Plumas County schools face a dismal fiscal reality that may force officials to apply for an emergency advance apportionment from the state legislature. The application would mean giving up local control of the school district.
That harsh likelihood followed the results of a two-month financial investigation by an independent state agency. Mike Fine, CEO of the Fiscal Crisis Management Assistance Team, delivered it in his April 12 presentation to the Plumas County Office of Education/Plumas Unified School District at their regular board meeting, held in Portola.
The main agenda item was a projected $8.7 million shortfall for the 2024-25 fiscal year. State investigators attributed much of the fiscal crisis to inadequate board oversight and lack of attention to its fiduciary responsibilities.
State crisis team addresses school board on the root causes of deficit
A beautiful spring evening at C. Roy Carmichael elementary school in Portola brought together a large gathering of concerned teachers, classified workers, parents and community members. Fine’s presentation focused on the current fiscal status at Plumas Unified School District.
FCMAT is an independent state agency that partners with the California Department of Education, the state controller’s office, the state legislature and the governor’s office on school fiscal crisis issues. There are currently 1,100 school districts in the state. Fine, who has been with the organization for ten years, was called to PUSD in March, after the district filed a negative budget with the state following its December 2024 meeting. He and his team have been engaged in a months-long investigation of PUSD’s finances. FCMAT chief analyst Tamara Moreno and John Miles, school fiscal administrator from the California Department of Education, were also in attendance as Fine delivered the findings.
He began the meeting with a warning: “Tonight, there will be discussion about difficult topics.” The first priority of schools is that students get what they need from the district, he added. Fine emphasized that his comments referred to PUSD only, and not PCOE.
School board’s duty includes “unquestionable integrity”
Fine pointedly addressed the four school board members in attendance: JoDee Read, Chelsea Harrison, Cindy Crim and Joleen Cline, who was in Colorado for a funeral and attended online by Zoom. The district 5 seat is currently vacant following the resignation of Leslie Edlund in March.
“The supreme quality of leadership is unquestionable integrity. Without it, no real success is possible,” Fine said, quoting Dwight Eisenhower.
His detailed review of the duties of the school board began with fiduciary duty and its components, including the duties of care, loyalty, disclosure, good faith, prudence and confidentiality. He proceeded to discuss the guiding principles of the board’s fiduciary duties. Questions need to be asked in regard to the allocation resources and the expenditure of funds. Fine repeatedly referenced the effect of the board’s decisions on students, noting that they should also consider compliance with the district’s adopted plan and priorities as well as consistency with laws and regulations. Do the board’s decisions foster public trust, he asked.
Fine then listed 20 indicators of risk or potential insolvency. Among them are a lack of attention to independent audits, insufficient budget monitoring and updates, inadequate cash management, increased or uncontrolled contributions and transfers and continued deficit spending.
“The tone for the organization is set at the top,” he told the board.
“The tone for the organization is set at the top.”
Mike Fine, CEO of FCMAT
The fiscal situation at PUSD may seem sudden but it didn’t happen overnight, Fine said. The primary cause of the PUSD crisis is significant deficit spending. Other contributing factors included poor budget development, improper budget monitoring and incompetence at multiple levels over many years. FCMAT’s investigation found poor audits that predate the current staff. It also found evidence that staff questioned certain directions, circumstances and processes as inaccurate or inappropriate. The superintendent ignored those red flags, he said. The PUSD 2024-25 original budget, approved in June 2024, had a fund balance of $1,112.849. When the unaudited actual numbers were presented in October 2024, the fund balance was negative $1.2 million. By the first interim report in December, the fund balance was negative $ 5.7 million. The FCMAT multi-year fiscal projection has the fund balance as negative $7.4 million by June 30.
Other fiscal concerns
The PUSD fiscal issues go far beyond deficit spending and declining enrollment, Fine reported. The investigation uncovered:
- Lack of position control. There was no record of school district employees, their payroll or benefits. FCMAT had to create a position control document during the review. In spite of not knowing staff expenditures the board approved employee raises.
- Mismanaged collective bargaining agreements.
- Incorrect multi-year projections, which made the district’s position appear better than it was.
- Program budgets that exceeded revenues or relied on expended or expired funding sources, requiring funding from the unrestricted general fund.
- Food service costs which were co-mingled with the general fund taking dollars intended for student instruction
FCMAT presents new multi-year financial projection
The FCMAT team created a new multi-year financial projection covering the 2024-25, 2025-26 and 2026-27 fiscal and school years. Their estimates continue to show negative balances. The district is required to maintain a statutory minimum reserve fund of between $1,272,577 and $1,304,600. PUSD cannot meet those requirements.
The latest FCMAT estimates predict a negative fund balance of more than $8.7 million for the current 2024-25 fiscal year, doubling in 2025-26 and rising to more than $24 million by the end of the 2026-27 school year.
The $1.8 million the district expects to save through 22 staff reductions announced in March will not solve this problem, said Fine. Careful planning in the upcoming 2025-26 year will need to take place to “right-size the budget to revenues,” he said.
Cash flow issues
Basic aid districts like PUSD receive most of their revenue from twice-yearly apportioned property taxes. It is common for basic aid districts to require short-term cash borrowing. This type of borrowing is typically repaid in the same fiscal year or early in the next fiscal year.
Unfortunately, PUSD borrowed from internal sources which it is now unable to repay, said Fine. During September and November, 2024, the district borrowed $10.1 million from three other funds to support the general fund. Those funds include: a special reserve fund for “economic uncertainties” (fund 17); a county schools facility fund (fund 25); and a self-insurance fund (fund 67). Legally, the district is required to repay both funds 35 and 67 within the same fiscal year. That amount is over $5 million.
Meanwhile, cash insolvency is looming. Cash insolvency takes place when payroll exceeds available cash and all borrowing options are exhausted. For PUSD, that could happen as early as July, or as late as September. The projected cash balance for June 30, 2025 is a little more than $2 million. By the end of July, the projection falls to $1.2 million, and by August it is expected to be negative $1.7 million.
Cash insolvency is a trigger for an emergency advance apportionment from the California state legislature. Such an emergency loan would mean the district passes into state receivership, with conditions including the elimination of the PUSD superintendent role, and “advisory” status for the local school board. During the period of the loan, a state administrator would be appointed to oversee the district from a vetted list. The emergency advance apportionment payment would have to be paid back, said Fine.
In the 32 years of FCMAT’s operation, only 10 local educational agencies have progressed from crisis to state receivership, Fine told meeting attendees. Two sets of state statutes define the conditions of emergency apportionments: type 1 is equal to or less than 200% of the district’s required reserve; type 2 is greater than 200% of the district’s required reserve. PUSD will need type 2 based on the current available information, said Fine.
Time is short, he said. An emergency apportionment would need to be included in the state legislature’s budget for adoption by June 30. The board must decide whether to request the apportionment, and complete the prerequisite steps within the next few weeks. The financial figures do not leave them many other options, Fine said.
Board and public questions Fine
New district 2 board member Cindy Crim was the first to question Fine: “How do we not make these mistakes again? What can we do differently?”
Fine’s response did not mince words: “Make sure whoever you hire as superintendent has high standards as well as qualified personnel.” He also recommended that the board enroll in master of governance training and budget format training with the state superintendent. “Have the firm who does the audit present the audit in person or by Zoom at your meeting,” he added.
Members of the public raised questions about the future of sports, electives such as band, and other local programs. Fine said those decisions will lie with the state-appointed administrator.
New chief business official
Interim Superintendent Andrea White briefly introduced interim Chief Business Official Stephanie Shatto, who is leading the district business office in the absence of Chief Business Officer Mallory Marin. Shatto is CBO-certified and has a masters degree in business administration.
Earlier in the meeting, during the public comment period, both the Plumas County Teachers Association and the Classified School Employees Association Chapter 193 issued statements of no confidence in Marin and Human Resources Director Megan Daun, both of whom are currently on leave. PUSD officials would provide no information about their status, citing confidentiality.
The CTA and CSEA representatives expressed disappointment that a closed session agenda item relating to these two officials was removed before the meeting.
Portola students honored
The Principal’s Recognition Award for C. Roy Carmichael was presented by Principal Lara Hollister to sixth grader Jamison Marquette, the son of Jeremiah and Kristen Marquette. Jamison was noted for being hardworking, dedicated, an exemplary student and a friend to all.
Portola Junior-Senior High School Principal Sara Sheridan presented an award to Braiden Jackson, a twelfth grader. Braiden is the son of Dennis and Sandra Wilkinson. He was recognized for being an outstanding citizen, helpful, dependable and punctual, with a passion for learning. He plays varsity football and has been an office aid for three years.
Principal Hollister and Tenaya Kooyman, vice principal, delivered a program spotlight sharing positive changes in the CRC cafeteria. Cook Manager Michelle Deberg (also fondly known as Mama D.), along with assistants Juliette Brennan and Shay McPherson, have encouraged students to try new foods with fresh, homemade options. They post weekly menus in the cafeteria on a large writing board.
What’s next?
The next regular PCOE/PUSD school board meeting is scheduled for May 14 at Chester Elementary School, 158 Aspen Street. The closed session begins at 4 p.m. with the public session following at 5:30 p.m.
