State to delay payments to schools

August 24, 2010 7:08:52 PM PDT
The state has decided to delay payments to school districts. It means schools and welfare programs will be left short-changed by about $3 billion.

Services will not be affected, because the school districts will find ways to borrow that money or they will dip into their cash reserves, if they have any. Simply put, the districts will be robbing Peter to pay Paul.

In September, school districts were supposed to get money from the state, but they'll have to wait longer. In the meantime, people and services will still need to get paid.

"You are going to use that to pay for your clerical, your custodians, most of your teachers. You pay for your utilities, insurance, things like that, so it's general operating funds of the district," says Sandra Lepley from the Hayward Unified School District.

There are things districts can do such as dip into their cash reserves, which few have, or get loans.

"They can do inter-fund borrowing, short term. So if they have a bond or a parcel tax where the money is coming in regularly, they can do an inter-fund transfer. If the districts can do that, it is the least expensive thing they can actually do," says Sheila Jordan from the Alameda County Office of Education.

Schools can also borrow from private institutions like banks.

Who signs off on these loans? The local county office of education. It's up to that office to make sure districts can repay the loans.

Like many districts, Hayward Unified has a cash flow problem. It will now have to borrow money to make up the difference. This way services will not be affected.

"It's kinds like your personal finances. One month you may have to borrow from savings because you had something was wrong with your car, but next month you'll be able to replenish that," says Lepley.

That's if lawmakers are able to agree on a budget.

But educators say this new crisis puts more pressure on local districts to come up with the money they are owed.

"That really just masks the problem, we need to have the budget settled and the appropriate amount of the monies go to the schools and go to the classrooms," says Mercedes Faraj from the Hayward Education Association.

Right now districts are quickly trying to calculate out how much money they will need to borrow. In the past, they may have used their reserves, but today they don't have that extra cash. For example, Hayward Unified has 20 percent less revenue today than it did three years ago.


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