SCHOOL DISTRICTS ON EDGE OF INSOLVENCY HIT RECORD HIGH

 

By Kimberly Beltran, SI&A Cabinet Report | http://bit.ly/KplwX8

Wednesday, May 09, 2012  :: The number of California school districts at risk of failing to meet their near-term financial obligations has reached an all-time high and is likely to increase between now and June, the state’s watchdog on school finance reported Tuesday.

Of 967 districts required to file semiannual reports on their financial status, 172 have classified themselves as having a “qualified” certification – meaning they may not meet their financial obligations this year or next two fiscal years, said Joel Montero, CEO of the Fiscal Crisis Management Assistance Team, in testimony before the Assembly’s budget subcommittee on school finance.

According to Montero, nine districts classified as having a “negative” certification and are at risk of insolvency because, based on current conditions, they won’t be able to meet financial commitments for the rest of this year or next.

“These are districts in jeopardy of running out of cash, meaning they wouldn’t be able to make payroll at some point,” Montero said.

The report comes as the state continues to struggle financially. This year, California faces a $9.2 billion budget deficit that, according to recent revenue projections, could grow by as much as $3 billion.

School district budgets, already feeling the sting of several years’ worth of funding reductions, also could be hit with additional mid-year cuts totaling $4.8 billion if voters reject a November tax initiative designed to restore some of their lost funding.

Montero’s report comes about a month before the official state release of school budget certifications, and the numbers of districts listed as qualified and negative are likely to increase, he said, because his figures are based on districts’ self-reviews of their own budgets.

The official “second interim” report from the California Department of Education, expected around June 1, is based on review and determination by county offices of education, charged with fiscal oversight of the districts within their jurisdiction.

The first interim report, released in late February, showed 840 districts with a positive certification, 120 deemed qualified and seven listed as negative.

While the number of districts with a negative certification was up by two over the February report, that figure is actually the lowest it has been since the 2007-08 school year.

But the 171 districts self-certifying as qualified represents a significant jump in that category, surpassing the previous high of 160 in the second half of the 2009-10 school year.

FCMAT works with county offices to help stabilize the finances of districts struggling to meet their obligations, whether it is by improving management practices, business policies and procedures or organizational structure.

The goal is to help districts avoid having to take out an emergency state loan, which also triggers a state takeover of the district administration.

“The elephant in the room for school districts is what happens in November and how do they both budget and plan for that eventuality,” Montero said.

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