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Report Warns of Possible Budget Shortfall

For the first time, the Long Beach Unified School District is reporting that it may not have enough funds to meet its reserve requirements through the end of the school year. The Board of Education this week received its first interim financial report for 2003-04. The report is an early warning system that shows the district's reserves have dipped below the legally required 1 percent of expenses, despite more than $40 million in cuts over the past three years. "In the history of these interim reports, the district has never issued a qualified report, which means we may not be able to meet our financial obligations," said Larry Bozanich, financial services officer. The district has stabilized most expenses, including salaries, but it faces skyrocketing costs for employee health plans and workers compensation. The report was submitted to the County Superintendent on Wednesday. A second interim financial report is due in March. The district meanwhile is implementing further cost-cutting measures and has reduced health costs while maintaining high quality benefits for 4,800 classified and non-represented employees. "We hope we can come back in March to report an improved financial condition," Bozanich said. The state last year lowered its 2 percent reserve requirement to 1 percent in recognition of the statewide budget crisis facing California and its public schools. Unfortunately, the state also made mid-year cuts last year which made it difficult to maintain even a 1 percent reserve. As a result of state cuts and increased expenses, reserves have plummeted below the state's 1 percent requirement. In the coming months, the district will maintain strict control over non-regular salary spending from its general fund, including overtime expenses. Employees are curtailing all travel and conference expenses unless they use categorical funds such as federal and state grants. A freeze on equipment purchases and other deferrable expenses continues. The district hopes to avert class-size increases, layoffs and other damaging cuts that would impair the education of children. Other California school districts are likely to file similar qualified financial reports. San Diego schools face up to $90 million in cuts. Los Angeles schools face cuts of hundreds of millions of dollars.