‘Cross year’ TRANs help with state payment deferrals
Published: December 1, 2010
As estimates of California’s deficit continue to rise, CSBA is once again offering a midyear program to help cash-strapped school districts and county offices of education deal with shortfalls caused by the state’s continuing delays in paying schools what they’re owed.
Lawmakers are increasingly attempting to balance the budget on the backs of public schools by deferring payments to local educational agencies for months at a time, making it difficult for schools to pay their bills. CSBA’s Cash Reserve program, which helps LEAs issue and sell tax revenue anticipation notes—or TRANs—to investors, provides low-cost, short-term loans to schools to help fill the gap between the time funds are apportioned and when the state actually pays.
In collaboration with Piper Jaffray & Co. and Orrick, Herrington & Sutcliffe, CSBA has traditionally offered TRAN programs to cover cash-flow problems that arise during a given fiscal year, which runs from July to June. This is the second time CSBA will add a “cross year” TRAN program to raise funds to compensate for payments owed to districts in one fiscal year—2010-11, say—but not paid until the next.
The process for applying is straightforward, but the schedule includes some tight deadlines and requires action by local governing boards.
Boards that anticipate possible cash-flow problems in the second half of the current fiscal year need to act soon to authorize participation in CSBA’s TRAN program. LEAs can expect to receive the proceeds from their TRAN sales in February to cover costs until the state makes its payments in the new fiscal year that begins July 1.
“In the past we have issued TRANs to cover shortfalls within a given fiscal year, but the state complicated the situation by deferring payments allocated in one fiscal year that will not be paid until the next,” said Suzi Rader, CSBA’s senior director for district and financial services. “The state deferred a quarter of the money it owed schools last year, and it looks as if a third will be deferred this year.”
For more information on the TRAN options available to your LEA, contact Mark Farrell at Piper Jaffray (mark.j.farrell@pjc.com; 800-876-1854) or Suzi Rader at CSBA (srader@csba.org; 800-266-3382).
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