves us poorer than when we started. Our public funds are to be spent on us the public, by us the public. And while we could use more of these, what we have is precious.