Print this Article

Faced With State Cash Shortage, Chiang and Lockyer Defer $2.5 Billion for K-12 Education

By Jeff Hudson - August 26, 2010

Faced with a looming cash shortage in Sacramento because there is still no state budget, State Controller John Chiang and State Treasurer Bill Lockyer moved on Monday to impose deferrals of $2.5 billion in funding for K-12 education in California.

The deferrals had originally been an option in October. Now, the deferral will be fast-tracked to September instead.

The move does not come as a complete surprise to many California school districts, who are by now all too familiar with the state’s ability to postpone payments.  But the deferral still puts a squeeze on already stressed school district budgets, since many districts will have to borrow to make payroll in the near term, and will need to pay interest on those loans.

State Superintendent Jack O’Connell told the San Francisco Chronicle that “Essentially, this is ... the state pushing its cash management (problem) to local districts.”

In a letter dated Monday, Chiang and Lockyer said “The decision for deferral acceleration was not taken lightly, given that these programs are already facing multiple hardships of potential budget reductions, payment deferrals last July and reduced month payments because of the late budget.” Department of Finance Director Ana Matosantos also signed the letter.

The letter noted that “the state has not enacted a timely budget that would provide valuable additional savings and receipts and allow for external borrowing."  They also acknowledged the financial strain school districts are facing and said, “unfortunately, this accelerated deferral of state payments will further exacerbate that situation.”

The deferrals were made possible by legislation approved back in February. To see an EdBrief story from February describing that process, click here.

Editor's Note:  Jeff Hudson is the editor of EdBrief and an award-winning education reporter and writer in print, radio and television media.