Fewer districts say they’re in trouble
Sleepless nights ahead for Joel Montero
Ten school districts have acknowledged that they’re headed toward insolvency this year or next. An additional 91 districts say they won’t be able to make ends meet two years from now, based on current projections.
The combination represents about 10 percent of the state’s school districts. It’s preliminary and may rise after county offices of education review districts’ financials over the next month. (Montero did not reveal the schools on the list.)
But the totals are lower than the 174 districts that last spring said they were headed for fiscal trouble. That’s surprising to Joel Montero, CEO of Fiscal Crisis and Management Assistance Team (FCMAT), the state agency that straightens out districts’ financial messes. He told district administrators last week at School Services of California’s annual budget outlook presentation in Sacramento that he assumed more districts would file negative self-certifications, indicating impending financial trouble.
“What keeps me up at night are the districts that certified themselves as positive” and shouldn’t have, Montero said. Six of the last eight districts that became insolvent had filed a previous report showing no problems on the horizon.
The latest numbers Montero cited will be in the First Interim Status Report for districts that the state Department of Education will release in March. They’re a snapshot, based on districts’ financial condition as of Oct. 31. A Second Interim Status Report, based on what shape they’re in as of Jan. 31, will be released in June. Districts will base that report on Gov. Brown’s proposed 2011-12 state budget, which basically provides the same level of funding as this year.
But that’s tenuous. If voters in June reject Brown’s request to extend $8.8 billion in temporary taxes – or the Legislature cannot muster a two-thirds majority to put the question on the ballot – K-12 schools will lose $2 billion in funding. If that happens, Montero predicts as many as 50 districts will become insolvent, and hundreds will file “qualified” certifications, meaning they foresee troubles making payroll within the next three years.
In last year’s Second Interim Status Report, a record 160 districts were certified as qualified and 14 filed “negative” reports. Between then and last fall, districts received unexpected good news. In the state budget that it passed in October, the Legislature added back $270 per student in K-12 funding that districts hadn’t expected when they built their 2010-11 budgets. That cushion could account for the expected drop in districts’ “qualified” ratings in the latest report.
But these are volatile times for K-12 schools. Montero and John Gray, vice president and CEO of School Services of California, agreed that districts’ best strategy is a big cash reserve. “I would never apologize for a large fund balance. Hedge your bets against cash insolvency,” Montero said.
The Legislature has actually lowered the required cash reserve to 1 percent of a district’s general fund for large districts (Los Angeles and San Diego) and 3 percent for small districts. But Gray said that, on average, 10 percent would be safer.
Bargaining units may fight large reserves, because there’s less money to bargain over. But, with the state proposing to defer paying a record $10 billion owed to districts into the next fiscal year, districts cannot take a chance of being caught short, Gray said.
The “flattening out” of school districts declaring they are heading toward fiscal insolvency is due to two events. One the Federal government provided another one time boost of revenues and October State budget restored some school funding levels to the May Revise. As a result, school districts can hang on for another year.
What will be interesting is how school district prepare their second interim given the uncertainity of ballot box taxation and the looming March 15 layoff notice deadline. Fundamentally, school districts are receiving 2005/06 fuding and are operting with 2010/11 expenses, a situation that is not sustainable.
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John, you write “If voters in June reject Brown’s request to extend $8.8 billion in temporary taxes – or the Legislature cannot muster a two-thirds majority to put the question on the ballot – K-12 schools will lose $2 billion in funding.”
The projection seems far too hopeful to be written up as if it were a fact. In reality, the only thing we know for sure is that if the tax extensions don’t go through then the Prop 98 guarantee funding level will drop by about $2 billion. …But that doesn’t mean that’s all schools stand to lose. The state has funded below the guarantee level before. In fact, it did so just last year.
So it seems a bit more cynicism/ caution is in order. If the Governor and legislature have to go back to make a second round of $12 billion in cuts on top of the $12 billion in cuts that the Governor has already proposed, all bets (and promises not to cut K-12) are off. In this bleak scenario, I just don’t see how the state can reach $25 billion in cuts if K-12 is cut only $2 billion. There are just too many areas of the budget that are off-limits due to initiative constraints, court decisions, etc. This is the reason why the special election stakes are so high for K-12 … and why those of us who care about public education should consider doing all we can to make sure it gets on the ballot and passes.
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Schools can no longer afford to fund pension obligations (their fault for caving in to union demands), six figure administrative employees who add nothing to the learning environment, and state/federal mandates that are unfunded/irrelevant to the future of a student. While schools can’t do anything about the mandates, they can go ahead and fire useless administrators and renegotiate pensions (if they can’t for legal reasons or don’t have the political will, then schools should consider filing for bankruptcy to break them).
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Some school districts are not “Qualified” because they negotiated with their unions. My union negotiated 6 unpaid furlough days and increased class sizes from the Certificated members and similar reductions among the Classified. As a result there are no in-service days and the students have 3 less school days. The result is an increase in class load at all grade levels and less time to teach the State Standards. As a teacher that’s less individual time per student, more work for me, and less pay. Doing this my district and many others brought their expenditures down, taking them out of the “Qualified” range. This is not the optimal solution, but we are working with the district, the students, and the parents to provide the best education we can. This is a tough time in California and we did not get into this situation overnight. It will take a long time and a lot of compromise and cooperation to correct the problems. However in the process, let’s not forget that education of our children is the future of the world!
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While Anonymous Poster fails to understand how teachers’ pensions are actually funded in California (school districts contribute about 9% of payroll, and teachers, about 9%, with, admittedly, a long-term unfunded liability that has arisen in the wake of the sub-prime mortgage crisis, due to declining investment returns), I am all for reducing school district staff.
I would do it in a different way, though: by consolidating school districts. Tiny jurisdictions do not need separate superintendents, associate superintendents, and support workers, all earning full pay even though they oversee insignificant operations.
Statewide, it is also time to eliminate all school district staff responsible for curriculum, including “coaches”. Curricular materials are now standardized, and are approved by the state. Beyond selecting which publisher’s materials to adopt, something that committees of teachers and principals can do, there is no longer any need for local interpretation. (Incidentally, I don’t like the approved curricula, which meet the letter but not the spirit of the state’s criteria. Nevertheless the decision to centralize and standardize and buy from big publishing houses has already been made.)
Big savings could also be achieved by centralizing school district human resource functions. Statewide model collective bargaining agreements could be adopted, with districts and local unions negotiating add-ons only. Standard employment contracts could also be administered by a central operation. Credential monitoring could be done centrally, and payroll and benefits, contracted to private service firms on a state-wide basis.
Many of the ideas suggested here have been used successfully in Ontario, a Canadian province with a population of over 10 million, and home to the third-largest school district in North America. See “Fewer School Boards Act” and “provincial labour framework agreement”.
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