Glendora Unified Approves $15 Million Loan to Pay For State Deferrals

In a familiar scenario, the Glendora Unified School District again approved a multimillion-dollar loan to help pay for a shortfall of cash as the state prepares to defer 40 percent of its funds to schools.

The Glendora Unified School District school board approved up to $15 million in Tax and Revenue Anticipation Notes, or TRANs – about $5 million more than the total amount of loans the district borrowed last year.

The resolution follows a continuing trend districts have been resorting to since 2002, when the state began deferring a portion of its funding owed to K-12 public schools to the next fiscal year. By fall of 2012, the state will have deferred $9.6 billion owed to California schools.

According to Assistant Superintendent Marc Chaldu, the district will only see 60 percent of every dollar of state funding for the fiscal year. Chaldu said the $15 million in TRANS is necessary to make up for the missing 40 percent and to remain cash solvent for the year.

The resolution comes following Gov. Jerry Brown’s unveiling of his January budget proposal, which aims for level funding for public education. However, the plan hinges on voters passing tax hikes, including increasing sales tax by half a cent and raising taxes on individual earners whose annual incomes are more than $250,000 for the next five years.

Even if the measure passes, funding to education will only pay for the deferred funds.

“It’s not a horrible budget, at least not right off the bat as there won’t be huge cuts to education,” said District Superintendent Dr. Robert Voors. “But if the proposal doesn’t pass, we will see midyear cuts -- likely multiple millions of dollars.”

The district projects a $2.7 million loss should the tax measure fail.

But the borrowing comes at a price, one that the district will ultimately have to pay.

While interest rates fluctuate, even with a rate of 1 percent – a rate the district has paid on previous TRANs  – the district will have to pay $50,000. The district will need to repay the amount ultimately borrowed by November, said Chaldu. Last year’s loans were repaid by November of that year.

The cash deferment of state funds continued to exacerbate school board members who criticized the practice.

“The state owes us money in the fiscal year and one of their accounting gimmicks is that they can defer payments until the next fiscal year,” said School Board Member Mike Gautreau. “ …The problem is we don’t get our cash flow when we’re supposed to so we have to, as just about every other district, borrow money just to meet our cash demands and pay interest.”

“We’re all becoming desensitized to the actions of what’s going on in Sacramento,” said School Board Member Chuck Gomer. “We’re obligated to pay our staff and yet at the same time the state doesn’t come through with the money, so we’re responsible. Now we’re spending general fund money that could be used to educate our children to pay interest on funds we were promised. It is ludicrous.”