County Will Reject Laguna Schools’ Deficit Budget Plan

The Orange County Department of Education today will formally notify the Laguna Beach Unified School District that its deficit budget for 1996-97 has been rejected, setting the stage for outside intervention in the troubled district’s financial affairs.

It will mark the first time the department has ever refused to accept a budget submitted by an Orange County school board, said Wendy Margarita, director of business services for the department.

“There will be a letter that will go out [Tuesday] disapproving their budget,” Margarita said Monday.

The action comes as no surprise to Laguna school officials, who have been struggling to resolve a $1.2-million shortfall in the district’s $13.3-million spending plan.

The budget rejection is the first step in a process that could lead to a county takeover of district finances, but both county and district school officials said Monday they do not expect that will happen. An approved balanced budget must be in place by Nov. 30.

“All indications are that the district will make the necessary reductions in expenditures and/or increases in revenues so that the county will not have to impose a budget,” Margarita said.

Laguna Beach has been immersed for months in a fiscal crisis that school and county officials blame largely on flattened property tax revenues that resulted in the district’s expenses eclipsing its income. Laguna Beach and Newport-Mesa are the only two school districts in the county that depend on property taxes rather than attendance-based state funding.

District trustees have said they plan to make up the shortfall by cutting salaries and by borrowing up to $800,000.

Financial advisors are expected to give trustees more information at tonight’s board meeting about a plan to borrow money by selling certificates of participation, a tool commonly used by school districts to raise funds for capital expenses.

Meanwhile, negotiations are continuing with union representatives about possible pay cuts.

“There have been numerous meetings between district representatives and representatives of the teachers’ union and the classified workers unit,” trustee Timothy D. Carlyle said Monday. “I’m hopeful and confident we’ll be able to conclude the work we have to in order to have a balanced budget within the time frame.”

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Also Tuesday, the county will ask the state to create a budget review committee to examine the district’s budget and fiscal policies, partly to confirm the county’s disapproval of the budget, Margarita said.

The committee--comprised of officials from school districts or county offices throughout the state--is expected to recommend what budget changes could help the district this year and in the future, Margarita said.

The committee’s report is due Oct. 31 but the deadline could be extended, she said.

This is the first time the county has gone through this process.

“There’s never been a disapproved budget,” Margarita said. “The boards of directors in Orange County and the districts are very fiscally conservative, they’re prudent fiscal managers.”

The situation in Laguna Beach is unusual for a variety of reasons, she said. Not only is the district dependent on property tax revenues, which failed to grow as expected, but it was also battered by a string of disasters that cost the district money.

“They were hit with all kinds of disasters, the biggest one being flat growth in [property taxes],” Margarita said. “Then there was the fire, the floods and the [county] bankruptcy. So they had a lot of unusual circumstances.”