SLO schools will lose millions when Diablo closes. Here’s how they may cover the gap

In a stark evaluation that captures the gravity of the impending closure of the Diablo Canyon nuclear power plant, a committee of local education, business, parent and youth leaders presented a range of financial options to help San Luis Coastal Unified School District counter an anticipated financial gut punch from lost property taxes.

Those include seeking a parcel tax measure, increasing class sizes, capping health care spending, selling surplus property, establishing an endowment, and pursuing private partnerships.

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A blue ribbon committee of 10 members presented a 12-page report to the district’s school board Tuesday, recommending a list of cuts and revenue-driving efforts to help make up for an $8 million in lost annual property taxes to the district from the impending shutdown.

Committee members included County Schools Superintendent Jim Brescia, Cuesta President Gil Stork, former Morro Bay Councilwoman Christine Johnson and San Luis Obispo Chamber of Commerce’s director of economic initiatives and regional advocacy Melissa James.

The committee, formed at the request of Superintendent Eric Prater, has spent the past several months studying school and financial data and formulating ideas.

“We likened the district’s budget challenge to a person recently diagnosed with a complicated illness,” James said. “The good news is the illness is not fatal; there are a variety of treatment options. But all involve some pain, side effects, and a change in lifestyle.”

Diablo Canyon generates $22 million in local property taxes annually, of which about $8 million per year is allocated to the school district. That accounts for about 10 percent of its funding, representing about 100 teachers or 150 support staff members.

The plant is scheduled to close when its licenses expire in 2024 and 2025.

The loss of PG&E tax money is already daunting, but potentially worsening the blow, the California Public Utilities Commission is scheduled to decide at its Thursday meeting whether ratepayers should foot the bill for an $85 million settlement agreement with local government agencies to help soften the financial impacts of the shutdown, and more gradually transition into an era without reliance on the plant.

Thursday’s hearing is critical to the district, which stands to receive $36 million from that $85 million settlement agreement, the largest anticipated local agency share.

An administrative law judge advised the commission in November not to approve the settlement portion of PG&E’s application, saying ratepayers shouldn’t be responsible for that funding.

“The district has no guarantees that it will receive the $36 million in bridge funding,” the report states. “Further, there are no guarantees that Diablo will continue to operate through 2025. In fact, Diablo could close years earlier. These uncertainties can be offset only by acting swiftly.”

The report encourages the district to work closely with local stakeholders, including teachers and parents, to best decide a strategy for cost-cutting measures and revenue enhancements.

Some of the key points from the report include the following:

▪  A parcel tax: As an example, an $80 parcel tax would generate $3 million annually; parcel taxes require two-thirds voter approval.

▪  The sale, rent, or development of surplus property: Estimates range from $200,000 in rental income to potentially $5 million (one time) for sale of property.

▪  Tuition reimbursement for interdistrict transfer students: Currently, the district receives no funding for 160 transfer students from other school districts, which could be made to pay reimbursement, generating $400,000 annually for San Luis Coastal.

▪  Creation of a permanent endowment: A $10 million endowment could generate $400,000 a year in perpetuity in support of educational programming.

Options that could more directly affect faculty, staff, and students include:

▪  Increased class sizes: Boosting class sizes within limits contractually agreed upon by the district and union could generate $2.5 million annually.

▪  Health-care caps: A negotiated cap on employees’ health-care benefits, similar to what other school districts in the county have, could save the district $2 million to $3 million annually.

Other ideas include an early retirement program for teachers, and adjustments to salary schedules and “step-up increases” in line with available funding resources. A worst-case scenario would be a school closure, which isn’t likely.

The school district already has identified $2 million in annual savings of the projected $8 million annual budget shortfall, using attrition to downsize the district’s office management and site-support staff.

No formal decision was made at Tuesday’s meeting, but the district and its board will be faced with the tough decisions in the months and years ahead.

“Our hope is that this report serves as a foundation for a community-wide conversation that brings together all stakeholders to ensure that San Luis Coastal Unified continues to be a vibrant center of learning for years to come,” the report concluded.

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