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Why public education finances in California are in bad shape

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Students may have trouble getting to class once federal trigger cuts slash $38 million from California's school transportation budget.

KPCC's Adolfo Guzman-Lopez reports today on the effect that anticipated "trigger cuts" to spending, due to a looming budget deficit in California, could have on funding to both K-12 and higher education:

The governor’s office may announce $2 billion in midyear cuts to state-funded agencies on Thursday. That’s likely to reduce state support for public education at every level from kindergarten through college.

The cuts are likely because the revenues state lawmakers had predicted never materialized. That means $100 million in cuts to the University of California and the Cal State systems. Student fees for community college would go up $10 a unit. School districts are figuring out how much money they’ll lose.

Charles Kerchner, an education researcher at Claremont Graduate University, says some public schools are better prepared than others. "It tends to be the case that school districts that have quieter politics tend to have bigger budget reserves."

So which school districts are in better shape than others? As it turns out, the state Department of Education maintains some oversight of this critical measurement. This is from the LA Times, back in July:

Of the state's 1,077 school districts, 14 are classified as in especially dire condition. They are unlikely to avoid bankruptcy based on their current approved budgets. L.A. County has one such system, the Lynwood Unified School District, officials said. Other districts in this category include Hayward Unified in Alameda County, Vallejo City Unified in Solano County and Natomas Unified in Sacramento County.

An additional 160 school systems have a "qualified" financial outlook, meaning that they are at risk although probably not in danger of immediate bankruptcy. L.A. County districts in that situation include L.A. Unified, Burbank Unified, Culver City Unified, Glendale Unified, Inglewood Unified, Montebello Unified, Norwalk- La Mirada Unified, Pomona Unified, Santa Monica-Malibu Unified and South Pasadena Unified.

My quick research suggests that bankruptcy is an extremely infrequent occurrence for a California school district. It appears to have last happened in 1991, and before that, in 1983. Both times the bankrupt district was in Northern California. But based on the data, at the moment 16 percent of California's public school district are, if not all "unlikely to avoid bankruptcy," then at potential risk of bankruptcy down the line.

Vallejo City USD has been in trouble for a while. The state took emergency action in 2004, effectively bailing out the district. But as recently as 2009 the district was facing $191 million in long-term debt, according to the Public Purse, which tracks municipal bonds. The city itself has already declared bankruptcy, and while I don't know what the total Vallejo City USD budget is, the city's population is only 120,000. The ratio of long-term education debt to population — 1592:1 — strikes me as alarmingly high.

The bigger question here is whether bankruptcy would actually help any of these struggling districts. Debts could be restructured and bondholders paid off, but would the districts be in any better shape? It's not even clear to me that a higher level of state oversight would make a difference. The state might just know sooner that it has to find the money for a bailout. And with revenues falling everywhere, it would probably be impossible for the state to insist that all at-risk districts bulk-up their reserve funds.

Throwing up your hands probably isn't an option, however, when it comes to public education. But obviously in close to a fifth of the state's school districts, cost structures aren't able to cope with major budget shocks, at the state or local level. And remember, the state's population is growing — it could hit 48 million by 2020. A well-educated workforce is something that California will urgently need to remain competitive in the 21st century. But in order to have that, the state is going to need to do something to stabilize the finances of its public education system. And before that...deal with the falling axe of the trigger cuts.

Follow Matthew DeBord and the DeBord Report on Twitter.

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