California’s fiscally reckless restraint on schools
The California Legislature adjourned for the year without reversing one of the more fiscally reckless moves against local school districts in recent memory. Under a provision in a 2014 budget deal, local districts across the state would be forced to exhaust their reserve funds down to an average 6 percent if the state puts even $1 into its rainy-day fund. The source and motives of this insidious provision are obvious: It was pushed by teachers unions that wanted to compel local districts to spend more money.
Fixing this irresponsible act should be high on the Legislature’s priority list going into the new year.
In our view, the ideal solution would be to lift the cap on reserves altogether. Local districts should have the ability to determine for themselves the level of cushion they need to build into their budgets. In fact, rural and lower-income districts, which have fewer resources and are more vulnerable to revenue swings, typically carry higher levels of reserves. In the 2013-14 school year, for example, smaller districts had a median reserve of 66 percent, compared with 21 percent for midsize districts and 15 percent for large districts.
However, as a practical matter, repeal of the reserve cap is simply not going to happen in a Democrat-controlled Legislature where so many members are beholden to the California Teachers Association.
So the urgent task at hand is to raise the 6 percent cap to a level that is both reasonable to the majority of districts and capable of securing the votes needed for passage.
Sen. Jerry Hill, D-San Mateo, forged such a compromise last session with SB799, which would increase the cap to a more manageable 17 percent. His bill secured the support of 16 lawmakers in a refreshingly rare example of bipartisan cooperation on a significant public policy matter.
It also includes the following reforms:
•Clarifies that the reserve cap covers unassigned balances but does not affect money set aside by districts for emergencies or large future purchases, such as technology, instructional materials or school buses.
•Exempts districts with fewer than 2,500 students and basic-aid districts from the cap because of their distinct cash-flow needs.
Without these reforms, school districts at all levels would be in a precarious situation. The school reserve cap is linked with Proposition 2, the state rainy-day fund approved by voters in November 2014. Once the state begins to put money into that rainy-day fund — no matter the amount — the California’s fiscally reckless restraint on schools - San Francisco Chronicle: