The Galt elementary school district has taken out a loan to make payroll, while Lodi Unified approved freely moving funds among accounts.
The measures were taken to help with local cash flow issues until the state adopts its annual budget. It was due June 30, the same day school districts were required to file their annual financial plan.
"No state budget passed means more uncertainty in making important decisions affecting our children's education," Galt elementary district superintendent Karen Schauer said.
"The delay causes districts to have more difficulty in working together with unions, communicating clearly with stakeholders, and bottom-line, paying the bills from payroll and vendors on time."
Now that school has started, the problem is that some districts may already have large bills to pay in September, but without state funding, many districts will have to start tapping into other accounts, such as emergency reserves, to cover maintenance fees or payroll.
Like many districts in California, both Galt elementary and Lodi Unified have taken out a loan and paid interest to meet payroll and vendor payments.
"This cash flow problem results from the delay in state payments that are due to districts on a monthly basis. These delays continue to bring uncertainty as the state can change the payment schedule at any time," Schauer said.
Meanwhile, the district has depleted its "healthy reserve" to retain programs that advance student learning, she added.
"This feels so unjust for our children and state's future."
Earlier this year, trustees approved moving forward to establish the line of credit for the $2.9 million short-term, low-interest loan through the California Cash Reserve Program.
The program is a cash management tool designed to supplement the district's general fund cash reserves for the fiscal year and to act as a cushion for temporary cash flow needs.
To create this reserve, a one-year tax-exempt obligation is issued by a third party to fund regular monthly expenditures when agencies face irregular receipt of state aid and property tax revenues.
Participation is not uncommon.
Schauer said the district received funding several years ago. Lodi Unified trustees voted to participate in the program due to a similar funding gap in February in preparation of the 2010-11 school year. They were allocated $17.9 million.
Although the Galt high school district qualified for the same program, it has not been used, according to Chief Business Official Audrey Kilpatrick.
"We do not anticipate any payroll delays. That is our priority," she said in an e-mail.
"The public has most likely already experienced the restrictions we have had to place on expenditures and the reduced funding we have available for our schools and students."
Not only has a state budget yet to be approved, but state officials recently decided to start delaying monthly school payments of $2.9 billion in September, rather than October, to help cash-strapped California meet debt and pension obligations. The state had originally planned a 90-day deferral from October to January. That period has now shifted from September to December.
With the state's deferral of district funds, Kilpatrick said staff will continue to monitor the local cashflow.
"We do not anticipate a concern of cashflow as this time, but we are watching every day for the state budget to be passed and eliminate the cash back-log.
"We are eagerly anticipating the budget to pass soon as the lack of a state budget directly impacts our students," she said.
In June and in anticipation of state budget delays, the Lodi school board voted to establish temporary interfund transfers.
At the time, Doug Barge, chief business official for Lodi Unified, was already aware of revenue deferrals imposed by the state for the current school year, and said the district may experience a strain on cash.
Any money borrowed between funds must be repaid within the same fiscal year or following fiscal year if the temporary borrowing takes place within the final 120 days of the fiscal year.
The state was scheduled to send the districts' 14 percent of their funding in September and no funding in October. But, now that payments are delayed, schools are expected to receive 5 percent later this month and the rest next.
Only specific apportionments have been affected at this time, according to Barge.
Meanwhile, on Friday, Gov. Arnold Schwarzenegger signed into law two bills authorizing the state to distribute federal education funds and take effect immediately. "The signing of these two bills into law could not have come at a better time, just as millions of students go back to school," state Superintendent Jack O'Connell said in a written statement.
"These funds will save and protect thousands of important jobs in California schools and provide the dual benefit of stimulating our economy, and helping students reach their full potential."
California's constitution requires that without a state budget, any appropriation bill — like SB 847 and AB 185 — may not be sent to the governor's desk unless the governor requests them by a formal letter.
SB 847 provides the California Department of Education the authority to allocate $1.2 billion from the federal Education Jobs Fund to school districts. It is estimated to save 16,500 education jobs in California.
AB 185 allows the state department of education to distribute nearly $904 million from two federal programs:
• $416 million is provided for districts that have schools participating in the School Improvement Grant program. The participating schools must implement one of four specified school intervention models to turn around the achievement of their students. • $488 million is for Phase II of the State Fiscal Stabilization Fund program designed to stabilize local school budgets. About $271 million will be distributed to K–12 schools, with the remaining going to institutions for higher education. The K–12 funds will be distributed based on cuts to district funding.
Under the education jobs funding, Barge said the district expects to receive at least $4.9 million. He believes the board intends to use it this year.
While local districts have already made cuts for this school year, administrators are already looking ahead to 2011-12.
Cuts in Galt elementary, for example, will affect people power and eliminate programs including kindergarten through third-grade class size reduction, counseling services, district office support, transportation, library services and elementary band, according to Schauer.
Contact reporter Jennifer Bonnett at email@example.com.