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LAUSD reviews saving $112 million or more, but no decisions yet

Mike Szymanski | June 1, 2016



CaliforniaCommunityFoundationPedroNoguera

School board meets at California Community Foundation.

In a series of special meetings to address looming deficits, the LA Unified school board on Tuesday reviewed potential savings of $112 million or more, but no action was taken.

The all-day discussion was the third off-site meeting held by Superintendent Michelle King to address recommendations by the Independent Financial Review Panel to stave off deficits that could reach nearly half a billion dollars in three years. The panel’s report was presented to the school board in November.

Three areas of cost savings were discussed at Tuesday’s meeting, held at the California Community Foundation a few blocks from the district’s Beaudry headquarters. In the area of food services, the panel suggested ending the practice of dipping into the general fund by about $50 million a year; changes to warehousing and moving equipment could save more than $12 million a year, and improving payroll operations and financing techniques could save $25 million to $50 million or more a year.

Some of the school board members seemed impatient and wanted to see the cost-saving measures implemented as soon as possible.

“I obviously think that if we received information in November we should be acting on some of it now. Yes, I am concerned,” board member Monica Ratliff said. “I do have a sense that the superintendent has a plan and I know she has been implementing some of the suggestions that were made. There are other suggestions that we should have done ourselves a long time ago.”

In a slice of good news, Laura Benavidez of Food Services said the Breakfast in the Classroom program has made $9 million in net revenue since it was started districtwide. “We found more efficient ways of distributing the breakfasts to every student and saved money,” Benavidez said. The district receives 85 cents a meal, and every student gets breakfast at no cost.

However, the panel report suggested that the district stop subsidizing the food services programs from the general fund and keep the costs contained to the division, instead of draining $50 million a year from the general fund. The six district food programs that include breakfast, lunch, snacks and dinner serve 134 million meals a year. King said that the higher costs of fresh fruit and vegetables and antibiotic-free chicken drive up costs for the district meals.

“Others have looked to us and our district on how to manage and deal with their menus and follow suit,” King said. “We have and are trying to be as efficient as possible.”

Another cost was adding an hour to three-hour shifts for cafeteria workers so they could get benefits, which was unanimously approved in 2008. The additional costs of the 1,700 employees resulted in a larger food services budget, said Chief Financial Officer Megan Reilly.

At one point there were 12 percent vacancies in food services, and now it’s 1 to 2 percent, Benavidez said.

This year 52 percent of the budget ($180.4 million) was spent on salaries and benefits while 48 percent ($168.1 million) was spent on food. That’s a total of $348.5 in expenses, and last year revenues were $321.1 million.

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School board reviews budget saving ideas.

Some of the school board members said the food services program seemed to be on track, and there was little they could do to prevent spending money from the general fund.

Reilly pointed out that other school districts such as Long Beach and Bakersfield are in similar financial situations.

“While the Financial Panel suggests we immediately eliminate this $50 million, I look back and I don’t see how they expect us to do that,” Ratliff said. “It suggests careful menu planning, implementation of consistent production and controlling food costs, and it sounds like we are already doing those things. I don’t see how we can eliminate this.”

The staff also discussed saving $12 million by avoiding the moving and warehousing of equipment from a central warehouse. The idea was to explore a desk-top ordering system that eliminates warehouses and shifts the burden for storage and delivery to the retailer. The district stores high volumes of art, medical, physical education, custodial and maintenance supplies which it gets a lower cost because of bulk orders. The district had previously determined that over the last eight years they had a cost-effective model, and board member George McKenna pointed out that the warehouse employs 360 people.

Zimmer asked if some of the supplies could be sold to independent charter schools that the district oversees, and if those schools could join in the large orders for the district.

The panel report also recommended changes in the payroll system that could save $25 million to $50 million or more and improve effectiveness and efficiency. Reilly said 97,000 W2 forms come through payroll each year, with $225 million for teachers. The payroll department also receives 23,000 calls a year.

The district officials said they have explored outsourcing payroll systems and paying semi-monthly. They noted that payroll costs per check issued have decreased from $6.20 per check in 2013-2014 to $5.81 in 2014-2015, showing some savings.

Board member Richard Vladovic suggested that breaking up the district into smaller units would decentralize payroll and warehousing and create cost savings.

King said, “We have local districts and we are doing everything we can to decentralize.”

Vladovic added, “I don’t think we can sustain this organization if we continue to lose kids. Failure tends to breed more failure.”

Zimmer said, “I’m interested in being bold. We should have the single best customer service in the country.”

Pedro Noguera, distinguished professor of education at UCLA and facilitator for Tuesday’s meeting, suggested that Los Angeles is on the verge of either becoming a bankrupt school district or becoming successful.

“We don’t want to be Chicago or Detroit or Philadelphia,” Noguera said. “There are growing districts like Miami and Denver. We need to figure out what is different. We need to look at other models.”

King said that she is putting together a long-term strategic plan for the district as well as using the board’s input at these meetings for next year’s budget that will be voted on by the school board at the end of the month.

“We need to know where to put the dollars, we have to be strategic,” King said. “We cannot do it all.”

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