A recently-completed audit report of the Morgan Hill Unified School District finances has given the agency a clean bill of health for fiscal year 2006-07, according to district officials.
But the district may have to dip into carefully preserved reserve funds in the upcoming year or make cuts in the budget because of a looming state deficit, Board of Education members were told during their Jan. 29 meeting.
The audit report, prepared by Vavrinek, Trine, Day & Co., certified public accountants, shows no "findings." Usually, when an audit report lists findings, there are changes or corrections that need to be made, said Deputy Superintendent Bonnie Tognazzini, who heads the district's business services department.
Tognazzini also told trustees that the state is looking at a $2 billion shortfall, and the governor's proposed budget would take $360 million from state school districts.
Trustee Peter Mandel pointed out that there will be attempts by lobbyists and others to convince the legislature to amend the budget.
"All of this is based on the governor's proposed budget," he said. "It is never that which is adopted ... However, the total deficit is real, they are still going to have to find the money."
The district could face more than $2 million in cuts, Tognazzini has said.
In case the district should take a financial hit, the business services department is "watching expenses very, very carefully to make sure nobody's
panic buying, worried the money won't be there later," she said.
Mandel said that in the corporate world, with a looming budget deficit, certain steps would be taken, including hiring freezes, purchase order restrictions and other measures. Superintendent Alan Nishino said the district will also do certain things to prepare, such as keeping a close eye on purchase orders.
Tognazzini said there will be a more definitive report by May, when the governor revises the budget again.
In the meantime, she said, the district needs to think about what kind of budgeting process will be used.
Board President Julia Hover-Smoot believes it is important to include interested parties in the process.
"The process is important," she said. "The cuts have to be across the board. No part of the district will be spared. We're going to be looking at how the process is going to work very soon."
In the past, when budget cuts were necessary, the district used a "performance-based" budget process, which involved each department presenting their ideas and discussing how most effectively and least painfully cuts could be made.
Morgan Hill Federation of Teachers President Donna Foster has advocated the district use the same process this time as well. She also has joined with the state union in recommending that the legislature look at other means to make up the deficit before slashing education budgets.
"I also think the board needs to think about a resolution addressing this, because the legislature needs to look a finding revenues some other way," she told trustees.
Marilyn Dubil Marilyn Dubil covered education and law enforcement for The Times.
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