Friday, July 10, 2009

SCHOOL DISTRICTS GET $4 BILLION IN IOUs INSTEAD OF CASH + Schools Chief Jack O'Connell, State Controller John Chiang Announce State Cash Shortage Causes Delay in $4 Billion School Funding Payment


School districts get $4 billion in IOUs instead of cash

by Howard Blume | LA Times LA Now blog

6:16 PM | July 10, 2009 -- Officials announced today that the state budget crisis has caused a delay in payments to school districts, but were hopeful that no school system would experience cash-flow problems as a result.

This delay marks the second time this year that the delivery of school funding has been postponed. A February legislative deal put off paying $2 billion that was due at that time so the state could keep its books balanced. But California’s worsening financial condition has resulted in an additional postponement applying to these dollars as well as another $2 billion that would have gone out to school districts today.

Instead, those funds, totaling about $4 billion, will be released July 30 to ensure that the state has sufficient cash on hand.

“I have no option but to delay payments and issue IOUs that push the state's problems onto schools, taxpayers, businesses and local governments," state Controller John Chiang said in a joint release with state Supt. of Public Instruction Jack O’Connell.

Word of the latest delay was “a bit of a surprise,” said Ken Shelton, an assistant superintendent for the Los Angeles County Office of Education, which oversees the financial condition of school districts in the county. “My big concern is the ability of school districts to meet payroll. This may not be overly significant. Most districts are OK for the moment.”

School systems can obtain short-term loans or borrow from other funds, including federal stimulus money, to cover the cash shortfall, which is presumably temporary. Over the last year, districts statewide have slashed programs and laid off thousands to offset state funding reductions.

Two cash-strapped county school systems, Wilsona and South Whittier, already had applied for a waiver that would allow them to receive their state funding sooner, Shelton said.


California Department of Education News Release

Release: #09-104
July 10, 2009

Contact: Hilary McLean, CDE
Phone: 916-319-0818
Contact: Hallye Jordan, Controller's Office
Phone: 916-445-2636

Schools Chief Jack O'Connell, State Controller John Chiang Announce State Cash Shortage Causes Delay in $4 Billion School Funding Payment

SACRAMENTO — State Superintendent of Public Instruction Jack O'Connell and State Controller John Chiang today announced that a $4 billion payment to schools has been delayed for several weeks as a result of the state's ongoing fiscal crisis.

The payment, known as the Principal Apportionment, is the largest annual payment of state funds to California's public education system. Due to the state's ongoing fiscal crisis and cash shortage, the payment scheduled for release today, which is the last payment for the 2008-09 fiscal year, will instead be issued on July 30, 2009.

"The delay of this school funding payment is a consequence of California's economic crisis and our very serious cash shortage. Public education continues to bear a disproportionate share of the cuts needed to solve our state budget shortfall. And delays in funding as a result of the state's cash flow problems transfer those problems to our local schools," O'Connell said.

"Without budget solutions that provide immediate cash in the treasury, I have no option but to delay payments and issue IOUs that push the State's problems onto schools, taxpayers, businesses, and local governments," Chiang said. "I urge the Governor and lawmakers to provide solutions that get our payments back on track."

The Principal Apportionment is a monthly payment to the public education system. However, the budget agreement in 2003 permanently deferred the June payment to July. Then the 2009 February budget increased the deferred amount by $2 billion, for a total of $4 billion, by deferring a portion of the February payment until July 2009.

In accordance with existing law, the California Department of Education (CDE) certified on July 2, 2009, the amount of 2009 Principal Apportionment funding designated for each county office of education, school district, and charter school. The law requires the Controller to make the payment to schools in the month of July, but historically has made this payment early in the month. Earlier this year, schools were notified to expect the payment on July 10, 2009, but the Controller recently was forced to announce the payment release date has moved to July 30, 2009 in order to ensure that the state has sufficient cash on hand to make the payment in full.

Later this month, CDE will certify another payment that is normally scheduled to go out at the end of July, the first apportionment payment for the 2009-10 school year. However, also due to the February 2009 budget agreement, slightly more than half of the funds that are normally sent out to local educational agencies at this point in the year will be deferred until October 2009.

Related Content
  • Budget Crisis Report Card - Report to the education community and the public about the impact of the state budget on public education.

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