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California School Fiscal Services

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New debate over school reserve cap

Posted on August 21, 2015 at 12:15 AM
We've heard a lot about the reserve cap and as the stewards of fiscal solvency, we are likely all on the same page about the need to repel it.  In any debate, it's always helpful to try to understand the thinking that opposes our position.  This article has a couple of quotes that might help us to better understand the opposition’s position.  In turn, this could help inform us as to how to provide factual information about the relationship between a school district's reserve cap and the State's rainy day fund.  

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San Diego Union Tribune

By Maureen Magee | 5:18 p.m. Aug. 19, 2015

The debate over how much money school districts should be allowed to sock away has been resurrected in California as lawmakers reconvene in Sacramento over the next month to finish their work for the year.

 

School finance leaders and education officials from throughout the county and state have launched a last-ditch effort in recent days to persuade the Legislature to lift new limits on so-called “rainy day funds.”

 

The reserve cap was included in the state budget last year in a trailer bill. The restriction limits school districts to setting aside no more than 6 percent of their budgets in reserve accounts to prepare for economic downturns.

 

The cap goes into effect the year after the state makes any payment into a new rainy day fund for schools and community colleges under Proposition 2, approved by voters last year.

 

Administrators and school boards have argued that the cap puts districts at financial risk by preventing them from adequately preparing for a fiscal crisis — from a potential decline in state tax revenue once Proposition 30 expires, to troubles brought on by natural disaster.

 

But labor leaders and other groups say the cap would free up education funds from bloated reserve accounts, putting money on the table for student programs, teacher salaries and other immediate uses that should be decided publicly.

 

According to a report from the Legislative Analyst’s Office, in the 2013-14 school year the state’s largest districts — those with more than 30,000 students — reported a median reserve of 15 percent of expenditures. The state’s smallest districts with fewer than 300 students reported a median reserve of 66 percent.

 

Reserves had been built up in recent years after districts weathered the recession and feared future fiscal uncertainties.

 

Dan McAllister, the county’s treasurer-tax collector, and Randy Ward, superintendent of the San Diego County Office of Education, have blanketed local legislators with letters sent this month urging a change to the cap.

 

“This makes a mockery of good fiscal behavior — and local control,” said McAllister, who is chairman of the San Diego Unified School District audit and finance committee. “Who other than local districts knows what their reserves should be?”

 

Claudia Briggs, spokeswoman for the California Teachers Association, said an argument for local control is an argument for keeping district reserve caps low.

 

“We had the rainiest of days during the recession and many of these districts sat on humongous reserves, which did nothing to mitigate drastic cuts,” Briggs said. Sen. Steve Glazer, D-Contra Costa and Sen. Jerry Hill, D-San Mateo, were part of a group to announce legislation Tuesday that would raise the state’s reserve cap as high as 17 percent.

 

Glazer praised Gov. Jerry Brown and the Legislature for strengthening the state’s rainy day fund to better position California for weathering future economic downturns. But he criticized the law that was passed last year that restricts how much local districts can save.

 

 

“What we don’t want to do is exercise fiscal responsibility at the state level only to erode that same financial prudence on the local level,” said Glazer, a San Diego State University alum.

 

Chris Prokop, president of the Cajon Valley Teachers Association, said large reserves are unnecessary, especially since the state now has its own rainy day fund.

 

“Now that the governor has a rainy day fund, it’s somewhat redundant to have a backup fund for your backup fund,” said Prokop, who is also a member of the CTA political action committee for San Diego and Imperial counties.


Categories: Politics, Reserve Cap

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