Cypress School District certifies positive financial status despite state budget uncertainty

Cypress School District trustees voted March 14 to certify a positive financial status for the current and two subsequent fiscal years after receiving the district’s second interim report, but staff warned that statewide revenue uncertainty could reduce future funding and affect local planning.

Dr. McClung, the district finance lead, presented the second interim report covering revenue and spending through Jan. 31. He said the district is recommending a "positive" certification, but noted state uncertainty: the governor proposed using the rainy‑day fund, and the Legislative Analyst’s Office presented a grimmer outlook, which McClung summarized as the LAO suggesting the shortfall could be larger than the governor’s $38 billion figure. McClung said a reduced cost‑of‑living adjustment (COLA) assumption could translate to a roughly $1.2 million to $1.4 million reduction in district revenue next year.

The presentation outlined revenue sources (about 65% from LCFF/state funding), declining enrollment projections (roughly a 120‑student decline next year), and expected cost pressures such as PERS increases and STRS remaining high. Staff described district measures to respond to a downturn, including using restricted one‑time funds where allowable (ELOP, learning‑loss monies), a temporary hiring freeze on new positions, targeted reductions through attrition, and close cash‑flow management if the state institutes deferrals.

During the discussion trustees pressed staff about particular line items and projects the board approved that evening: the transportation service plan (trustees questioned a $102,000 'books and supplies' line, which staff said covers bus maintenance such as tires and parts), a multipurpose‑room renovation contract to MP South Inc. for $435,000 (funded from capital/fund 40 and restricted ELOP where legitimately chargeable), and a Fortinet cybersecurity license purchase for $21,863.80. Staff explained that some capital and restricted funds can be used strategically to preserve the general fund but noted these are not indefinite solutions.

After discussion the board approved the second interim report and the associated positive certification by voice vote.

"We are presenting to you and recommending a positive certification for tonight's second interim report," Dr. McClung said, while acknowledging the difficult statewide budget outlook and the need for ongoing fiscal conservatism.