East San Jose school district money problems may prompt takeover

An East San Jose school district is facing a dire financial deficit and could be taken over by the county’s top education office.

The Santa Clara County Office of Education is reviewing Alum Rock Union School District’s second interim financial report for the 2023-24 school year approved by district leaders on March 14, as well as resolutions addressing its projected $20.8 million budget deficit. The outcome of this review is still uncertain, but trustees acknowledge school closures in the district are imminent, as it teeters on landing in the red without drastic cuts.

ARUSD Board President Corina Herrera-Loera said she doesn’t think additional oversight is needed and that the board can come up with a sound plan.

“We, as a district board, get to make some tough decisions in the near future that will not make everyone happy. We cannot keep pushing the hard decisions to another time,” she told San José Spotlight. “If in the near future we as a board can’t make the tough decisions together, then clearly we will need oversight.” 

The district has 22 schools ranging from transitional kindergarten to eighth grade and a population of about 8,000 students.

Trustee Minh Pham said the board directed the administration to create a more comprehensive fiscal plan prior to the budget being adopted in June. He said the board will seek out community input.

“The district’s budget is already required to have oversight from the county education office,” Pham told San José Spotlight. “The district and the community need to sit down together and work out… spending reductions in light of decreased enrollment while protecting educational services.”

In its latest 2023-24 income and expense report prepared on March 14, the district had revenues of nearly $173 million and expenses of more than $208 million. If not for a $72 million prior balance, the district would be in the red by roughly $35.5 million.

But this year’s budget included more than $22 million in federal funding. That amount drops to just more than $5 million going into the 2024-25 school year. This cut, along with a decrease in state and local funds, will reduce total revenues to roughly $146 million — and barely save the district from a $20.8 million shortfall due to a small $36 million balance going into the next school year. Pham said the loss of federal pandemic funding and state learning loss recovery grants is about $20 million. 

With a budget shortfall on the horizon, the school board plans to freeze 48 positions and cut staffing, benefits, services, operating expenses and capital outlay through school consolidation. The board also plans to reduce administrative overhead and look for opportunities to lease facilities for additional revenue streams, Pham said.

Herrera-Loera said it’s possible the Santa Clara County Office of Education would take over if the board doesn’t follow through with its fiscal responsibilities and cost-cutting measures. 

Mary Ann Dewan, Santa Clara County superintendent of schools and a San José Spotlight columnist, said her role is to provide fiscal oversight to ensure school districts meet their financial obligations in the current and subsequent two fiscal years — and that can require corrective action when necessary. 

“We are closely monitoring the fiscal health of Alum Rock Union School District. A determination cannot be made until the review is complete,” Dewan told San José Spotlight. “The impacts of declining enrollment suggest the school district may have individual school sites with lower-than-average number of students, which would increase budgetary pressures. Alum Rock has been facing fiscal pressures for the past six or more years.”

The state allows the superintendent to assign the County Office Fiscal Crisis and Management Assistance Team to review teacher hiring practices, retention rates and more to provide recommendations for corrective action. If that occurs, the district has five days after the determination to appeal.

“I am committed, along with all my colleagues on the board, to fiscal responsibility while protecting our commitments to students, families and staff to the furthest extent possible,” Pham said. “Right now, we have reserves that will enable us some time to make choices strategically and with the consensus of the residents of Alum Rock.”

Contact Lorraine Gabbert at [email protected].