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ACSA, CSBA Leaders Support Bill to Restore School Districts’ Ability to Maintain Healthy Fiscal Reserves

September 4, 2014

Assembly Republican Leader-Elect Kristin Olsen (R-Modesto) and Senator Jean Fuller, (R-Bakersfield) introduced AB 146 on August 18 – a bill that would restore the ability of school districts to save money in reserve accounts.

The bill faces an uncertain future in a legislature dominated by Democrats, who by-and-large voted in favor of a bill that restricted the ability of school districts to save money in reserve accounts earlier this summer. That move came in the form of a last-minute amendment to the education trailer bill of the recently enacted 2014-2015 State Budget, capping the amount of reserves that school districts could hold.

“Budget reserves are vital to the financial well-being of school districts and it is completely unacceptable that they were capped in this year’s budget at the last minute,” said Assemblymember Olsen. “It is ironic that this was done the same year that we have increased local control in education through Local Control Funding Formula and in the same year that Democrats and Republicans alike have praised a new State Rainy Day Fund (reserve account).”

Senator Fuller, a former Superintendent for the Bakersfield Unified School District and principal co-author of the measure said, “As a former superintendent of schools, I understand the importance of having funds available for emergencies. From fire to vandalism, it is important to have the resources necessary to act quickly to limit the impact on the classroom. Assembly Bill 146 will ensure school districts can appropriately prepare for the unexpected and act in the best interests of the students.”

Senate Bill 858 (Budget) enacted strict limitations on the ability of school districts to maintain prudent budget reserves. The provision will be implemented upon passage of Proposition 2 (The Rainy Day Fund). If minimum deposits are made to the Rainy Day Fund in a given year, school districts must then spend down their reserves in those years.

In 2009, after state revenues plummeted, schools that had managed to build healthy reserves were able to prevent many of the devastating budget cuts in their classrooms. Unfortunately, with the new restrictions on budget reserves, future economic downturns could result in districts not being able to spare their classrooms from painful cuts by using reserve funds. This would hurt the neediest school districts especially hard.

Assembly Bill 146 would repeal the caps and ensure school districts can maintain healthy reserves to protect students and teachers from budget cuts during future economic downturns.

"The thought of the state building a reserve so school districts don't have to is a fa├žade. Once the state makes its first contribution, however small, to the Prop 98 reserve, it could take more than a decade for that account to reach $1 billion. In the meantime, school districts will have been forced to spend nearly all of their reserves, leaving them exposed financially," said Josephine Lucey, President of California School Boards Association (CSBA), and Cupertino Union School District board member.

"Education is built on the premise of providing quality learning opportunities and equality to all California students,” said Wesley Smith, Executive Director of the Association of California School Administrators (ACSA) and former Superintendent of Morgan Hill Unified School District. “Budget caps on local reserves create uncertainty for districts and, more importantly, for our students. Local control gives educators the opportunity to advocate for our students. We know our students and understand their needs. Making monetary decisions at the State Capitol and not at the local level is a disservice to students, their families and the community.”

“Placing a cap on the amount of budget reserves that school districts can maintain is short-sighted, and inconsistent with sound fiscal practices,” said Beverly Heironimus, Legislative Committee Chair for the California Association of School Business Officials and Assistant Superintendent of Business Services for the Dublin Unified School District. “Requiring school districts to deplete their reserve funds will not result in more educational programs, and will only jeopardize their fiscal solvency in the next economic downturn.”

Sources:  Office of Assemblymember Kristin Olsen, EdBrief staff.