State Schools Chief Tom Torlakson Reports Significant Drop in Number of Districts in Financial Jeopardy

A new report shows that the number of California school districts in financial jeopardy has been slashed by more than two-thirds over the past year, State Superintendent of Public Instruction Tom Torlakson announced.
This year’s Second Interim Status Report, FY 2013-14 shows a total of 30 local educational agencies (LEAs) are either in negative or qualified financial status. This is down significantly from the last report-in March 2014-that showed 49 LEAs with this status. This is also down even more significantly from the same report a year ago. In the Second Interim Status report of 2013, there were 92 LEAs in financial jeopardy. See Table 1.
“A combination of factors over the past few years has given schools the tools they need to take control of their own future again,” Torlakson said. “Although we won’t be finished until every school is on stable ground, this is welcome news that school funding is moving in the right direction.”
Twice a year, the California Department of Education receives Notice of Interim Certifications on the financial status of the state’s 1,038 LEAs, comprising school districts, county offices of education, and joint powers agencies. The certifications are classified as positive, qualified, or negative.
A positive certification means the LEA will meet its financial obligations for the current and two following fiscal years. A qualified certification is assigned when the LEA may not meet its financial obligations for the current or two following fiscal years. This certification allows the LEA’s county office of education to provide assistance to the district.
A negative certification-the most serious of the classifications-is assigned when the LEA will be unable to meet its financial obligations for the remainder of the current year or for the subsequent fiscal year. This certification means the LEA’s county office of education may intervene in the district’s finances. The assistance or intervention by the county office of education may include assigning external consultants, requiring a district fiscal recovery plan, or disallowing certain district expenditures.
Of the current 30 LEAs on the list, seven have a negative certification, down one from the last report in March 2014. The remaining 23 LEAs have a qualified certification, down from 41 reported in March 2014. See Table 2.
This new list is a compilation of the certifications by LEAs that were due April 16, 2014, and cover the financial and budgetary status of the districts for the period ending January 31, 2014. The certifications reflect whether the LEAs are able to meet their financial obligations for the remainder of the current fiscal year and subsequent two fiscal years, based on projections at that point in time.
These certifications also predate the Governor’s May Revision to the proposed 2014-15 state budget. Because these Interim Status Reports are snapshots in time, the LEAs’ financial status may have changed since these certifications were collected.

June 12, 2014

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