An independent Blue Ribbon Committee has recommended that San Luis Coastal Unified School District consider a mix of cost cutting and revenue enhancements to close the $8 million annual budget gap that will occur due to PG&E’s closure of Diablo Canyon Power Plant.
The volunteer committee – composed of education professionals, civic leaders, district graduates and parents of current district students – was formed last April at the request of San Luis Coastal Superintendent Eric Prater. The committee formally presented its report to Prater at Tuesday night’s School Board meeting.
Prater requested the committee analyze the District’s budget and operations as well as recommend ways for the District to offset the $8 million a year it will lose in property taxes as a result of PG&E’s plan to close Diablo Canyon Power Plant in 2025. For context, $8 million is the equivalent of about 10% of the District’s operating budget, or roughly $1,700 in funding per student each year.
Compounding the District’s budget challenge, $36 million in mitigation impacts that the District had negotiated with PG&E may be in jeopardy. That money was negotiated to stabilize current funding levels in the District until Diablo’s planned closure in 2025.
However, an Administrative Law Judge has recommended against PG&E’s proposed rate increase, which would have funded the $36 million settlement. If the California Public Utilities Commission ultimately sides with the Administrative Law Judge, the District will feel the impact of Diablo’s closing years earlier than previously anticipated.
In the report, the committee compared the District’s budget challenge to a person recently diagnosed with a complicated illness: “The good news is the illness is not fatal; there are a variety of treatment options. But all involve some pain, side effects, and a change in lifestyle. We are not prescribing which options should be chosen. We are simply describing options that can work and recommending that the administration, the Board, teachers and the community engage in a robust discussion about which treatments are best for the District’s current and future students.”
The Blue Ribbon report outlines possible cost-cutting measures and revenue enhancements that could be used in combination to offset the annual $8 million loss. Among the possible revenue enhancements:
- A parcel tax. As an example, an $80 parcel tax would generate $3 million Parcel taxes require 2/3rds voter approval.
- The sale, rent or development of surplus property. Estimates range from $200,000 in rental income to potentially $5 million in one-time sales of property.
- Tuition reimbursement for Inter-district transfer students. Currently, the District receives no funding for 160 transfer students. A fair reimbursement plan could generate $400,000
- Creation of a permanent endowment. A $10 million endowment could generate $400,000 a year in perpetuity in support of educational programming.
In outlining possible cost-cutting measures, the committee recommended the District avoid layoffs by taking full advantage of attrition through voluntary resignations and retirements. Among other possible expense reductions:
- Class size. A relatively modest increase in average class size, not to exceed the maximum average as negotiated in the current contract, could save the District up to $2.5 million annually.
- Health-care costs. A negotiated cap on employees’ health-care benefits, similar to what other school districts in the county have, could save the District $2 million to $3 million annually.
In its report, the committee stressed the need for District officials and the community to address the budget gap with urgency, noting: “It’s difficult enough to face the financial impacts of losing Diablo Canyon eight years from now. But it is possible that Diablo Canyon could close years earlier than 2025. With that in mind, the District should plan to have identified and implemented measures to completely close this structural gap within the next three fiscal years.”
The committee also recommended that the Board “provide every opportunity for all stakeholders – parents, students, employers, teachers, staff, community members and union leaders – to engage in a process that helps the Board reach fair and workable decisions rather than unilateral decision-making.” The committee also urged stakeholders “to be constructive in expressing their concerns and avoid reflexive opposition.”
The report concluded: “Our hope is that this report serves as a foundation for a community- wide conversation that brings together all stakeholders to ensure that San Luis Coastal Unified continues to be a vibrant center of learning for years to come.”