The school board approved Benicia Unified School District’s second interim financial report at Thursday’s school board meeting.

According to Chief Business Official Tim Rahill, BUSD’s revenue for 2017-18 is at $44.4 million. Thirty-seven percent of the revenue comes from the Local Control Funding Formula, 6 percent comes from local and other funds, 5 percent comes from state funds and 2 percent comes from the federal government. Of the LCFF funds, 37 percent is covered by property taxes and 63 percent comes from the state budget.

Rahill said expenses for 2017-18 were budgeted at $46.3 million. Eighty-six percent went to salaries and benefits for certificated and classified staff, and about 14 percent goes toward supplies, operation services and capital outlay.

Looking at the difference between revenues and expenditures, Rahill said the district was operating at a net deficit of $1.9 million, with $1 million being ongoing in nature and $900,000 being one-time.

Rahill predicts the district’s fund balance at the end of 2017-18 would be approximately $5.2 million, which would provide for the state’s required 3 percent reserve for economic uncertainties and the local board policy reserve.

Trustee Celeste Monnette asked how dependent BUSD was on a healthy stock market.

“If there’s a big flux or a big change, would that significantly impact the projections for what we’re going to be paying into this?” she asked.

Tim Rahill said the market would definitely affect the projections.

“What we do is monitor this with every financial report,” he said. “As they update their records at the state level, they pass that along to us pretty quickly.”

Trustee Peter Morgan said he was apprehensive about the budget because of that level of uncertainty.

“While the market is volatile and always will be, the press and the studies in the last month do not suggest the state will meet any of its projections,” he said.

Morgan also cited a survey which said that 50 percent of Bay Area residents are contemplating moving out of the state and research firms which suggested the U.S. has a 100 percent chance of a recession in the next three years.

“The state cannot do what the federal government does and run a federal deficit,” he said.

“These budgets we’ve been doing for years have us on a path to ruin,” he added.

Rahill said the Public Employees Retirement System (PERS) rate would likely increase over the next two years.

“In the PERS retirement system, over seven years we would put in an additional $744,000 that have the rates stay flat,” he said. “Back in 13-14, those funds continued to be used for something else.”

Rahill said another big factor for LCFF funding is student enrollment and attendance. He noted that BUSD is heading into its third year of declining enrollment.

“We don’t think next year (2018-19) is gonna be as big a decline as we’ve had the last two years, but we do see a decline,” he said, “mainly at the elementary school. We’re monitoring the middle school a lot closer because we’re projecting that to be flat.”

Rahill said the district would be meeting with the principals to discuss it further.

Morgan asked Rahill what he based his projections on. Rahill said they were based on internal analysis and a demographic study from a few years ago.

“We roll forward the grade levels,” he said. “When you roll the grade levels up, for example, first graders become second graders next year. At fifth grade, at the middle school, there is an additional bump from students outside our public schools. There are sixth graders that come from outside of our district.”

While BUSD is currently operating at a $1.9 million deficit, Rahill is anticipating a slight surplus of $200,000 in 2018-19.

“At this point in time, that would be needed to cover a slight deficit in 19-20,” he said.

Morgan requested data to show how much revenue would increase in a recession.

“If we had a 10 percent decline in revenue from the state, we don’t have a reserve to get through that,” he said.

Rahill was open to the request.

Based on the state’s adopted budget for 2017-18, the district is able to provide a positive financial certification. Contributing factors include LCFF and maintaining district reserve funds above the state 3 percent and local board reserve.

The board voted 4-1 to approve the second interim financial report. Morgan was the lone dissenting vote. The report will be filed with the Solano County Office of Education and California Department of Education. Following Gov. Jerry Brown’s May Budget Revise, the district will report back to the school board and provide a final school budget in June.

In other business, the board highlighted the district’s instructional coaches. The community also turned up during the public comment period to comment on issues such as school safety, suggesting increases for teachers and a new policy at Joe Henderson Elementary to have the playground become a student-only zone during morning drop-off time. Supervisor Monica Brown also introduced nine Benicia High School students who read a resolution for BUSD to call upon Congress and the California Legislature to pass legislation to prioritize the protection of school employees and students and to request that the school board to not adopt any policy to arm faculty. The resolution was presented for the board’s consideration for its next meeting.

The board will next meet Thursday, April 19.