Source: Webcast of Senate commission hearing

Michael Hulsizer said the cap on reserves contradicts adept policy recommendations of national fiscal oversight organizations.

Source: Webcast of Senate committee hearing

Michael Hulsizer said the cap on reserves contradicts good policy recommendations of national fiscal oversight organizations.

Check out our graphic explainer on the upkeep.

The Legislature passed a country upkeep Sunday with a big funding increase for Yard-12 schools that pleased school district leaders and a concluding-infinitesimal statutory alter that angered them.

The $61 billion in fiscal 2014-15 for Proposition 98, the formula setting G-12 and community higher revenue, includes $4.75 billion more for implementing the Local Control Funding Formula that will raise per-pupil spending nearly 10 percent, on average.

During a hurried hearing earlier the Senate Upkeep and Fiscal Review Committee on Sunday, fifty-fifty the committee chairman, Sen. Marker Leno, D-San Francisco, who led the upkeep negotiations with the governor'south office, best-selling, "I can't tell you why the governor made it (the cap on commune reserves) such a loftier priority; that this is part of our overall agreement on the budget." He said he would have preferred if the proposal had gone through the normal legislative procedure, where the potential affect could have been explored. "There'due south no way I would have done it this way, but this is where we are now," Leno said, before he and other commission members approved the language in AB 1463, the trailer bill on Grand-12 issues, by a 12-3 vote, sending it to the total Legislature for passage.

For years, the Legislature has required that districts proceed minimum reserves to stave off financial crises. Relaxed during the recession, side by side yr it will be restored to between i percent of their budgets for Los Angeles Unified to 5 percent for small districts, with the average being iii per centum. But it has never imposed a maximum reserve, leaving it to each district to make up one's mind what's advisable. The new maximums, in years in which the cap is activated, would range from 3 to 10 percent of the district budgets, with 6 percent for most districts.

The cap on reserves would exist tied to voter passage in November of Gov. Brown's revised plan for a land rainy day fund, and even so only in years when the state actually puts coin into a new reserve for Prop. 98. The rationale for the cap is that in revenue-healthy years, when the state puts aside money into its reserve for educational activity, districts also wouldn't need to accumulate large reserves of their own, so should spend down anything to a higher place the maximum immune. Districts that tin can justify reserves to a higher place the maximum will be able to get a waiver from county offices of education under AB 1463, said Todd Jerue, chief operating officer of the California Department of Finance. He testified Sunday that some districts currently have reserves of 30 to 50 percentage.

Employee unions, whose support Brown is counting on for his re-election and for passage of the rainy 24-hour interval ballot measure, are the primary advocates of the cap on reserves. Steve Henderson, a lobbyist for the California School Employees Association, testified Sunday that districts tend to follow the state's lead. If the country puts coin in a rainy solar day fund, districts will add together to their reserves, fifty-fifty when non necessary, he said. A representative from the California Teachers Association, which besides pushed for the reserve limit, did non testify on Sunday. On Fri, Josephine Lucey, president of the California School Boards Association, defendant the teachers clan of pushing for the cap so that more money would be freed upwards for pay raises.

Sen. Mark Leno acknowledged that the proposal to restrict reserves deserved more extensive hearings. Source: webcast of Senate hearing.

Sen. Mark Leno acknowledged that the proposal to restrict reserves deserved more extensive hearings. Source: Webcast of Senate hearing.

As EdSource has noted previously, information technology would be at least seven years before the land could begin diverting money into a Prop. 98 reserve, and fifty-fifty then strict preconditions would accept to exist met to trigger the cap on district reserves. Considering the cap would exist years away, supporters argued that legislators would accept time to prepare it. "No harm, no foul," as Leno put information technology. But opponents threw back the aforementioned statement: If it's not going to happen for years, "why the rush to enact it now?" asked Andrea Ball, a lobbyist for the California School Boards Association.

Edgar Zazueta, a lobbyist for Los Angeles Unified, said mandatory lower reserves would impact districts' credit rating – i of several effects that proponents hadn't considered.

Other critics said districts would accept to describe down reserves potentially by hundreds of millions, if not billions of dollars, regardless of the corporeality, even so small, the state filled the Prop. 98 reserve. Jennifer Kuhn, deputy legislative annotator with the Legislative Annotator's Part agreed that the lack of a linkage between the sizes of the land and local reserves is a concern.

Michael Hulsizer, chief deputy for government affairs for the Kern County Superintendent of Schools, said a 6 percent cap would "contradict the best practices of national organizations," which recommend 15 to 17 per centum reserves in club to cover two months of district expenses. "We have learned during the recession that districts' reserves were  the biggest protection from financial insolvency and the need to come to you for loans," he told senators. "Every education management group has agreed this is bad public policy."

John Fensterwald covers education policy. Contact him  and follow him on Twitter @jfenster . Sign upward here  for a no-cost online subscription to EdSource Today for reports from the largest education reporting squad in California.

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