Record Number of California School Districts Near Bankruptcy

Michelle Klampe writing in the Press Enterprise reports that many schools in California are in extreme financial jeopardy with up to 20% of school districts in the State currently looking unable to pay their bills within the next two years. She notes that districts with a qualified budget could become insolvent in as little as two years absent drastic further cuts or addition of income streams.

Twelve districts — none in the Inland Empire — have indicated they cannot meet their financial obligations this fiscal year or next, a budget status known as negative certification. Another 176 districts indicated they may not be able to pay their bills this year or in 2012-13 or 2013-14, a qualified certification.

Stan Scheer is superintendent of Murrieta Valley Unified School District and claims that a major challenge for schools is predicting future budgets while noting that districts weren't allowed to make assumptions about any future employee concessions.

Murrieta Valley has furlough agreements for 2012-13 to help balance the $145 million budget, but negotiating similar agreements now for future years would be nearly impossible, he said.

"There's no way I would even think about doing that right now," Scheer said. "It's too volatile."

This sentiment was echoed by Paul Jessup, the deputy superintendent for Riverside County office of education, who said that districts achieving a firm financial footing would be impossible while the state budget crisis continued along with uncertainty over taxation plans to provide funding for schools.

"We're in desperate need of an honest state spending plan," he said. "We keep on getting budgets built on hope. Hope is not a plan."

Since the 1990s, districts have been required to file financial reports a year by the 15th or December and March. These reports, known as interim reports, look at cash flow, reserves, deficit spending, labor agreements, enrollment, etc, in a complete review of fiscal health for the current year and anticipated fiscal health for the two following years.

School districts which get qualified or negative certification face extra oversight from the county office and have to file a third interim report. The additional county oversight effectively means that the district's spending decisions will be reviewed and can be vetoed.

The number of districts and other local education agencies facing bankruptcy has increased by 61 since February and by 45 over the previous year's list.

05 24, 2012
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