Rainy Day Fund
Educators fight to repeal law that could prohibit schools from holding ample funds in reserves for economic uncertainty
In the dark of night last June without proper vetting from stakeholders, language was slipped into the state budget by way of a trailer bill that could prohibit schools from holding adequate funds in their budget reserves for economic uncertainty, educators say.
For many districts, it was these savings accounts that helped them weather the Great Recession. When state funds became scarce during the most severe economic downturn since the Great Depression, districts were able to maintain programs, keep classes sizes manageable and continue adequate support for teachers.
SB 858 maintains that if the state deposits as little as $1 into the statewide rainy day fund for schools – which could happen sooner than previously expected based on an improving economy – local school districts statewide could be forced to eliminate billions of their savings that took years to build up.
For most school districts in California the new cap on savings equates to approximately 6 percent, which represents only a few days of cash flow. Many school districts maintain much more than this in their current reserve accounts.
“It’s a fiscally reckless law,” said Dr. Rob Arias, superintendent of Bakersfield City, California’s largest K-8 school district.
Arias was among several school administrators and school board members that gathered for a news conference at the Kern County Superintendent of Schools office on April 27 to call for a repeal of the law.
Educators argue that SB 858 undermines the notion of local control that Governor Brown so wholeheartedly supported in his recent overhaul of how school districts are funded and held accountable.
“Local school boards who are closest with our children and our communities should be making these decisions,” Arias said. “Not some distant overseer from Sacramento out of touch of the needs of our schools.”
The respected, non-partisan Legislative Analyst’s Office agrees that SB 858 is bad policy. In a January 2015 study, the LAO reported that “reserves allow districts to manage cash flow, mitigate funding volatility, address unexpected costs, save for large purchases, and reduce borrowing costs.”
Sen. Jean Fuller, former superintendent of the Bakersfield City School District, is working on legislation that would repeal the budget reserve cap.