CA’s LEAs enjoying fiscal health in the pink

CA’s LEAs enjoying fiscal health in the pink

(Calif.) The fiscal health of California school districts has improved significantly from this time last year when pension uncertainty forced 41 local educational agencies to officially warn they might be in trouble.

Thanks to a still booming economy and a fully funded share of state revenues provided in next year’s budget, just 25 LEAs submitted a “qualified” fiscal report to the state—which is a formal recognition that the district might not be able to cover all financial obligations out three years.

There were, however, four LEAs that landed in the more serious reporting category—a “negative” certification, which means that district officials have determined that, based on current projections, they cannot not meet all their fiscal obligations either in 2017-18 or in 2018-19.

Last year at this time, just two LEAs fell into the negative certification.

The state budget, signed into law by Gov. Jerry Brown on Wednesday, will provide a record $78.4 billion in Proposition 98 funding next year. That translates into an increase of $4,600 in per pupil spending since the depth of the recession five years ago.

Next year’s budget builds on an upswing in Proposition 98 spending since 2012-13 when K-12 schools and community colleges received $58 billion. Such growth can solve many fiscal challenges, even though Brown has been careful not to add many new ongoing programs, including those that might address the teacher shortage, deficient facilities and ballooning pension costs.

In fact, under an agreement to more fully fund the teacher pensions, districts were asked to increase their share by 18 percent over three years—but without any specific increase from the state.

Of the four LEAs receiving negative certification this spring, the biggest is Inglewood Unified, which has had an assortment of problems going back years.

Inglewood was on the brink of insolvency when the state took it over in 2012. Today, with declining enrollment and spiking expenses, the district remains under state receivership and is still struggling with many of the same problems.

The other three LEAs that filed negative reports are Feather Falls Union Elementary; Southern Kern Unified; and Yosemite Unified.

Common issues that force a negative certification can be a declining enrollment, an unanticipated increase in special education costs—especially for small school districts—and litigation.

Under state law, districts must file two interim fiscal reports. The first covers the beginning of the fiscal year through the end of October. The second is an update and covers the period ending January 31.

A positive certification means that the LEAs have been found to be able to meet all obligations for the current year and two subsequent years.

A qualified certification means there’s a question about meeting all demands for the current year and two subsequent years.

A negative certification means the district will not cover all required spending for the current year and the next.

Since the system has been put into place during the early 1990s, the most at-risk districts were reported during the Great Recession:

  • 2007-08: 109 LEAs qualified and 14 negative.
  • 2009-10: 160 LEAs qualified and 14 negative.
  • 2010-11: 130 LEAs qualified and 13 negative.

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