EDUCATION - San Diego School District, Insolvency

"San Diego Unified School District Discusses Risk of Insolvency" by R. Stickney, NBC San Diego 10/26/2011

Parents, teachers and students sitting in on a packed meeting of the San Diego Unified School District got a "big picture" look at the financial crisis facing the state's second largest school district.

While some parents were there to argue against school closures and against cuts to transportation, the bulk of the meeting involved the future of the district.

Financial adviser Ron Bennett painted a grim picture because California's economy is growing at a much slower rate than hoped.

After five years of cuts, school leaders say that no amount of layoffs or cutbacks could make up for the projected $118 million gap in state funding this year.

Proposition 98 requires that a minimum portion of the state's budget goes to schools but that amount varies from year to year, depending on what the state has to work with.

With the state still in the thick of its financial problems, Bennett told the board the district will be making cuts every year until this economic crisis is over.

And the word insolvency and a possible takeover by the state are now being talked about as real possibilities.

The state of California cannot allow a school district to go belly up. So to help the board and the public realize the financial situation facing the district, Bennett walked through the steps of bankruptcy.

According to our partners at voiceofsandiego, the County Board of Education would step in first to help the district then the state can send in a team to advise. The state may have to loan money to the district and a state official would manage that money and decisions affecting the district and its schools, meaning the board and the superintendent would no longer have any official duties.

“Isn’t it ironic, that if the state simply funded you at the level that you were funded in 2007-8 or simply stopped cutting you or if the miracle occurs and you get back up to the line where Prop 98 is, you’re adding millions of dollars to your budget," Bennett said.

“Instead with the threats of cuts, the state creates the situation for you but the state has an obligation to step in if you get too close to the brink,” he said.

Board members say they can save an estimated $5 million a year if they close 10 to15 schools.

Key upcoming dates for the district are a meeting Nov. 29 to discuss possible closings and a meeting Dec. 13 to vote on recommended cuts including closures or the sale of other assets.