California school districts in LA, Sacramento copy the Capitol’s budget deficit dance

Last week, Sacramento County’s Office of Education rejected a revised labor agreement that the Sacramento City Unified School District had claimed would stave off its insolvency.

“The long-term financial recovery of the district will take time and require extraordinary fiscal discipline, not just short-term loans and redirected funds, all of which must be repaid,” David Gordon, the county superintendent of schools, said in a statement. “The agreement would only temporarily delay SCUSD’s impending insolvency by a few weeks while also making it more difficult for the district to make a sustainable long-term fiscal recovery.”

Sac City Unified has been flirting with financial collapse for decades by chronically spending more — especially on labor contracts — than it could cover with revenues.

Every time it reaches the brink, it cobbles together some sort of plan that on paper covers its shortfall but turns out to be pixie dust. The county education office and the state’s Fiscal Crisis & Management Assistance Team tell district officials their plan is unworkable, and the squabble continues. The county education office figures the district faces a structural deficit of $221.8 million, but the district has said it’s a $170.5 million deficit.

Ultimately, if the state steps in with loans, the district would be compelled to cede day-to-day management to an outside caretaker, reducing the district’s board and administration to bystanders. It’s happened to a number of other urban school districts in years past, and Sac City Unified is very close to that ignominious status.

Four-hundred miles to the south, the state’s largest school district, Los Angeles Unified, is following a similar path, although it has not quite reached the critical stage of the Sacramento district.

In July, the Los Angeles County Office of Education warned L.A. Unified that its financial plan does not adequately demonstrate how it can meet all of its obligations. It faces a $231 million shortfall next year, and if its gap between income and outgo continues, an “advisor” would be appointed to overrule district officials on financial matters.

Michael Fine, CEO of the Fiscal Crisis and Management Assistance Team, told the California education news outlet, EdSource, that L.A. Unified has approved labor contracts without explaining how they would be financed.

“It’s when the board says, ‘I’m going to approve these contracts, even though I don’t know how I’m going to pay the bill,’ that’s where the problem is,” Fine said. “It’s not with the negotiations themselves. It’s not with the deal that was made.”

As the Sacramento and Los Angeles situations imply, the chronic tendency to overspend revenues is largely an issue for larger urban school systems, reflecting how they have become ultra-politicized and dominated by school trustees elected with the support of powerful school unions.

California schools do face some daunting issues, such as declining enrollment — which affects attendance-based state financial aid — and the same inflationary forces that affect everyone.

Schools have experienced remarkable gains in financial support in recent years — now totaling more than $25,000 per pupil from all sources — but as revenues increase, so do political pressures to increase spending.

The resulting gaps between income and outgo become structural deficits — very much like what’s been happening with the state budget. The scrambles to paper over the shortfalls essentially kick the fiscal can down the road without addressing the underlying causes.

One of the steps Gov. Gavin Newsom and the Legislature took in June to balance the state’s $351 billion budget on paper is to withhold $3.9 billion in constitutionally mandated state school aid, promising to catch up later.

Thus the state’s irresponsible fiscal games are exacerbating the chronic financial problems that school systems face, including those in Sacramento and Los Angeles.