Senate Committee Rejects Bates' Effort to Repeal Controversial School Savings Cap

Wednesday, April 20, 2016

On a partisan vote, the Senate Education Committee today voted down Senate Bill 1249 by Senator Patricia Bates (R-Laguna Niguel) that would have restored the full ability of school districts to save money in reserve accounts.

"Saving money for the future helps the financial well-being of local schools by avoiding painful cuts when the next economic downturn hits," said Bates. "Unfortunately, Sacramento is living in an alternate reality where current law caps the amount a school district can save for a rainy day. There is no good reason to keep this cap other than to please special interests who want more money for their needs rather than the students."

SB 1249 (“Save Our Schools Act of 2016”) would have repealed controversial legislation that Governor Jerry Brown signed in 2014 that ties the hands of school district leaders by forcing them to spend fiscal reserves instead of using them to plan in the best interest of their students. Senate Bill 858 of 2014 limits school district reserves to six percent of its general fund. According to the California School Boards Association (CSBA), a six percent reserve amounts to only a few days’ worth of cash flow needs.

The Legislature inserted the savings cap at the last minute when it approved the 2014-15 state budget. The last minute nature of the insertion ensured very limited debate and discussion of the policy. A diverse coalition of the CSBA, the non-partisan Legislative Analyst’s Office, California school districts, the California State PTA, education groups, civil rights advocates and newspaper editorial boards such as the Los Angeles Times and San Francisco Chronicle have called for the cap’s repeal. CSBA has written a letter in support of SB 1249.

In a June 2014 letter to the governor, Republican lawmakers argued that the proposal was fiscally-irresponsible, and would disproportionately hurt schools serving low-income and English Language Learner students. Even legislative Democrats in a June 2015 letter called for modifying the savings cap, stating that the “current cap on school district reserves has potential for several negative impacts, including school districts paying higher interest on bonded indebtedness,” and “further discourages savings for…textbooks, school buses, technology, school construction and maintenance.”

In August 2014, Assembly Member Kristin Olsen (R-Modesto) and Senator Jean Fuller (R-Bakersfield) introduced AB 146 to repeal the cap, but the bill stalled in the Senate.

Teresa Stanley, a member of the Folsom Cordova Unified School District’s Board of Education, testified in support of Bates’ SB 1249 today. After the committee vote, she remarked, "School districts need the flexibility to make plans to meet the publicly vetted goals for students. The reserve cap removes that flexibility and forces districts to borrow funds to meet basic needs such as transportation and advanced career and technical education improvements."

Stanley added, "In the not too distant future, another economic downturn will come and school districts throughout the state may be forced into insolvency. A healthful reserve with flexibility is crucial in safeguarding the services upon which our youth depends."