11:07 PM PDT on Sunday, March 27, 2011

The Press-Enterprise

The state’s decision to delay one-fifth of the funding due to schools is forcing Inland districts to take out loans to pay their bills.

The loans will cost taxpayers hundreds of thousands of dollars in interest, school officials say.

California will defer 21 percent of its funding for school districts in fiscal 2011-12 as a way to help balance the state budget. Similar deferrals were imposed in the previous two years.

“The state is essentially using the districts as a bank,” said Jurupa Unified School District Superintendent Elliott Duchon.

Late payments to schools will now top $9.4 billion. That total includes $2.1 billion in new deferrals for the 2011-12 school year.

School districts have cut staff and upped class sizes to deal with budget cuts from the state. The deferrals are putting on further strain, officials said.

“We’re having to do more borrowing and it’s costing us more,” said Lori Ordway-Peck, assistant superintendent for business support services in the Temecula Valley Unified School District.

Eleven of the 23 districts in Riverside County took out the loans, called tax revenue anticipation notes, this fiscal year. Three of 33 districts in San Bernardino County used the borrowing method.

County education offices expect those numbers to rise for 2011-12.

California Department of Finance Deputy Director H.D. Palmer said the state is deferring money to schools “so in the short term we can keep funding for education fairly level” while the governor makes deep cuts in other programs.

The alternative is to take another $2.1 billion from schools in 2011-12, added Nick Schweizer, education program budget manager in the Department of Finance.

“When we started these deferrals, this was what the school districts were asking for instead of taking it out of the budget then,” Schweizer said.

At the time, school districts were able to survive on their cash reserves, which have dwindled after years of budget cutting.

In the past three years, California has reduced funding to K-12 schools by $18 billion, “a loss of one-third of the annual budget for schools,” State Superintendent of Public Instruction Tom Torlakson said in a news release.


Temecula Valley borrowed $40 million for this year, and the board recently authorized borrowing up to $50 million for 2011-12, Ordway-Peck said.

The interest will cost about $350,000, or about as much as salary and benefits for five teachers, Ordway-Peck said.

The Alvord Unified School District board in west Riverside raised its tax revenue anticipation notes from $15 million this year to $20 million for 2011-12.

The interest for this year is more than $100,000, Controller Tina Daigneault said, or about as much as the salary and benefits for a teacher and a half.

After school started last fall, the district rehired all 16 of its laid-off teachers but sent preliminary layoff notices to them and 39 more this month.

Building maintenance is bearing the brunt in Lake Elsinore Unified School District, said Michael Taylor, executive director of fiscal support services. Buildings aren’t getting repainted as often as they should and roof replacements are being postponed because of budget cuts. Interest on the loans adds to those cuts.

He said the board recently authorized tax revenue anticipation notes up to $35 million and estimated borrowing costs will total about $300,000 from the general fund. That total includes staff time and interest ranging from 0.5 percent to 1 percent, plus interest the district will pay from its general fund to its other funds, such as construction or cafeteria accounts, for internal borrowing. The general fund is the hardest-hit part of districts’ budgets and covers most teachers’ salaries.

Jurupa will borrow $30 million, costing $100,000 to $200,000, Duchon said.

District officials throughout much of Riverside County report similar costs but said they have no other way to fund their monthly obligations.

“You have to, unless you have a tremendous amount of cash,” Duchon said.


Riverside Unified School District is among the districts that don’t have to borrow, said Mike Fine, deputy superintendent. Riverside has cash in self-insurance funds as well as in its construction funds.

Historically, school districts haven’t had to worry about cash flow, he said.

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