Capitol Alert

New push to end school district reserve cap

Hovhannes Muradyan 10, eats breakfast while doing his school work at his desk at White Rock Elementary School in Rancho Cordova in March. Lawmakers on Tuesday announced a new bill to ease a cap on local district budget reserves.
Hovhannes Muradyan 10, eats breakfast while doing his school work at his desk at White Rock Elementary School in Rancho Cordova in March. Lawmakers on Tuesday announced a new bill to ease a cap on local district budget reserves. rbenton@sacbee.com

A bipartisan group of lawmakers launched a new push Tuesday to relax a cap on school district budget reserves that critics blame for increasing districts’ borrowing costs and hampering efforts to prepare for the next economic downturn.

The local district cap was a late addition to the 2014 budget package. The measure, supported by the California Teachers Association and other unions representing school employees, restricts what districts can set aside if state-level reserves for schools reach certain levels.

The cap has never taken effect. Districts can ask the local county office of education for a waiver from the rule. It’s also unclear to what extent it has raised borrowing costs; last month, Gov. Jerry Brown signed legislation, Senate Bill 222, intended to improve the credit ratings of financially stressed districts.

Tuesday, critics said the district reserve cap poses another layer of fiscal uncertainty for school leaders. “California voters understand the importance of saving for an economic downturn,” state Sen. Jerry Hill, D-San Mateo, said. The proposal, to be amended into Senate Bill 799, would increase the cap on local reserves from 6 percent to 17 percent, Hill said.

The California School Boards Association has run radio ads on the issue, and announced a new radio push Tuesday. The reserve cap previously has been used as a campaign issue in some legislative races.

“We pushed it in the campaign, and we’ve pushed it since the campaign,” said Assemblyman David Hadley, R-Manhattan Beach, who unseated a Democratic incumbent last fall. Hadley was a coauthor of a Republican-backed bill, AB 1048 to eliminate the cap, which failed in committee.

Supporters of the existing restriction said some districts increased their reserves even as they cut programs and teachers during the recession. They also said local reserves aren’t as necessary because of the state school reserve created by last November’s Proposition 2.

Claudia Briggs, a spokeswoman for the teachers association, said the union has not taken a position on the latest bill. “Those funds are not doing anybody any good sitting in bank accounts,” she said of district reserves. “Those funds, taxpayer dollars, are best used to enhance student learning.”

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