To School Districts, Deferred Money Is Here-and-Now Money

In line with the majority of school districts in California, is using money it doesn't actually have yet to boost teachers' pay and restore school days to the calendar. 

District officials confirmed the budgetary tactic Wednesday, in response to watchdog and trustees' questions about how it could afford the changes, simultaneously issuing notices to nearly 350 teachers and faculty that their contracts would expire and not be renewed at the end of this school year.

Ron Lebs, deputy superintendent of business and support services, said school districts are allowed to consider deferred payments as money already in the bank.

That’s how schools have done their budgeting and spending since the state started issuing deferred payments in 2001-02, said Ron Bennett, president of School Services of California LLC, a consultant to school districts across the state.

The California budget that was approved Oct. 8 "increased spending authority for school districts by an average of 5.17 percent. But the cash is deferred until next year,” Bennett said. “So, districts can use their reserves, borrow or use other means to maintain cash, but they can indeed spend more now.

“The state has never defaulted on a deferral, so it is perfectly legitimate to spend it now.”

Even though it's legal to spend deferred payments, Schools Services doesn't recommend doing it. In a Feb. 18 report, its staffers say: “Given the continuing scrutiny of these funds and the uncertainty surrounding the outcome of the June election to extend the temporary taxes, we advise keeping these funds in your current-year budget but not spending them at this time.”

According to a recent survey, 45 percent of California’s school districts are doing just that. They're not spending their deferred money this year until the end of the 2010-11 year or are waiting for the 2011-12 school year, the state Legislative Analyst Office found. The LAO is a state agency that gives budget and policy advice to the Legislature.

Bennett said the other 55 percent of the districts that do tap into deferred income will either dip into reserves or borrow the money until the deferred payments make them whole. The payments will come, he added.

“Only in government and bureaucratic organizations could ‘deferred,’ which means withheld or suspend, mean the same thing as ‘actual,’ which means existing, current, present,” said Wayne Tate, a lawyer and parent in the district.

Lebs said the district receives its major share of property taxes and state aid in December and April, so the district routinely uses short-term loans to bridge its cash-flow issues.

“The term of the note is approximately one year, and it is borrowed and repaid within the fiscal year,” Lebs said. “In 2010-11 we are borrowing about $60 million and anticipate borrowing the same or a little more for 2011-12.”

He added that the loans have very low interest. Because the district invests the loan money while waiting to spend it, the interest made offsets any costs to borrow the money.

In December, Capo Unified announced the return of two days to the academic calendar (the teachers still have three unpaid, non-instructional furlough days on their calendar). And earlier this month, the district announced the .

But some critics, including a former school board member who was a trustee at the time the agreement was negotiated, . They point to the “proposed restoration language" document leaked to Patch Friday that says restitution comes “following the adoption of the 2010-11 and 2011-12 state budgets.”

In October, the state Legislature finally adopted a budget for fiscal year 2010-11. It included $1.7 billion for California schools that would come as a deferred payment, now scheduled for July. For Capo Unified, that meant about $13.5 million extra dollars it hadn’t included in the budget it had to pass by July 1.

Schools are paid according to a formula called the "average daily attendance," an amount per student. With the extra money, the district recalculated its ADA to $5,208 per student, up from $4,939 a student, according to district documents.

Trustee Ellen Addonizio has been asking district Superintendent Joseph Farley for evidence the money is district coffers. Not receiving it to her satisfaction, she submitted a Public Records Act request for the district’s financial documents Feb. 11. She received a packet Tuesday.

“I want to see the numbers and ensure that this [restoration trigger] has actually occurred,” she said at Tuesday night’s school board meeting, where the board authorized the , counselors, nurses and psychologists who have a one-year contract with the district.

That Addonizio only recently received the documentation she requested surprises her, she said. “I am an accountant by profession. I’d just like to see everything, all the dollars and numbers falling into place. I’m surprised my concerns have not been allayed sooner.”

For further reading on the district's finances: