‘What if’ scenario outlined in case of school district insolvency
City News Service
The San Diego Unified School District would face county or state intervention if it reaches fiscal insolvency, which could be caused in part if the state cannot uphold its $4 billion commitment to schools, triggering mid-year cuts, according to a report presented to the Board of
The cuts, which would include a loss of half the money pledged for transportation and a reduction of $260 per student in state funding, could begin in February if at least $2 billion of the projected state tax revenue is not reached by December, according to Ron Bennett, president and chief
executive officer of School Services of California.
“When the state Legislature votes to cut you, they know or should know that 90 percent of that is going to be reflected in people, its going to result in cuts to the jobs at the local level,” Bennett told the board.
If the budget for the next year is not approved, financial intervention would begin with the San Diego County superintendent appointing a fiscal expert with limited authority, Bennett said.
If insolvency, meaning the district cannot fund the programs it is legally required to provide, becomes a real possibility, a fiscal crisis and management assistance team may be called in to help identify, prevent or resolve financial problems, Bennett said. The team can also advise state
legislators on the district’s need for a loan.
If a greater level of intervention is required, a fiscal advisor would be appointed with the power to stay or rescind board actions, Bennett said. The advisor would work with the San Diego County Office of Education to avert an emergency loan.
If the loan becomes necessary, the state would appoint a trustee, whose duties mirror that of a fiscal advisor, or an administrator, who would function as both the superintendent and the board of education, depending on the amount of the loan, and would remain until the loan is repaid, Bennett said.
If an administrator is appointed in the most severe form of state intervention, meaning the district is forced to borrow more than twice the amount of its required reserves of 2 percent of the total expenditure budget, the board would lose authority and would function in an advisory-only capacity and the district superintendent would be dismissed, Bennett said.
In this worst-case scenario, the state would retain oversight until the loan is repaid, most likely over 20 years, and the district would still be required to balance its budget, Bennett said.
The state budget caused the district financial vulnerability which could result in the need for emergency assistance, Bennett said, noting that the fiscal crisis was not caused by financial mismanagement on part of the district.
“Ironically, it is the state that brings districts to the brink — and it’s the state that must step in to prevent the fall,” Bennett said.
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