SBE considers relief for scores of LEAs in fiscal crisis

A growing list of local educational agencies have notified the state that they are so close to insolvency that they cannot survive the series of payment deferrals the Legislature has imposed for the coming months.

More than 30 charter schools and small to mid-size districts have petitioned the California State Board of Education for relief from the payment deferrals saying that without the waiver they will have insufficient cash to pay their bills and will require an emergency state loan.

The waiver requests, which are scheduled to be heard at next week's state board meeting, continue to be filed and state officials said Tuesday they will probably need to provide the board with an amended agenda item to account for all of the petitions.

State officials have indicated that while the California Department of Education has recommended approval of the waivers with conditions, staff at the state board will recommend denial.

Of immediate concern to LEAs is a $2 billion apportionment deferral from February of this year to July. School officials are also looking for exemption from a $679 million deferral from April to August this year; and another $1 billion deferral from May to August this year.

The three payments represent a 25 percent reduction of the normal principal apportionment payment for the current fiscal year that will be paid instead in the next fiscal year.

District officials filed cash flow documents with the state to prove their shaky condition.

Left out of this batch of waiver requests but clearly looming on the horizon are three more deferrals coming in the 2010-11 fiscal year of $2.5 billion each: one in July of 60 days; one in October delayed 90 days; and one in March, 2011 for another 30 days.

To navigate the funding maize, bigger districts with more financial resources have been able to get short term loans to cover the gaps. Natomas Unified in the Sacramento area, for instance, took on a $12 million loan at a cost of about $300,000 in interest.

Small districts and charter schools don't typically have that option and the pleas for relief to the state board are symptomatic of the fiscal crisis many are facing.

Indeed, only last month State Superintendent Jack O'Connell announced that the number of LEAs placed on the state's watch' list has jumped 17 percent over last year.

Confronted with the worst economic slowdown in a generation, the 2009-10 interim status report identified 12 districts as receiving a negative certification and 114 districts given a qualified certification.

Just three years ago, there were only three districts given the negative certification and 19 on the qualified list. Last year, there were 108 districts on both warning lists.

The biggest issue of concern, state officials said, is the number of small districts that now populate the watch list. Of the 12 districts considered negative, four are LEAs with budgets of less than $20 million; but among the 114 considered qualified, 52 have budgets of less than $20 million.

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