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Cash crisis looms for Manteca schools

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POSTED January 8, 2009 1:44 a.m.

The deepening state budget crisis is going to make it difficult — if not impossible – for Manteca Unified School District to meet payroll and pay other bills through June 30.

Manteca Unified — in a worst case scenario — could be forced to issue the equivalent of IOUs to bridge payroll costs at the end of the school year.

Acting Superintendent Jason Messer is scrambling to conserve as much cash as possible by having the district office even stop expenditures of $100 or so for supplies for programs so that there is money on hand to pay teachers and other employees.

Messer said saving money — even if it is a couple hundred here and there — will effectively save thousands in cash that the district is going to need now that Gov. Arnold Schwarzenegger is delaying a payment to local schools promised in April until July. That exasperates an already strained money flow from Sacramento. Over the years, it has gotten to the point where public schools receive commitment from the state to pay for programs but are forced to spend it up to six months ahead of getting it. The money that was promised in April was actually due to local schools by now and that is still almost six months in the arrears.

In November, Messer was fairly confident Manteca Unified could make it to the end of the school year in terms of cash flow based on the April payment promise plus other restricted funds the school district has that it can borrow against.

“We still should be able to make it with (the freezes) we’re doing plus borrowing,” Messer said.

That means the district may have to tap into things such as its Measure M school bond account just to meet payroll.

There is a twist, however. That money must be paid back plus interest. That puts yet another demand for future dollars on the table. The state, by contrast, will not pay local schools interest on money that they owe them yet are now saying they won’t send until July.

Messer noted that because of special restricted accounts such as the bond money and decisions to implement budget cuts for next school year now, Manteca Unified is better positioned than a number of neighboring districts when it comes to having the cash to meet its payroll obligations for the rest of the current school year.

Representatives of various school districts are meeting Tuesday at the San Joaquin County Office of Education to map out a strategy to try and keep money flowing.

Manteca’s problems are multiplied almost a thousand times throughout California as there are roughly that many local school districts. The lion’s share of each district’s revenue comes from the state with payroll related costs eating up between 80 and 90 percent of a district’s expenditures.

Messer has been taking immediate steps to conserve additional cash ranging from clamping down on the use of substitute teachers to refusing almost all expenditures for supplies including small amounts for special programs to be spent.

On Wednesday, a memo went out that the district would suspend its after-school remedial tutoring program effective Monday. Upwards of 1,000 students who have flunked subjects such as math or else need help with English will be impacted.

Even the Give Every Child a Chance after-school program is not immune. The GECAC is essentially a sub-contractor with the school district. Since money already committed is not forthcoming from the state plus the fact Messer is trying to conserve every dollar he can to make sure there is cash on hand to meet district payroll through the end of the school year, Manteca Unified may be forced to do to GECAC what Sacramento is doing to Manteca Unified and not pay the non-profit until after the district receives promised money from the state

Currently, GECAC operate its programs about a month in advance of being reimbursed by the school district.

Schwarzenegger’s decision to postpone the payment due California public schools in April until July is a bid to deal with Sacramento’s cash shortage triggered by the $42 billion deficit projected for the next 20 months.

The state is expected to run out of money in February and could be using its own IOUs within 30 days. The tight bond market coupled with inadequate tax revenue as the result of the economic slowdown triggered by the liar loan mess and the state’s soaring deficit has virtually made it impossible for California to borrow its way out of the current budget crisis.

The school board is meeting Tuesday to receive the first recommendations from a 100-member committee on how best to make the $8.25 million in budget cuts they still have left to make to cover a projected $14 million deficit in next year’s budget.

The fact the state is now postponing payments already due to the district from April to July may mean some of those cuts may have to be moved up from next year into the current school year calendar.

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