Schools’ Money Woes Rise (CA)

July 6, 2010

Ten of the 23 school districts in Riverside County and another 10 of San Bernardino County’s 33 districts expect to have trouble paying their bills in the next two years, according to the state’s watch list.

Last week, the state released its updated list of districts whose three-year budget projections earned them a "qu alified" label, indicating they may not be able to meet all their financial obligations for the next three years, or "negative" label, meaning they can’t pay their bills for the current or next year.

The Inland school systems are part of what state officials say is a dramatic statewide increase on the fiscal early warning list as funding dropped three years in a row. Most school revenue comes from the state.

"We have never seen 160 qualified districts being on this list," said State Superintendent of Public Instruction Jack O’Connell.

Those with qualified or the more serious negative certifications must cut expenses or raise revenue to avoid extra fiscal review and, as a last resort, takeover by a state administrator. State administrators took over eight districts since 1991 after they received emergency loans.

O’Connell said that the number of school districts on the watch list has increased by 38 percent since the beginning of the budget year. He blamed the state’s budget crisis and inadequate funding for public education for the fiscal peril of districts educating 38.56 percent of California students.

 O’Connell said 16 percent of California districts submitted budget reports certified as negative or qualified this spring.

No Inland districts have negative certifications. Most districts have positive certifications that they can meet all financial obligations.

One qualified district, Temecula Valley Unified School District, said it has already fixed problems that landed it on the early warning list.

O’Connell said districts all have different circumstances, but falling rev enue is a common problem.

For instance, Riverside Unified School District’s revenues are shrinking from almost $320 million in 2009-10 to a projected $287 million by 2012-13. The district has been spending its reserve funds as expenses drop from $329 million in 2009-10 to $310 million in 2012-13.

Riverside Deputy Superintendent Mike Fine said about half of that district’s $43.6 million shortfall for 2010-11 was addressed by one-time fixes, such as spending down reserves.

Fine said the Riverside board will start trying to cut more ongoing expenses in October, or as soon as the California Legislature adopts a 2010-11 budget and districts know how much money to expect.

Also, districts throughout California are running out of one-time money, such as federal stimulus funds that saved most teachers’ jobs for 2009-10, said Scott Hannon, director of the School Fiscal Services Division of the California Department of Education.

However, Temecula’s latest round of financial reports indicates the district is back in the positive, said Jeff Okun, assistant superintendent for business support services. The district filed a qualified report in March not because the books were out of balance, but because of concerns about cash flow that have since been resolved, Okun said.

State deferrals of payments to schools had created cash concerns, and school officials weren’t sure they would be able to secure a private loan to cover payroll and other expenses until the state funds came in. Shortly after the district declared its budget qualified, school officials received word they would get the bridge loan.

"It was all a matter of timing," Okun said.

Riverside Unified school board President Lewis Vanderzyl said the district where he spent his career as a student, teacher and principal has always tried to be responsible in budgeting. Vanderzyl said it’s embarrassing and frustrating to have a qualified budget.

"California needs to get real in terms of revenues" and raise money to fund education, Vanderzyl said.

Frank Pew, president of the California School Boards Association, said the state ranks 47th nationwide in per-student funding and last in student-teacher ratios.

In the 2009 ranking by Education Week, California spent $7,571 per student compared with a national average of $9,963. Vermont spent the most per student, $15,139.

Next year, kindergarten through third-grade classes will average 26.5 students in Riverside and up to 28 or 29 in Corona-Norco, where early elementary classes had only 20 students two years ago. High school classes will go up from 35 to 36 or 37 students.

Nationally, all class sizes average 15.5 students per teacher, said Lindsey Burke, education policy analyst for the Heritage Foundation in Washington, D.C.

She said more federal money will only delay long-term systemic changes states need to fix budget shortfalls and improve education.

"So many things don’t require additional money," Burke said, such as a shift to rewarding and retaining teachers based on their effectiveness and their students’ academic performance.