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Bill Repealing 2014 Cap on School District Financial Reserves Voted Down in Senate Committee

May 2, 2016

On a partisan vote on April 20, the Senate Education Committee voted down Senate Bill 1249 by Senator Patricia Bates (R-Laguna Niguel) that would have restored the full ability of school districts to save money in reserve accounts.

"Saving money for the future helps the financial well-being of local schools by avoiding painful cuts when the next economic downturn hits," said Bates. "Unfortunately, Sacramento is living in an alternate reality where current law caps the amount a school district can save for a rainy day. There is no good reason to keep this cap other than to please special interests who want more money for their needs rather than the students."

SB 1249 (“Save Our Schools Act of 2016”) would have repealed controversial legislation that Governor Jerry Brown signed in 2014 that ties the hands of school district leaders by forcing them to spend fiscal reserves instead of using them to plan in the best interest of their students. Senate Bill 858 of 2014 limits school district reserves to six percent of its general fund. According to the California School Boards Association (CSBA), a six percent reserve amounts to only a few days’ worth of cash flow needs.

The Legislature inserted the savings cap at the last minute when it approved the 2014-15 state budget. The last minute nature of the insertion ensured very limited debate and discussion of the policy. A diverse coalition of the CSBA, the non-partisan Legislative Analyst’s Office, California school districts, the California State PTA, education groups, civil rights advocates and newspaper editorial boards such as the Los Angeles Times and San Francisco Chronicle have called for the cap’s repeal. CSBA has written a letter in support of SB 1249.

Teresa Stanley, a member of the Folsom Cordova Unified School District’s Board of Education, testified in support of Bates’ SB 1249 today. After the committee vote, she remarked, "School districts need the flexibility to make plans to meet the publicly vetted goals for students. The reserve cap removes that flexibility and forces districts to borrow funds to meet basic needs such as transportation and advanced career and technical education improvements."

Stanley added, "In the not too distant future, another economic downturn will come and school districts throughout the state may be forced into insolvency. A healthful reserve with flexibility is crucial in safeguarding the services upon which our youth depends."

Source:  Office of Sen. Patricia Bates

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