District land reuse plan can move forward

As retirement contributions from the district increase, CUHSD searches for new revenue streams including initiative that’s projected to bring in $1 million plus dollars


The district

Michaela Edlin, Editor in Chief

The district will be selling an area of its land to home developers as a part of an initiative to increase funds after approval from the San Jose City Council.
This initiative, known as the For the Kids Initiative, is expected to add between $1 million to $1.5 million of revenue per year for 66 years, a part of the district’s broader plan to prepare for continued funding struggles that will worsen as it pays more into the retirement accounts of teachers and staff.
The rezoning was originally to be voted on by city council Dec. 4, but was deferred until Dec. 11 after a protest broke out in the chamber due to an unrelated agenda item. Because the city approved the rezoning, the developers will spend six to eight months designing and getting approval for home construction in the newly residential parcel before the plan will advance further.
CUHSD trustee Stacey Brown, who submitted the request for the land rezoning, is a strong supporter of this initiative because she sees an issue with current funding.
“The way that schools are funded makes it nearly impossible for us to pay our employees—teachers being the largest group of those employees—in a way that keeps up with just the cost of living,” Brown said.
If the district manages to make up for increasing pensions costs, student programs won’t be at risk. Teachers raises and cost of living increases will also continue, and more counselors may be added to school sites, an opportunity being discussed by the district.
In recent years when funds were available, the district hired more academic counselors, Counseling and Support Services for Youth counselors and a college and career specialist for each site.
The For the Kids Initiative, which could add a significant amount of revenue, utilizes two portions of district land, one portion as a storage locker facility and the other as memory care and daycare center, both portions will be leased out with 60 year leases. The land being rezoned as residential, that has been unused by the district, will be sold to a developer.
This initiative was formed in part because in 2013, California’s retirement system for teachers was severely underfunded, forcing districts to increase contributions from 8 percent in 2013 to 19 percent by 2020.
The district projects an increase from an estimated 7.7 percent to 10.85 percent contribution for teachers by the 2020-2021 fiscal year. For other school employees, there’s a projected increase from an estimated 2.7 percent to 15.293 percent by the 2024-2025 fiscal year, according to the district’s 2018-2019 budget.
Over the next three years, some schools in California may need to use over half of all the new money they’re projected to receive to cover these obligations, according to state Department of Finance and Legislative Analyst’s Office estimates.
California Gov. Jerry Brown has invested over $20 billion into the education system since 2013 in order to help districts deal with this rising burden. Eve Walton, the For the Kids Initiative project manager, feels that this is not enough.
“I was not surprised by that (the retirement obligation increase), but I was surprised that they offered very little financial support,” she said.
All of these factors, as well as the possibility of a recession in the next few years, make it difficult for the district to maintain funding as the student population is increasing.
Brown recognizes that this plan is not an immediate or quick fix, but finds it necessary in absence of more state funding.
“The solutions take a lot longer than I’m comfortable with,” Brown said. “But we’re trying to solve structural problems, and that’s going to take time.”
According to Walton, the initiative has already received over 1,200 letters of support, surpassing the district’s goal of 500 letters. Walton estimates that about two-thirds of these letters were signed digitally.
“I’m really proud and impressed with the support that the community has given the project,” she said.
The mandated pension contribution increase is only one of the factors contributing to what administrators describe as “inequitable funding.”
The Local Control Funding Formula is the system that California uses to distribute aid to schools. Districts receive money from the property taxes within their district and the state supplements this revenue, up to a limit. This is determined on a school’s average daily attendance where for each student there is a minimum amount the state needs to provide.
Some districts, like CUHSD, receive more revenue from property taxes than is set by the limit. Districts like this, called basic aid districts, are allowed to accept the extra revenue, but have limits on how they can increase revenue. Districts who receive basic aid do not see funds increase as enrollment increases. CUHSD receives 9 percent of funding from the state government and 2 percent from the federal government.
Despite the fact that CUHSD receives more money than the limit, the district’s banker, Nancy Pfeiffer, has described the funding that the district receives as “inadequate” based on how LCFF works.
“We’re at the lower end of property taxes for our area,” she said. “And some of the neighboring districts’ parcel taxes are a lot greater than ours.”
The district’s parcel tax is lower than others in the area. CUHSD renewed its parcel tax of $85 per parcel in 2013 and it will be voted on again in 2023. Palo Alto Union High School District has a parcel tax of $758 per parcel and the Los Altos School District has two parcel taxes that sum to $820 per parcel.
In the 2016-2017 school year, CUHSD received $13,542 per average daily attendant, while districts such as Palo Alto Unified and Mountain View-Los Altos received over $19,000 per average daily attendant.
Pfeiffer said that even when property taxes do go up, this doesn’t make up for the difference between what CUHSD receives and what the surrounding districts receive.
“When property taxes go up, it’s not enough to bring our salaries up to comparable to neighboring school just gets enough to keep her status quo,” she said.
In order to address the differences in funding between CUHSD and nearby districts, the district has decentralized maintenance operations, reworked special education department transportation and passed Measure AA with the help of voters. CUHSD also makes money by leasing out the Blackford campus as well as using the Civic Center Act to allow fields on campuses to be rented out for events by outside organizations and companies.
Measure AA, which was passed in 2016, is a bond measure meaning that the money can only go to construction and facility upgrades. Money from bonds can’t be used on counselors and student programs, which Brown, the trustee, and Pfeiffer, the banker, have cited as areas the district is looking to spend more in if the funds are available to do so.
The district does, however, have a $20 million reserve and has chosen to add 6 percent of the budget, instead of the mandated 3 percent, into the reserve in order to prepare for possible funding shortfalls in the next few years.
According to Pfeiffer, the district may need to use these reserves in order to maintain a “fiscally sound budget.”
The district, though, is trying to avoid using these reserves and seeking alternative funding opportunities, like the For the Kids Initiative.
Walton has continually praised the district for “responsible fiscal management” and their AA+ credit rating from Moody’s Investor Service, a rating awarded to less than 10 percent of California schools.
“I feel fortunate that we live in an area is wealthy and where parents support is pretty high,” she said. “Our school district may be able to make up the shortfall without cutting student programs,” she said. “But I can’t say that that that for for for a fact, that that will be the case for other school districts.”