Prop. 2 has hidden surprise for local school districts

Proposition 2 asked California voters to pay down debts and establish a rainy-day fund for education at the state level. The approval of the proposition during the Nov. 4 election also establishes a new state law that shifts budget control in education from local districts to the state level.
The new law takes effect after a state reserve for schools is in place and restricts the reserves of most school districts to between 3 and 10 percent of their annual budget.
“To me it just seems financially irresponsible,” said John Perales, superintendent of the San Benito High School District. “If a district is willing to sacrifice and save for a rainy day, I don’t see why the state government would, in essence, penalize us for being financially frugal and financially savvy.”
The proposition, which will bring the required spending on the state’s estimated $300 billion in debts each year from none to a minimum of $800 million, garnered 69.2 percent approval or more than 4.6 million “yes” votes, according to semi-official election results listed on the Secretary of State’s website Tuesday.
Unlike the constitutional changes that go into effect with Prop. 2, the law restricting school district reserves could be changed in the future by the legislature without a vote from the people.
While most administrators are wary of the changes, Katherine Foster, president of the San Benito High School Teachers Association, supports the smaller reserves and more money for teachers’ salaries and classroom amenities as a way of ensuring taxpayers’ money stays closer to local people.
“Generally, we like to see local control but we also are concerned that taxpayers intend that money to be spent on students and schools and that districts just kind of sit on the money or bank the money – that’s not really a good use of the taxpayers’ money either,” Foster said. “Hopefully, this will set some parameters that will prevent extremes.”
The state education code currently requires a minimum 3 percent reserve but many districts choose to keep higher ones. In the nearby Aromas-San Juan Unified School District, the district had an 18 percent reserve as of the Oct. 22 regularly scheduled board meeting. The San Benito High School District currently has the state-mandated minimum reserve of 3 percent, according to Roseanne Lascano, the director of finance and operations.
But Hollister School District Superintendent Gary McIntire and many trustees have seen firsthand the limits of keeping just a 3 percent reserve.
In 2007, California experienced its worst economic downturn since the 1930s and the recession that resulted created statewide budget problems, which trickled down to school districts.
At that time, the district had the state-mandated 3 percent reserve. By the 2010-11 school year when McIntire joined the district as superintendent, it had a negative certification, meaning the district would be unable to meet its financial obligations for the remainder of the fiscal year or the subsequent fiscal year.
A large part of administrators’ concerns stem from the fact that California doles out allotments of state education funds based on cash flow and tax revenues dip when the economy is bad. Following the recession, many of the state’s payments of education funds were deferred and reached school districts one to six months late, McIntire said.
During these tough years, Proposition 98, which mandates minimum state aid to schools, was also suspended, McIntire said.
Coming out of this dark period of cuts, the district’s trustees chose to establish a target 8 percent reserve by 2017-18. The district currently has a 3 percent reserve.
For Cheryl Rios, of the Hollister Elementary School Teachers Association, the formation of a state reserve fund for schools means districts can keep smaller reserves and put more money into school programming and staffing.
“I think that the bottom line is that the children of the Hollister deserve to have a stable level of education,” Rios said. “And I hope that this would provide this with the (state) rainy-day fund.”
McIntire, though, doesn’t have as much faith in the state.
“It’s a mixed bag. I want the state to have healthy reserves so we don’t get cut again but at the same time, to do that means we have to cut into our reserves,” McIntire said. “It’s a very confusing proposition for school districts and it causes us to wonder about local control.”