Peterson Endorses Parcel Tax As District Faces Fiscal Emergency

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school-musicLast week, the Davis School board did what it never thought it would do – put yet another parcel tax on the ballot.  However, under the best case scenario, the governor’s budget provides for flat funding if the November tax measure passes.

Even if that occurs, the district would still lose around three million dollars when Measure A sunsets.

But if the governor’s measure fails, and the trigger cuts get pulled, the district stands to be $7.5 million in the hole.

“The county office of education requires that the proposed budget include an acknowledgement of these fiscal challenges and a plan to address the district budget deficit to be fiscally solvent. The contingency plan will need to include program and staffing reductions as well as collective bargaining concessions,” Associate Superintendent Bruce Colby wrote two weeks ago.

“Without a definitive plan to cover the ‘trigger reductions’ and our budget deficit, we are in fiscal distress and could lose our positive budget certification,” he continued.

The board acted as it felt it needed to.

“Sheila [Allen] and I spent awhile saying that was an emergency parcel tax,” Board Member Gina Daleiden said two weeks ago.  “That was absolutely what I believed at the time.  Things have only gotten worse.  It’s almost unpredictably worse.   If we’re going to say, look, game has changed, we have new information and our first job is to protect the school district as best we can, then I’m willing to talk about continuing what you are already paying to bridge us through some additional time.”

Susan Lovenburg, who just announced her re-election bid, explained to the Vanguard her thinking.

“We have known for some time that Measure A was going to sunset,” she said.  “It was our preference not to renew that tax.  We’ve gone to the community four times in the last five years and every time they’ve responded affirmatively.”

“It was the realization as we were working through the adopted budget for next year, that despite the fact that we made $3.5 million in reductions, despite the fact that we’ve passed a parcel tax in March, we still have a budget that does not hold together for two years,” she continued.

Last night, Nancy Peterson, the only other known candidates for the two spots open on the school board, issued a statement in support of the parcel tax as well.

“The funding of education is a statewide problem.  Budget cuts have left communities on their own to mitigate the impact on their students and I support the proposed parcel tax,” she said. “Today’s students should not have to make do and wait for the state to adequately prioritize public education.”

Ms. Peterson added, “I support the Governor’s tax initiative as a first step toward stabilizing funding because continual budget deficits have heavily impacted communities and created vast disparities in financial support for public education. The current situation is not healthy for the academic welfare of our state. Every child deserves a quality education.”

We often hear the term crisis and emergency misused in the public realm.  If anything, the district right now is understating how dire the situation is in.

Without a new parcel tax and a loss of the governor’s tax measure, the district would be faced with making $7.5 million in cuts on top of what they have already cut.

Susan Lovenburg said the board discussed some of this and it would mean 30 to 65 FTE reduction on top of this year’s 50 positions that were laid off.

“As Winfred said during the meeting, those aren’t cuts that you can make and keep the doors open,” she said.  “So it would involve negotiating concessions to shorten the school year, it would likely involve looking at whether we can consolidate schools, because we’ve really been able to hold that conversation steady – the question of school closure.”

“Cash flow from the State continues to be a challenge and the district could be cash negative at year end based upon the updated payment schedule from the State,” Mr. Colby wrote.

“Should the trigger cuts be pulled, the district will in all likelihood be in a qualified state which is the first step towards state takeover,” Susan Lovenburg said.

Three weeks ago Superintendent Roberson laid out the cash flow crisis.

As we have previously explained, the state is consistently behind on its cash payments to the district.  Cash is what is used to make payroll, make purchases, and run the day-to-day operations of the school district.

Because the state is in fiscal crisis they are deferring on those payments, which means the district has to borrow money short-term to make payrolls and function, and then pay that back when they receive their money from the state.

Right now, the district is in trouble.  The current fund balance is $9.6 million, which is roughly $2 million less than last year at this time.

More alarming, the cash balance is between $3 and $4 million.

In order to borrow the money needed to fund the district, they need 25% of what they are borrowing, or roughly $4 million in the bank, otherwise they lack the ability to borrow money and, absent that ability, they cannot run the district.

As Bruce Colby explained two weeks ago, we are getting close to the point where we lack the cash to make payroll.

If the district runs out of cash, the state will have to loan it money and if that happens, the district ends up in a receivership.  Those who do not believe this is a real possibility need to understand that California last spring had the highest number of districts ever that ended up with the state taking over.

Joel Montero, who is the Deputy Executive Officer of the Fiscal Crisis and Management Assistance Team (FCMAT), explains, “When a district gets to the point where it no longer has the cash to pay its bills, it must apply for a state loan, which means state receivership.”

“A school district receives a qualified or negative certification generally because of its inability to maintain the state-required level of reserves in all three years of its multiyear projections. Running out of reserves by itself, however, does not cause a school district to require a state loan; running out of cash does,” Mr. Montero explains.

Districts have to rely on a cash to pay their bills.  The district typically has had to borrow cash locally using what is called tax and revenue anticipation notes known more commonly as “TRANs.”

As Mr. Montero explains, “All of these options are temporary, short-term borrowing – they generally require that the district pay back the borrowing within a year or less. For each of these types of borrowing, the district is required to prepare a cash flow projection that indicates that the borrowing can be paid back from the district’s future revenues in the time frame required.”

This is where the problem starts to emerge, when cash flow projections show that the district will be unable to pay back the local borrowing and they lack the cash on hand, usually about 25% to make the next payroll, the local district will be unable to keep up with their operational obligations plus pay back the borrowing.

“If the district is unable to borrow locally, then the only other option is to request a loan from the state,” Mr. Montero explains.

This is the situation that the Davis School district is getting perilously close to finding itself in.

A loan requires an act of the state legislature, usually sponsored by the district’s local representative, and as an urgency bill it requires at least a two-thirds vote of each house of the legislature so that it can become effective upon the governor’s signature.

This loan from the state, Mr. Montero explains, results in the state taking control of the district.

“The degree of state control is determined by the size of the loan relative to the district’s budget,” he explains.

If the size of the loan exceeds twice the size of the district required service level, the school board becomes an advisory body only, the superintendent is no longer employed by the district, and a state administrator is assigned and assumes the powers of the Board and Superintendent.

“State loans are typically set up for repayment over 20 years. In both situations above, state control remains over the school district until the loan is fully repaid,” he explained. “The State Trustee or State Administrator reports directly to the Superintendent of Public Instruction – the State of California – not the local school board or community.”

All of the costs of ensuring a fiscal recovery are the responsibility of the district and are added to the amount of the state loan.

“The State Administrator’s mission is to restore fiscal solvency as soon as possible so that the loan can be paid back to the state. This will be done by reducing expenditures to a level that is lower than revenues so that the reserves can be rebuilt over time while the state loan is being paid back. This means that all possible avenues for balancing the budget are pursued,” Mr. Montero continues.

“The State Administrator cannot set aside any contractual obligations that the district has already entered into, including vendor contracts and bargaining unit contracts, without renegotiating them,” he said.  “If modifying provisions of these contracts is critical to gaining fiscal solvency, the State Administrator has the power to invoke the timelines available in the contracts or by law, including the ability to use the impasse/factfinding process to unilaterally impose changes in collective bargaining agreements.”

His final note is that the district remains under some level of state control until the payback is complete and generally speaking, “recovery costs more and takes longer if a state loan is required.”

The most ominous statement, though, comes from Bruce Colby, who warned the board that the district could have a balanced budget but still run out of cash due to deferrals from the state.

—David M. Greenwald reporting

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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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32 thoughts on “Peterson Endorses Parcel Tax As District Faces Fiscal Emergency”

  1. 91 Octane

    vanguard: “Last week, the Davis School board did what it never thought it would do – put yet another parcel tax on the ballot.”

    lol, we all knew it would ask for another one just as soon as the last one was approved. The people are making do with less right now, but they are too special for that.

  2. E Roberts Musser

    To 91 Octane: I believe a number of people predicted even before the last school parcel tax was passed that the schools would ultimately be asking for another one very soon. Many of us knew the economic downturn was a long way from being over…

  3. wdf1

    91 O: Your perspective on what’s important and the long term cost of cutting back on education will become clearer when you start raising kids of your own.

  4. wdf1

    Davis Enterprise, 7/3/12: Harris talks about proposed tax on radio ([url]http://www.davisenterprise.com/local-news/schools-news/harris-talks-about-proposed-tax-on-radio/[/url])

    KDRT interview w/ Richard Harris, 7/2/12: The $642 schools tax: Possibly Davis’ boldest political idea of the year
    ([url]http://kdrt.org/node/9747[/url])

  5. 91 Octane

    WDF1: I was a product of the davis schools system, and I can tell you I learned more in one summer than what the school tried in my entire career there. Furthermore I remember many times watching movies in class, useless assemblies, and “day on the green” – the good part of an entire taxpayer subsidized day wasted on fun activities.

    sorry WDF, but I AM interested in seeing what is behind door number two.

  6. wdf1

    91 O: The grass is always greener elsewhere. I’ve been there and done that with looking for alternatives. Wow. I’m sorry that those trips to Yosemite and Canada were wasted on you. I’d be interested to eavesdrop on you conversing about what a drag it all was with low income students I taught in south Sacramento. Again, when you start raising kids of your own…

    It will no longer be about you and your personal resentments.

    Door number two is what you see in all the schools in neighboring districts.

  7. E Roberts Musser

    [quote]erm: To 91 Octane: I believe a number of people predicted even before the last school parcel tax was passed that the schools would ultimately be asking for another one very soon. Many of us knew the economic downturn was a long way from being over…

    dmg: Elaine: The school district doesn’t have a lot of control over the state economy, does it?[/quote]

    So you would concede that as long as the schools don’t get what they think they “need” from the state, we should expect more school parcel tax measures?

  8. wdf1

    ERM: [i]Are you trying to tell us that field trips, etc. are a thing of the past?[/i]

    Field trips still happen.

    All the field trips that I’ve been involved with my kids involved fundraising from parents/families. If a family can’t afford it, then other families make up for it. DSF and private donations have subsidized 6th grade field trips. I’m not aware of field trips being in the school budget.

    I think field trips are a worthwhile experience for most students.

  9. rusty49

    “Last week, the Davis School board did what it never thought it would do – put yet another parcel tax on the ballot.”

    David, did you write this tongue in cheek because I seriously laughed like Hell when I read it.

    On another note, did you get the house?

  10. Frankly

    I’ll vote yes on the parcel tax if two-thirds of the revenue generated is gifted to two disadvantaged school districts in Sacramento.

    Or…

    I will vote yes on a parcel tax to fund temporary investments in Davis’s education system that commit to goals of doing more with less.

    But…

    I will not vote yes to give more money to a system lacking a plan for preventing the growing disparity of education quality access between affluent and poor districts, and preventing escalating costs to support the same or declining service levels.

  11. Frankly

    wdf1: that is doing the same or less with less.

    Doing more with less would be something like using technology to consolodate certain roles/tasks/topics/classes to free up money to be used for more industrial arts options.

    In my view, we should minimize the amount of time a teacher is standing in front of a classroom lecturing. It is the worst style of teaching in this day and age where kids get most of their information from a dynamic and fast-moving flow of data on a 3″ screen.

    Put a marketing professional hat on and try to sell me on what my $600-800 additional cost per year will buy me. Your approach will likely be to tell me it will protect existing teacher jobs and education programs from being cut. That has been the same argument for every reach into my pocket for school funding. It is apparently a perpetual thing. Sorry, but that is not enough. It is time for the rest of us to start demanding a greater return on investment for our hard-earned dollars.

  12. Mr.Toad

    Seems like only yesterday the same arguments were being made. i don’t really care about yes votes who are still yes or no votes that are still no. If anyone who was a yes is now a no or a no that is now a yes i want to hear why?

    As for field trips you can learn lots of things on a field trip. I remember a field trip to the La Brea Tar Pits when I was a kid. I can still visualize the tar pits and a saber tooth tiger. No, we didn’t see a live one.

  13. K.Smith

    Wow. Now there’s zero tolerance for field trips?

    Just FYI: These field trips aren’t 100% paid for my taxpayers. When my daughter went on the 6th grade trip (apparently a long-standing tradition in California schools), we had to pay for it.

    And I’m pretty sure that bands/orchestras/choirs do some pretty serious fundraising when they go on trips.

    The instructional time off for such activities is well worth what the kids learn.

  14. David M. Greenwald

    “David, did you write this tongue in cheek because I seriously laughed like Hell when I read it.”

    No it was a serious comment and reflected the mindset of the board prior to the last few weeks when reality set in.

    “On another note, did you get the house? “

    Headed in that way.

  15. wdf1

    JB: [i]that is doing the same or less with less.[/i]

    A teacher with 5-10 extra students would NOT feel like he/she was doing the same. I think he/she would feel like it was more work.

    JB: [i]Doing more with less would be something like using technology to consolodate certain roles/tasks/topics/classes to free up money to be used for more industrial arts options. [/i]

    I think you’re too technophilic. The teachers I’ve liked best in the district worked a classroom very well without much use of technology. At some point, Murphy’s law will take over, and there aren’t enough redundancies in the system to compensate. Your computer will crash, internet connection will be slow or shutdown, your computer projector will shutdown, or you find out that material you thought was available for use at a certain time is not available, or some other issue you didn’t even think of. Then it comes back to that primitive model of a live human teacher and a live class.

    There are plenty of useful things that computer technologies can do, and I have tried out a lot of them. Additional computers cost money, and whether it is a good investment or not will not win over 2/3 of Davis voters in a time like this to fund them. What I see going on now is teachers presenting some computer/internet resources in class for more extensive use outside of class — Khan academy, typing exercises, math drills. What I predict will happen is probably the next big generation of textbook purchases will be e-books (assuming money is made available to purchase computers or reading devices for everyone), and the publishers will probably supplement their textbook packages with added technology. Even still, I think technology’s promise for solving our education issues is overrated, and even some top Silicon Valley tech types also think so ([url]http://www.nytimes.com/2011/10/23/technology/at-waldorf-school-in-silicon-valley-technology-can-wait.html?_r=1&pagewanted=all[/url]).

    Da Vinci is probably the best lab available for trying new stuff out, but even with their program, I don’t see any remarkable increase in teacher productivity (maybe there is and I just don’t know about it). And some of their more successful and portable strategies that schools like Da Vinci use will spread elsewhere over time. But never fast enough for your liking.

    So you conveniently position yourself as too idealistic to support anything. Must be tough living among mere mortals.

  16. Ryan Kelly

    OK, how about an “exit strategy?”. If this new tax is approved, will it become permanent too? How will the district deal with the sudden loss of money if it is allowed to expire without renewal? If the state restores funding, will we get a tax break or will the funds be used elsewhere?

  17. wdf1

    R. Kelly: An “exit strategy”? That requires forecasting the future. I don’t think anyone will be capable of formulating an exit strategy until revenue/funding bottoms out. It appears that would happen if the Governor’s tax proposal passes. The other key figure to watch is month-by-month state revenue trends. That’s what is used for developing budget assumptions for state budgets.

    When funding flattens out, then I suspect many school districts will feel inclined to build up bigger reserves to weather future downturns. DJUSD was probably average in the amount of reserves they saved up prior to this economic downturn. Several other districts had saved a larger percentage in reserve. But this recent downturn has exhausted available reserves for every district that I’m aware of, especially when deferrals are factored in.

    If you want a more direct answer, I suggest asking Bruce Colby, who would likely make recommendations to the school board if asked, or ask the school board members themselves what they imagine, as they have the more immediate power to set that kind of policy.

  18. E Roberts Musser

    [quote]91 Octane; “short term my blank. it is yearly policy now.”

    dgm: I’m interested in your alternative policy.[/quote]

    So, dmg, you are conceding school parcel taxes are going to be a regular policy? If yes, I suspect you are correct. But at what point is voter fatigue going to set in?

  19. David M. Greenwald

    For now I believe they will be a regular part of funding the district.

    I don’t know when voter fatigue is going to set in. The public seems willing to fund education more than all other government services. Is that willingness unlimited? No. But given the stakes, as long as the district honestly lays out their needs, I suspect the voters will approve it.

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