This post was contributed by a community member. The views expressed here are the author's own.

Schools

Saddleback Valley Schools Grappling with 'Tremendous' Cash Flow Problem

Thanks to the state's "revenue deferrals," the district won't receive one out of every four dollars it is already owed by the state until next year. It's a problem that cost the district $230,000 in interest this year alone.

A state policy of “deferring” revenue owed to schools is becoming a bigger and bigger headache for local school districts like Saddleback Valley Unified, officials say.

On Tuesday, the SVUSD school board approved two resolutions authorizing the district to borrow up to $25 million in the 2011-12 school year to cover its cash flow problems.

School districts across the state are struggling with cash flow because of a state practice of pushing payments budgeted for this year into the next. But because schools still have to pay salaries, utilities and vendors today, they often have to borrow to cover the shortfall, leaving them with interest payments that eat into their bottom line.

Find out what's happening in Mission Viejowith free, real-time updates from Patch.

Today, California defers 28 percent of the Saddleback Valley Unified’s revenues, district officials say.

In 2010-11, the district shelled out $230,000 in interest on money it borrowed to bridge the cash flow gap, said Geri Partida, the district’s assistant superintendent for business.

Find out what's happening in Mission Viejowith free, real-time updates from Patch.

“Imagine you have a job that is supposed to pay your car payment, house payments, grocery bills and all your expenses,” Partida said. "Now imagine if your job tells you that you’ll get your paycheck, but you have to wait six months. But those bills don’t go away."

Gov.  would make the problem even worse, district officials say, raising the total K-12 education deferrals statewide from $7 billion to more than $9 billion. If it is passed, SVUSD schools would not receive 45 percent of their revenues until the following year, Superintendent Clint Harwick said.

One way that SVUSD hopes to lessen the cost of deferrals is by using so-called interfund cash transfers, essentially borrowing from itself, taking cash it has on hand that has been designated for other purposes. The board unanimously approved the use of such transfers Tuesday, as well as authorizing it to raise cash through so-called TRANs, or tax and revenue anticipation notes, a form of short-term borrowing for schools.

Partida said she hopes that the district could borrow as much as $20 million from itself before needing to tap TRANs funds, which must be paid back with interest.

“If the state would pay us when they’re supposed to pay us, we wouldn’t have to do this,” board President Susie S. Swartz said before the vote.

“I don’t know that the public understands how bad the problem is," said board member Dennis Walsh. "We don’t even physically get that money until the following year. It’s a tremendous cash flow problem."

We’ve removed the ability to reply as we work to make improvements. Learn more here

The views expressed in this post are the author's own. Want to post on Patch?