Leg Analyst: School reserves law not working

by John Seiler | January 23, 2015 9:50 am

LAO AnalysisWhether finances are personal, business or government, having a reserve makes sense. You never know when an emergency might crop up and you’ll need the funds.

Indeed, last November voters approved Proposition 2[1], which increased the state’s “rainy day” fund for its budget. It was supported by Gov. Jerry Brown and most state political leaders.

But, strangely, last summer the California Legislature also passed legislation that capped local school reserves. A new report by Legislative Analyst Mac Taylor, “Analysis of School District Reserves[2],” found the legislation isn’t working.

Here’s how the law works:

Recent legislation includes a provision capping district General Fund reserves if, during the previous year, the state made a deposit into the state school reserve recently established by Proposition 2. The caps vary according to district size, with assigned and unassigned reserves capped at 6 percent of expenditures for mid-size districts. Districts may apply to their county offices of education for exemptions from these caps if they face extraordinary fiscal circumstances.

And here are the Leg Analyst’s recommendations:

Several Concerns With Caps, Recommend Repeal. To the extent districts begin shifting monies to avoid the caps, we are concerned that local budgeting practices could become more confusing. To the extent districts begin spending down their reserves, we are concerned that they would incur a number of risks:

That all seems common sense, doesn’t it? Why was this law passed in the first place?


  1. Proposition 2: http://www.voterguide.sos.ca.gov/en/propositions/2/
  2. Analysis of School District Reserves: http://lao.ca.gov/reports/2015/edu/district-reserves/district-reserves-012115.pdf

Source URL: https://calwatchdog.com/2015/01/23/leg-analyst-school-reserves-law-not-working/