How much is too much for a school district to save?
It's a question that at first seems irrelevant -- perhaps even a little bizarre -- at a time when so many public agencies of all kinds are just scraping by.
But in far East Contra Costa County, some Knightsen School District employees are questioning what they say is an overly cautious approach to money management, one that has enabled the tiny agency to sock away seven-figure reserves in recent years while it has cut back on personnel and the curriculum.
"We've always planned for the worst," said Superintendent Theresa Estrada. "When the county says, 'You should expect to lose X dollars,' we plan for that per-student cut. We budget conservatively. A larger district can wait and see (what happens). We cannot because we have a smaller pot to begin with."
State law requires small districts to set aside at least 4 percent of their budget for a rainy day; based on the $4.2 million spending plan for 2012-13 that Knightsen trustees adopted last month, the one-school district should maintain a minimum of $170,000 in savings.
But Knightsen currently has a safety net of more than six times that amount -- just over $1 million -- and although there's no legal limit to how much it can accumulate, teachers argue that the district should be investing more in students.
"We're not saying spend your last dollar, but we have gone to the brink of wrecking it," said seventh-grade instructor
Those running Knightsen School District say that insufficient revenues give them no choice but to hang on to what they've already managed to save, however.
They point out that it's not enough to have an adequate emergency fund; districts are under a state mandate to show that they not only can pay their current-year bills but those for the following two years.
As such, Knightsen must demonstrate that it can come up with $262,000 annually to repay the $3.3 million loan it took out in 2007 to finish building the first phase of Old River School.
That's $787,000 the district either must have on hand or show in its three-year budget projections where it will get the money.
In addition, it has set aside funds to prove it can cover payroll when the state is late with its checks as well as retirement benefits and unexpected costs.
Administrators have chosen to stash cash because they say Knightsen's needs are greater than future revenue estimates.
As it is, developer fees have dried up with the collapse of the housing market, and help from Sacramento has fallen off: The district not only hasn't received any additional state funding over the last four years, but it has lost $2.8 million in attendance-based revenue.
During 2011-12, Knightsen dipped into its general fund for the first time to supplement what it had set aside for the loan payments, and for the foreseeable future the district is entirely reliant on that pot of money, Estrada said.
Faced with what Business Manager Teresa Sidrian calls a "perfect storm" of setbacks and on the advice of a county Office of Education consultant, the school board decided to start beefing up reserves to ensure it can pay down the loan.
The district also eliminated the equivalent of nearly 12 full-time employees by cutting workers' hours, including that of the librarian. Others lost their jobs outright, including eight classroom aides and the school's only music teacher. Two other instructors who left were not replaced.
But Bruce Colwell, a union representative of teachers in far East County school districts, calls these steps "excessively conservative."
He likens the district's fear of defaulting on its loan payments to a homeowner who lets his children go hungry to make sure he can cover the mortgage.
"Who's really bearing the burden of the debt is the students," Colwell said, emphasizing that Knightsen's children can't wait to be educated.
And teachers fear that the district's austerity measures actually are exacerbating its financial pressures. The fewer enrichment activities it offers and the less individual attention students receive during class, the less likely it is that parents outside the district will want their child to attend, they say -- and each child represents $5,382 in revenue from the state.
"We have to keep being that place where people want to come," said teacher Susan Dutra at a board meeting last month, voicing concerns that the loss of personnel has resulted in larger class sizes.
Indeed, although enrollment has dropped by 50 students over the past four years, the student-to-teacher ratio in grades K-3 has increased from 20 to 1 to 27.94 to 1.
But Estrada says the problem isn't a lack of interest, noting that only a handful of families have pulled out because of the programmatic cuts whereas there's a waiting list of those who want to enroll their child.
The difficulty is that other school districts have clamped down the number of students they're allowing to leave because they, too, are watching their bottom line, Estrada said.
Colwell readily agrees with school officials that the district's current income won't allow it to continue paying on the loan for the remaining 15 years of its life, but he points out that the community might come to the district's aid in November.
Trustees decided this spring to place a $3 million bond measure on the ballot -- the district's first -- to retire the debt, and employees are hoping it will succeed this time; a $5 million proposal two years ago failed by just two votes.
Sidrian, for one, is optimistic.
"It is hard times, but Knightsen is a community that loves its schools," she said.
Contact Rowena Coetsee at 925-779-7141.