Leadership Matters in the Reserve Cap Policy Debate

by School Services of California, Inc. staff

We have written quite a number of negative articles outlining the potentially disastrous financial effects of the reserve cap policy contained in Senate Bill  858 enacted in June 2014. We think that the education community is well informed on the substantive issues related to limiting reserves. And we also think that the effects of political pandering as they relate to this trailer bill language are widely understood within the education community. But we think the complicated process to amend poor public policy once it is in law is much less widely known. The purpose of this editorial is to recognize and commend the California School Boards Association for seizing leadership on this important issue and to elicit support for their efforts.

Leadership starts with the President, and this is the year, of all years, for Jesús Holguín to lead the CSBA Board. Jesus is not only a highly experienced school board member, but is also an accomplished school business administrator at the county office of education level and a very active member of the California Association of School Business Officials. He knows reserve policy inside and out, and he knows from his county oversight role what happens when districts that have inadequate reserves are surprised by even a small crisis. Jesus is one of the most effective speakers on the topic of public education in our state. Under his leadership, the CSBA Board has made the reserve cap their flagship issue, and they are putting their time, talents, and treasure into making repeal or significant modification of this flawed policy a priority for the state.

The data is clear; there is no evidence that there is widespread hoarding of money by school districts in California.

For more than a year, the CSBA staff, led by Chief Executive Officer Vernon Billy, has worked to replace vague assertions and “anecdotal evidence” with hard facts about reserve levels in California schools and the importance of maintaining a safety net for our students, staff, and communities. The data is clear; there is no evidence that there is widespread hoarding of money by school districts in California. There is now a clear understanding that under current law (SB 858) the average school district would be required to have a minimum reserve totaling about six days of payroll and a maximum reserve of about 12 days of payroll. Reserves that low will provide very little protection for local school districts when the next downturn comes. Some will remember the devastating layoffs, furlough days, shortened school years, salary rollbacks, and program eliminations that occurred during the Great Recession, even though the average district entered the recession with about twice as much in reserve as SB 858 would allow.

Thus was born SB 799 (Hill, D-San Mateo). CSBA has lead a broad coalition of activist education groups in crafting and generating legislative support for this bill. Among the most active education public partners joining CSBA in this effort are CASBO, the Association of California School

Administrators, Children Now, and the League of Women Voters. Purists would like to see this misguided legislation simply repealed, but the more practical view adopted by CSBA and its partners is that once something is in law there is greater chance of success in amending than repealing provisions.

SB 799 now represents the best solution on the table, and, while we are not yet certain it will pass or be approved by Governor Jerry Brown, we do know that it gives us our best near-term solution to a troublesome problem. Purists like us at School Services of California, Inc., see no need for this provision of law and think it should be repealed completely. Unfortunately that is not likely to happen this year. And we are very concerned that the four conditions necessary for the reserve cap to become effective are just around the corner. That would produce a very damaging result for school districts; a result we could not live with.

The higher cap as proposed in SB 799, with exclusions for specific designations, is not the best solution for education in the long run but we believe that local agencies could deal with it in the short run. In any event, we have joined the rest of the education community in concluding that, regardless of the purity of the means, we need a solution that allows districts to hold on to a more reasonable reserve than what is in current law. And if the education community is divided on this bill it will have a more difficult time becoming law.
We, therefore, urge support for SB 799; your state legislators will need to hear that from you. But we also urge you to let CSBA President Jesús Holguín and the members of the CSBA Board and Delegate Assembly know how much you appreciate their leadership on this important issue. Leadership can be very lonely without the affirmation that broad support provides.

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