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O'Connell, Chiang Announce State Cash Shortage Will Cause Delay in $4 Billion School Funding Payment

July 17, 2009

State Superintendent of Public Instruction Jack O'Connell and State Controller John Chiang announced on July 10 that a $4 billion payment to schools has been delayed for several weeks as a result of the state's ongoing fiscal crisis.

The payment, known as the Principal Apportionment, is the largest annual payment of state funds to California's public education system.  Due to the state's ongoing fiscal crisis and cash shortage, the payment scheduled for release on July 10, which is the last payment for the 2008-09 fiscal year, will instead be issued on July 30, 2009.

“The delay of this school funding payment is a consequence of California's economic crisis and our very serious cash shortage.  Public education continues to bear a disproportionate share of the cuts needed to solve our state budget shortfall.  And delays in funding as a result of the state's cash flow problems transfer those problems to our local schools,” O'Connell said.

“Without budget solutions that provide immediate cash in the treasury, I have no option but to delay payments and issue IOUs that push the State's problems onto schools, taxpayers, businesses, and local governments,” Chiang said.  “I urge the Governor and lawmakers to provide solutions that get our payments back on track.”

The Principal Apportionment is a monthly payment to the public education system.  However, the budget agreement in 2003 permanently deferred the June payment to July.  Then the 2009 February budget increased the deferred amount by $2 billion, for a total of $4 billion, by deferring a portion of the February payment until July 2009.

In accordance with existing law, the California Department of Education (CDE) certified on July 2, 2009, the amount of 2009 Principal Apportionment funding designated for each county office of education, school district, and charter school.  The law requires the Controller to make the payment to schools in the month of July, but historically has made this payment early in the month.  Earlier this year, schools were notified to expect the payment on July 10, 2009, but the Controller recently was forced to announce the payment release date has moved to July 30, 2009 in order to ensure that the state has sufficient cash on hand to make the payment in full.

Later this month, CDE will certify another payment that is normally scheduled to go out at the end of July, the first apportionment payment for the 2009-10 school year.  However, also due to the February 2009 budget agreement, slightly more than half of the funds that are normally sent out to local educational agencies at this point in the year will be deferred until October 2009.

Source: California Department of Education