Question: Can you provide any information on districts who have received state loans due to fiscal insolvency?
Response: FCMAT has information on our website reflecting those districts that have had to request, and have received, a state loan due to becoming insolvent (i.e. running of cash). That information can be found at: http://wwwstatic.kern.org/gems/fcmat/CALIFORNIASTATELOANSTOSCHOOL.pdf.
Basically, the districts who have received state loans include: Richmond School District (now called the West Contra Costa Unified School District), Coachella Unified School District, Compton Unified School District, Emery Unified School District, West Fresno Elementary School District, Vallejo Unified School District, and Oakland Unified School District. The loans have ranged in size from $1.3 million to $100 million.
If a school district governing board determines during a fiscal year that it has insufficient funds to meet its current obligations, it may request an emergency apportionment loan. Statute specifies legislative intent that emergency apportionment loans are to be provided only through a legislative appropriation. In each case, legislation has had to be enacted for the loan to occur, with the legislation outlining what must occur for both the loan to occur and for local power to be given back to the school district.
General statutory conditions for acceptance of a loan that exceeds 200 percent of the amount of the district's recommended reserve include:
- The State Superintendent of Public Instruction (SSPI) shall assume all the legal rights, duties, and powers of the governing board of the district.
- The SSPI shall appoint an administrator to act on behalf of the SSPI.
- The school district governing board shall be advisory only and report to the state administrator.
- The authority of the SSPI and state administrator shall continue until certain conditions are met. At that time, the SSPI shall appoint a trustee to replace the administrator. Trustee authority is addressed below.
General statutory conditions for acceptance of a loan that equals or is less than 200 percent of the amount of the district's recommended reserve include:
- The SSPI shall appoint a trustee to monitor and review the operation of the district.
- The school district governing board shall retain governing authority but the trustee shall have the authority to stay and rescind any action of the local district governing board that, in the judgment of the trustee, may affect the financial condition of the district.
- The authority of the SSPI and the state-appointed trustee shall continue until the loan has been repaid, the district has adequate fiscal systems and controls in place, and the SSPI has determined that the district's future compliance with the fiscal plan approved for the district is probable.
3/4/09
