California Gov. Jerry Brown signed more than 15 state budget bills last month, one of which will limit the amount of money individual school districts in the state can have in their fund reserves.
The LA Times reports that the bill has been criticized by state educators as a giveaway to employee unions that don’t want money tied up in reserves during contract negotiations.
The approved cap on reserves requires districts receiving funding from the state to keep their reserves at twice the statutory minimum required.
Locally, though, the cap presents various challenges for school districts that have recently gone through a fiscal crisis and have relied on high fund reserves in times of economic uncertainty.
“This particular budget is really not kind to us in Nevada County in general because we don’t have the demographic profile of the students who generate a lot of extra funds,” Nevada Joint Union High School District Superintendent Louise Johnson said.
“And putting a cap on the reserves, it’s really disturbing that the state would take away that discretion from us and put us in harm’s way.”
Johnson said NJUHSD would usually keep two to three months of payroll in their reserves, which would equate to more than $3 million. But with a statutory minimum of $900,000 the district can now only save up to $1.8 million, less than two months of district payroll.
“There’s always been a philosophy that you should spend this year’s money on this year’s kids,” Johnson said.
“I think that was a part of the motivation for the Legislature to consider this idea. But we need to be able to save up for hard times. Passing a law that we’re not allowed to maintain those reserves, that’s going to be particularly harmful for a district like ours with declining enrollment.”
At a board meeting last month, Nevada County Superintendent of Schools Associate Superintendent of Business Services Donna Fitting said limiting reserves makes it difficult for districts and the county to save money needed to stay afloat.
“Enacting this budget makes it illegal to have a certain percentage of reserves,” Fitting said.
“It reduces local control and flexibility in uncertain times and supersedes the uniqueness of each district.”
The Nevada City School District had a meeting on its Local Control Accountability Proposal, also known as LCAP, where Superintendent Roxanne Gilpatric pointed to the effect the cap on reserves will have on the district.
“We’re going to have to borrow money to make payroll so it will end up costing more,” Gilpatric said.
“This affects our cash flow hugely.”
NCSD Business Manager Anne Padget said the new bill is very short-sided.
“It’s irresponsible in my mind,” Padget said.
“It’s going to be harder to plan for the future, and as a basic aid district, it’s not going to give us a safety net. It takes away local control and it’s not good for the kids that we won’t be able to plan ahead.”
Ancillary to the cap on reserves, Gov. Brown signed a bill that will require schools and employees, effective July 1, to pay more for teacher pensions. The bill is intended to remedy the $74-billion shortfall in the California State Teacher’s Retirement System, also known as CalStrs, which is currently 67-percent funded.
Under the measure, CalStrs contributions will gradually increase, and schools will pay the biggest share of the funds. Penn Valley School District Business Manager Laura Estoy said the bill means less money for school districts, as it will raise teacher contributions to 8.15 percent of their salary starting July 1 and will increase by more than 1 percent for each of the following two years.
District contributions will raise by 1.25 percent next year and will gradually increase, through 2020-21, to 19.1 percent.
Estoy says next year alone will cost the newly consolidated Penn Valley Union school district $26,000.
“This is something Gov. Jerry Brown wants before he leaves office, to sustain the teacher’s retirement system. This is his way of doing that,” Estoy said.
“The state is responsible to the taxpayers and they’re elected officials, and I think when they look at the teachers’ retirement, and how much they’re willing to put on the taxpayers of California, it’s kind of a balance to decide who pays those huge bills.”
To contact Staff Writer Ivan Natividad, email firstname.lastname@example.org or call 530-477-4236.