Reforming school reserve caps crucial to educating our children
- If reserve cap goes into effect, schools won’t be able to save for major projects, enhancements
- Senate Bill 858 limits money school districts can hold in reserve accounts (SB858 is current law)
- Assembly Bill 1318 aims to balance fiscal responsibility, local control, classroom needs, transparency
Except for when it comes to schools.
For the last decade – even before the first indicator of the downturn surfaced – the state worked to balance its budget on the backs of kids. Budget after budget was passed and signed with drastic deferrals of payments to schools. Ten billion dollars of debt was racked up before the state was stable enough to begin repaying school districts.
The result was years of chaotic school layoffs, high-interest loans to keep classrooms open and uncertainty for educators, students and parents.
Education is the great equalizer. Access to a top-quality education has the power to lift individuals out of poverty by providing self-assurance, knowledge, opportunity and, ultimately, independence.
The state must allow schools to protect themselves from inevitable future rainy days.
Toward that end, we have been working hard to reform the School District Budget Reserve Cap, which was passed into law during budget negotiations last year. Senate Bill 858 limited the amount of money school districts can hold in reserve accounts at 3 to 10 percent of their total budget – which, for the average district, is only enough to cover from six to nine days of payroll.
This policy puts districts at undue risk and undermines local control by preventing districts from maintaining adequate budget savings to protect classroom instruction and jobs during economic downturns. The cap also jeopardizes the ability of school districts to save funds needed for large expenses such as textbooks, technology upgrades, buses and fixing or modernizing classrooms, to name a few.
According to the California School Boards Association, if the cap goes into effect, school districts would be forced to eliminate from $5 billion to $14 billion in reserves.
Other credible analysts are sounding alarms if the reserve cap remains in place. Fitch Credit Rating Agency said: “A number of California school districts could see their credit quality weaken if a fund balance cap included in the ﬁscal 2015 budget becomes eﬀective.”
The nonpartisan Legislative Analyst’s Office recommended a full repeal of the cap, noting that school districts use reserve funds in fiscally responsible ways: “Reserves allow districts to manage cash ﬂow, mitigate funding volatility, address unexpected costs, save for large purchases and reduce borrowing costs.”
After ongoing talks with stakeholders, our legislative colleagues and the Governor’s Office it became clear that a full repeal of the reserve cap would not be possible. That is why we introduced Assembly Bill 1318 together – an effort to strike a balance between fiscal responsibility, local control, current classroom needs and transparency.
It is crucial that we deliver a balanced alternative to the governor’s desk as quickly as possible so that districts can plan appropriately for their financial futures on behalf of the children they serve.
We are hopeful our efforts will not be taken lightly. Educators, school boards, parents and others in our districts and across the state are waiting for the Legislature to find a solution that protects our children’s right to an education – even in times of economic uncertainty.
You can help facilitate ongoing conversations by sending a letter to: Gov. Jerry Brown, c/o State Capitol, Suite 1173; Sacramento, CA 95814.
Kristin Olsen of Riverbank is the Assembly Republican leader and represents the 12th Assembly District, including portions of Stanislaus and San Joaquin counties. On Twitter: @KristinOlsenCA
Adam Gray, D-Merced, represents the 21st Assembly District, which includes all of Merced County and portions of Stanislaus County