California’s K-12 schools are being set up for a fall of epic proportions

If we are reading the laws about school reserves correctly, California’s K-12 schools are being set up for a fall of epic proportions unless schools or the state save much more from surging revenues.

Under conditions likely to be met this year, non-basic aid school districts with more than 2,500 Average Daily Attendance must cap reserves at only 10 percent of expenditures, but 10 percent is just one-sixth of the drop in state revenues — the principal source of school revenues — that DOF forecasts will occur over three years from a stock market decline no greater than the declines of 2001 and 2008. In such a decline, after tapping a State-Level School Reserve that (as of July 1) will hold less than five percent of school expenditures, the Legislature would have to choose between not protecting schools or taking funds from state reserves that — as of now — the Legislature and Governor are planning to fund with less than one-quarter of the forecasted decline, thereby starving other programs.

Today’s revenues are much higher than the revenues before the 2001 and 2008 declines:

The revenue declines in 2001 and 2008 will look small compared to the decline that revenues will suffer from today’s loftier level. Neither school districts nor the state are sufficiently reserved relative to the volatility and size of our revenues. The budget the Legislature must pass in six days should require the state and school districts to save much more than is currently planned.