Although a final state budget still appears beyond the horizon line, one budget issue that will potentially have a huge impact on LEAs has been addressed. On June 20 the Joint Budget Conference Committee of the Legislature unanimously adopted an LAO compromise version of a cash management plan for the state.
As EdCal has reported – and as just about everyone now knows – the state faces a huge financial black hole, a hole that has been deepened by falling revenues brought on by a sluggish economy.
These falling revenues are creating a cash flow conundrum for the state. The state controller’s office has already estimated that California will run out of cash in August or September. The governor’s administration originally proposed a cash management plan as part of its May Revision proposal. However, most of the education community reacted negatively to that proposal. The compromise version adopted by the conference committee would do the following:
- Shift payment of approximately $2.8 billion of the February 2009 K-adult apportionment to April 2009. This would occur on a one-time basis for the 2008-09 fiscal year only.
- Of this amount, no more than half would come from the Principle Apportionment, typically referred to as P1. The P1 amount in 2007-08 was approximately $4.1 billion. P1 will typically change year-to-year based on statewide ADA amounts.
- The remaining amount would come from the CSR K-3 February apportionment. The estimated amount would be approximately $800 million.
“I understand why they’re doing this,” said ACSA Management Services Executive Brett McFadden, “but this just puts their cash flow problem on our backs.”
At press time for EdCal, statutory language regarding this proposal was still being developed. ACSA and the Education Coalition have issued a statement opposing this additional education fund shift. This proposal shifts the burden of managing cash flow and incurring substantial borrowing costs onto local education agencies. But the unanimous vote by the conference committee will make it very difficult for education advocates to alter its outcome.
“This proposal is better than the previous ones we’ve seen, but we’re still being made responsible for a problem someone else has created,” McFadden said. “To make matters worse, we’ll have to incur the borrowing costs of this problem.”
ACSA will provide a management advisory on this matter once details become available. Check ACSA Online for breaking budget updates.