Top four reasons why school district reserve cap must be fixed now
Published: April 13, 20164/13/16
Top four reasons why the Reserve Cap must be fixed in 2016
1. The reserve cap hurts schools now
The effects of the reserve cap are already being felt. The mere existence of the law is cited by school district credit rating agencies, making it more expensive for districts to borrow money. This is especially critical given that a major $9 billion school facilities bond measure will appear on the statewide ballot in November. School districts must be able to maximize their funding: Education dollars should be going to classrooms, not banks.
2. Another rainy day is coming
While we always prefer a sunnier forecast, at some point in time we know another economic rainy day is coming. Gov. Brown said it himself when he released his 2016-17 budget proposal: “Everything that goes up comes down.” Under current law, if the reserve cap trigger is pulled and reserves are decreased to the dangerously low level allowed by law, the next downturn would leave California’s school districts with no choices but to make devastating cuts to programs and employees. Fixing the reserve cap will help districts prudently budget to safeguard against future economic downturns.
3. Bad policy requires a quick fix
The Legislative Analyst’s Office and editorial boards across the state have called for the reserve cap to be fixed or repealed. Some major papers have further emphasized that fixing the cap must be on the legislature’s “To Do List” this year. We couldn’t agree more. The cap is, quite simply, bad public policy. The longer the current law is on the books, the more it threatens the ability of California’s schools to maintain their fiscal solvency and make basic classroom purchases to provide their students the best possible education. There’s no reason to keep a bad law in place, especially when a reasonable bill like SB 799 would solve the problem.
4. The reserve cap strips away local control
Districts across the state cite a litany of examples of how the current reserve cap would affect their ability to maintain prudent reserves and make local decisions that are in the best interests of their students and communities. Local control is the very premise of the state’s major reform movement with the LCFF and LCAP. Local communities must have the ability to make budget decisions and plan for economic uncertainties – before a crisis hits.
Log on to
www.fixthecap.com to learn more about how Senate Bill 799 (Hill and Glazer) would protect the financial health and local control of California’s school districts by amending the current reserve cap law. Forms are available on the site to contact your legislators to urge them to support SB 799, which currently resides in the Assembly Rules Committee. CSBA strongly urges members of the Legislature to support the bill in policy committee and on the floor. It is critical that this issue be resolved during the 2016 session.
As a CSBA member, you can help in the effort to pass SB 799 by contacting your legislators and telling them your story:
• Why does your district maintain its current level of reserves?
• What are the district expenditures that your district typically uses reserve funds for?
• What programs were you able to continue or what potential staff reductions were you able to avoid during the last recession due to the reserve funds you had available?
• Is the reserve cap already affecting your district credit rating?
It is critical that Legislators hear the answers to these questions and be provided specific, local examples of how the current reserve cap law affects their own communities.