Reserve cap blemishes otherwise good news budget

Reserve cap blemishes otherwise good news budget

(Calif.) Despite strong opposition from school management groups, the final state budget approved Sunday night includes provisions restricting the size of reserves that districts can accumulate under certain economic conditions.

The proposal, a last-minute addition to the 2014-15 spending plan, held special importance to Gov. Jerry Brown – although legislative leaders were clearly uncomfortable defending the plan and members of the Senate budget committee agreed to bring the issue back for further review in January.

“I hope that the Department of Finance is hearing what we are hearing,” noted Sen. Mark Leno, D-San Francisco and budget chair. “I don’t understand why the governor had to have this provision included in the budget instead of bringing it through the legislative process, giving everyone adequate time to evaluate it. But here we are.”

Administration officials said the reserve cap was needed to ensure that school districts were not holding back dollars during periods when the state would be making contributions to the proposed ‘rainy day’ fund. They noted that the cap comes with waiver options that could allow districts to exceed limits when undertaking special projects.

Under the system, most districts would be required to have reserves that do not exceed 6 percent of their revenues.

The final budget otherwise provides schools with a lot of good news, with $60.9 billion set aside for the Proposition 98 package.

Among the highlights:

  • About $5 billion set aside to repay districts for appropriation deferrals.
  • $250 million more than Brown proposed for the Local Control Funding Formula, bringing it to $4.5 billion.
  • $250 million for the Career Pathway Trust, which funds a second year of grants for career tech and linked learning programs.
  • $400 million to begin paying off K-14 education mandates with the intent that the money be used for the implementation of the Common Core State Standards.
  • $155 million for new child care slots expected to serve an additional 1,500 low-income students.
  • $4.5 million in federal funds to support development of instructional materials for disabled students.

The plan to cap district reserves would take effect with the 2015-16 budget year.

Districts that wanted to exceed limits could apply to their county superintendent for permission. The waiver would be allowed for up to two consecutive fiscal years within a three year period. To get the waiver, a district board would have to provide documentation of extraordinary circumstances and hold a public hearing.

The budget passage came well ahead of the midnight deadline, with budget committees holding hearings Sunday afternoon and floor sessions ending just after the dinner hour.

Assembly Speaker Toni Atkins, D-San Diego, said she was proud that the budget was on time and balanced.

“The budget also plans for the future and prepares for emergencies by responsibly paying down debt and building up reserves,” she said in a statement. “No budget is perfect, and no side got everything they wanted. But with the investments we made and the restraint we showed, this budget absolutely keeps faith with the vital priorities of ensuring stability and expanding opportunity.”

Senate leader Darrell Steinberg, D-Sacramento – who will be leaving the Legislature at the end of the year due to term limits – noted his last budget returns a lot of services cut during the recession.

“California has also made dramatic progress in improving early childhood education; in building strong foundations to reduce high school drop-out rates; in reforming the criminal justice system; in tackling the afflictions of mental illness; in advancing healthcare; and in preserving California’s verve by stewarding growth toward breathable and sustainable transit-oriented communities instead of endless suburban sprawl,” he said in a statement. more