Bill to remove school reserve cap fails before Senate panel

Bill to remove school reserve cap fails before Senate panel

(Calif.) A bill that would have repealed California’s statutory cap on the amount a school district would be allowed to maintain in fiscal reserves failed Wednesday to win passage out of a key Senate committee.That doesn’t mean, however, that the issue itself is dead for the session.

There remain at least six bills still alive in the Legislature that would repeal or scale back the legislation Gov. Jerry Brown included in a trailer bill to his 2014-15 budget. The provision limits school districts from holding balances more than twice the minimum reserve requirement during years when contributions are made to the state’s Rainy Day Fund, which voters approved two years ago.

Supporters are likely to continue to press for its removal.

“The arbitrary cap set forth in SB 858 in 2014 has created problems for school districts across the state,” said Sen. Patricia Bates, R-Laguna Niguel, and author of SB 1249. “Districts of all sizes, levels of wealth and students and community make-up have incredibly different needs that cannot be addressed by an arbitrary, one-size-fits-all cap.”

The state has yet to trigger the reserve cap for schools and community colleges, and will only do so once state tax revenues from capital gains are higher than average and two other conditions are met. The Legislative Analyst’s Office has indicated that one of those conditions – payment of all maintenance factor debts prior to 2014 – will be met this year.

In a report earlier this year the LAO did note that the second condition will not be met within the next three years, and could likely take much longer.

Opponents of SB 1249 argued during Wednesday’s Senate Education Committee meeting that even in the unlikely event the trigger does get pulled, a district would still be able to save for the things it needs with approval from its local school board.

“While there is a cap on the assigned and unassigned reserves, there is no cap on the committed reserves, so if a district thought they needed to increase their reserves they could go before their board and vote to raise their reserves for the item they need,” said Steve Henderson, spokesperson for the California School Employees Association. “We would also argue that is a more transparent process.”

According to Bates, districts often used their reserve funds on large, one-time expenditures such as school construction or repair costs, post-employment benefits for employees, investments in educational materials or purchases of large items such as school buses during the 2007-10 national recession.

Without such reserves, she said, districts would likely have been unable to keep schools afloat. Supporters of SB 1249 said this was especially true of smaller districts and those funded with high percentages of property taxes.

“Besides preparing students to be college and career ready, the responsibility of school board members is to be fiscally responsible,” said Teri Burns, legislative advocate with the California School Boards Association, one of the key critics of the budget reserve cap. “This involves being prepared for unexpected events.”

The bill was heavily supported by representatives of school administration, including the CSBA, the California Association of School Business Officials and the Association of California School Administrators.

Opponents of the proposal came largely from the labor side of the school community.

Estelle Lemieux, lobbyist for the California Teachers Association, introduced eight teachers during the hearing who had been affected, they said, by schools maintaining reserves while cutting school days, increasing class sizes and neglecting the sacrifices made by faculty.

One, a kindergarten teacher from Lake Tahoe Unified School District, said that rural schools were able to stave off some issues faced by other schools during the recession, but that many districts had “built up their reserves drastically…during the recession on the backs of their students and educators.”

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