Hollister School District is facing a budget deficit of $3.3 million which needs to be resolved by the March 15 deadline for budget approval and school employee layoff notices. In addition, a shift of budget sources must be undertaken soon to prevent adding another $2.7 million to the deficit.
The Board of Trustees heard a fiscal analysis from Michael Bishop, of Michael Bishop & Associates, Inc., during a special session on Feb. 15. He noted several discrepancies and large swings in budget balances seen in periodic updates during 2020-21 fiscal year.
According to Bishop, the 2020-21 budget included an almost $1 million operating deficit in its adoption on June 30, 2020, which became a $1.5 million budget surplus by the time of the first interim report on Dec. 15, 2020, the second time trustees would have been updated on the district’s operating budget.
The second interim report, or third update, on March 15, 2021, showed a surplus, but it had shrunk to $600,000. The fourth update, on June 30, 2021, contained estimated actuals showing an operating deficit of almost $650,000.
By the time the books were closed on the unaudited actuals, the district showed an operating surplus of almost $3.9 million by Sept. 15, 2021.
“That is quite a bit of variability that occurred during that 15-month period of time,” Bishop said.
He went through an analysis of splitting the budget between unrestricted general funds, which can be spent as the district decides, and restricted general funds, which come with requirements on how the district can spend. Both breakdowns showed similar surplus-deficit swings in the overall budget.
“For there to be such a huge discrepancy from one column to the next is like a roller coaster ride,” trustee Elizabeth Martinez said. “I don’t think I’ve ever seen anything like this since I’ve been on the board. I can’t even begin to explain how or ask how this happened.”
Loss of leadership
Bishop said the reason for such variability in the numbers came from a breakdown in business leadership since April 2020. The breakdown happened when former chief business officer Gabriel Moulaison left the district, he said.
“Since then you have had inconsistent leadership in your business department,” Bishop said. “When you have those kinds of transitions, often comes financial difficulties as it relates to the leadership and stewardship that the business office is supposed to provide.”
He added that without Moulaison, accounting decisions were made by other personnel. The trustees indicated those duties were performed by the prior superintendent, while not specifically naming former HSD superintendent Diego Ochoa, who served from 2018 through 2021.
Ochoa did not comment on the financial planning which went into the budget when contacted, but gave a statement about his time as superintendent in Hollister.
“I’m grateful for my experience in the Hollister School District, and the positive special education, early literacy, and social emotional support for students,” Ochoa said.
Martinez and trustee Lisa Marks noted that budget information from Ochoa would come too late to make informed decisions.
“Most of the time I’ve been on the board, I sat down at the desk and that’s when I saw the information for the first time,” Marks said.
“I won’t come to a board meeting and have something laying on my desk and have to make a decision. I’m just not going to do it anymore,” Martinez said.
She also said the trustees were left out of the loop.
“Particularly with a superintendent that didn’t have any checks or balances, not even with the board, there were a lot of things he was doing that we were not aware of,” Martinez said.
Complicating matters for the district is that the 2021-22 unaudited actuals have not been finished, and are not expected to be ready until April 1. Bishop attributed the delay to COVID-related setbacks affecting auditor performance across the state.
Those numbers, which would have normally been ready in December, will give the district an accurate idea of where they stand for the current and future fiscal years. Without them, the district must operate with estimates before the March 15 deadline for budget approval and notification of employee layoffs.
Bishop said the district faces a possible total of $6 million in budget problems. Almost half of that, $2.7 million, can be resolved by shifting budget sources from unrestricted to restricted funding in a one-time move. However, even if the shift is made—and this is the expected outcome—the district still must make $3.3 million in cuts.
Bishop said if the budget isn’t balanced by March 15, the County Office of Education might step in to oversee the budget process, or the district could face takeover by outside agencies to bring it back into operational stability. However, he noted that this latter option was unlikely.
Cuts to consider
Bishop said the district appears to be overstaffed. Asked for an estimated range of overstaffing, he said, “It’s a low in the high 30s, it’s a high in the high 40s.”
“This is the worst scenario any district could be in because we know it impacts people, our children, and we had one person completely devastate the district,” Martinez said in reference to Ochoa’s tenure.
“If we do have cuts, we want to do it together and do it in a way that is compassionate,” trustee Carla Torres-Deluna said. “We deserve to hear whatever comments come this way, and now our responsibility is to move forward.”
Public comment during the meeting focused on the presumption that cuts will be made to district physical education positions as well as a prior budget motion that would have cut 12 other positions.
Trustees clarified that no such cuts were part of a board motion.
“We have not said this area is going to be cut or this area is going to be cut,” Torres-DeLuna said. “That is not identified as of yet. There are false comments being made about ‘this specific position has been voted on.’ Not true.”
Torres-DeLuna noted that “everything is on the table” for consideration by the board on how to balance the budget.
“Decisions that need to be made with respect to solvency are often very difficult and often involve very difficult choices,” Bishop said. He added that his firm is advising the district on how to not only move forward with cuts based on numbers, but also the effects on service in the district and political repercussions.
Next steps
HSD Superintendent Erika Sanchez said the board could consider the budget at the Feb. 22 meeting or in a special meeting before March 15. She added that another factor which may contribute to the staff reductions is a class size agreement which ends June 30.
“I need more time than a week,” Martinez said. “If it’s going to talk about staff impacts, I need time to digest that and I need time to process that to make a determination.”
Sanchez did confirm the district had plans to present to the board on how to move forward with such a short timeline.
“We do have a preliminary list of recommendations for the board,” Sanchez said. “It will be a menu of options for the board to look at and select which options the board would like to move forward with to achieve the reductions that are needed. Those are conversations that happen behind closed doors, in closed session, between staff and the board, and the board decides at that time.”
Previous BenitoLink reports about Hollister School District financial issues:
Schools in the dark about budget shortfall
Over $2.7 million in school funds recovered through audits
BL Special Report: The errors of their ways
Supervisor Botelho slams Hollister School District over litigation
County and Hollister School District agree to confidential settlement, details still sketchy
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