The Natomas Unified School District paid $300,000 in interest this school year – enough to have saved three counselors from being laid off – on a $12 million loan to keep its lights on and staff paid.
It took out the loan because the state of California has failed to send money in a timely fashion, deferring payments to the school district until the state can come up with the money it owes Natomas Unified for operations for the current school year.
The state in general sends fewer dollars to California schools these days – a total of $18 billion less over the last two years. And much of the money districts do receive is coming late – sometimes as much as five months after the payments originally were scheduled.
Instead, when the due date comes for state payments, districts are getting only a percentage of what they are owed. For example, $2 billion of the amount that the state was supposed to send public schools in February won't show up until July. An additional $1.7 billion due in April and May will show up in August. The bulk of the June payment has been pushed off until July, the beginning of the 2010-11 fiscal year.
"What happened with the state over the years is they've started a habit of borrowing from the next year and they've imposed that on school districts," said David Gordon, schools chief for Sacramento County. "It's a dysfunctional way of operating."
As of 2008, all four of the payment delays have been built into law. In addition, school districts will see three other late payments this year, for now characterized as one-time deferrals.
That means districts counting on state funding to cover costs such as teacher salaries and school supplies face seven delayed payments. And the state says payments will be delayed at least seven times again next school year.
A March 30 letter from the state Department of Finance says districts collectively should expect three one-time deferrals of $2.5 billion next school year. July's payment will be 60 days late, October's payment 90 days late and the March payment 30 days late – unless the Legislature decides to pay even later.
Assemblywoman Julia Brownley, D-Santa Monica,who chairs the Assembly's Education Committee, said the deferrals are regrettable but necessary during "one of the worst fiscal crises the state has ever faced."
She said the state opted to defer payments to schools to avoid the expense of taking out loans to pay its own bills.
Districts can apply for an exemption from the deferrals – but essentially only if they are facing bankruptcy.
"You need to show that you can't borrow, that you've exhausted your local remedies and would otherwise need state help," said the state Department of Education's Scott Hannan.
The state hasn't yet told districts how much of what's owed them individually will be deferred next school year – that information will be posted on the Department of Education Web site later this week.
"We're sitting on pins and needles," said John Christ, assistant superintendent at Natomas Unified.
He said the district is expecting to take out a larger loan for next year: "The $12 million may grow to $15 million."
The loans cost districts more than the interest, Gordon said. They require staff time, attorneys to draw up documents, and reviews by county Office of Education staff.
So far, most local districts have managed to avoid taking out loans, juggling finances through layoffs and program cuts, digging into reserves and borrowing from funds dedicated for other expenses, such as pensions and facilities. But even these internal loans usually result in cuts, as state law requires they be paid back from the general fund with interest.
Natomas Unified has cut $21 million from its budget in the last two years. "We're cutting. We've been cutting, and we'll continue to cut," Christ said.
Most area districts are considering taking out loans to get through next school year. Among them: Twin Rivers Unified; Elk Grove Unified; Sacramento City Unified; and San Juan Unified. The El Dorado County Office of Education is looking into loans for multiple districts.
But getting a loan may not be that easy.
Terena Mendonca, associate superintendent of the El Dorado County Office of Education, said California's poor bond rating is making it difficult for districts to issue the short-term notes they use to raise revenue. She said interest costs have also increased.
"We live with the effects of being funded by the state, which makes us unfavorable in the market," Mendonca said.
© Copyright The Sacramento Bee. All rights reserved.
Thu, April 8, 2010
by Majority Vote