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New State Budget Lets Districts Use Proceeds from Surplus Property for "One-Time" Purposes The recently approved state budget has opened up a short-term chink in what historically has been a “firewall” separating facilities funds from money used for salaries in California school districts. From now through January 1, 2012, school districts have the option of using proceeds from the sale of surplus real estate for any one-time general fund purpose – provided that the surplus property being sold was purchased entirely with local funds. (Property that was purchased in part with state funds does not qualify.) There is a trade-off. The State Allocation Board will reduce any hardship funding sought by school districts that sell surplus property under this new provision. The reduction will be equal to the amount of proceeds from the sale of surplus property that was used for one-time general fund purposes. School districts that sell surplus property and use the money for one-time general fund purposes will also be ineligible for hardship funding from the School Deferred Maintenance Fund for five years. Districts that decide to sell surplus real estate under this option (contained in ABX4 2) will need to prepare an expenditure plan, and meet a number of requirements with the State Allocation Board. In some districts, this new flexibility may require a bit of explanation to the public. This year, several California districts moved forward with long-planned construction projects, which were partly funded by facilities bonds approved by voters several years ago, even as spring layoff notices were sent to teachers and other staff, stemming from general fund reductions made by the state. At more than one local school board meeting, a member of the public raised the question “Why can’t we sell the district’s surplus property to pay teacher salaries?” And at many of these meetings, the school board trustees and district administrators patiently explained that a school districts’ facilities funds are legally separated from the general funds that cover salaries. But now, with the provisions of the new state budget, that situation is somewhat different. In many districts, the amount of surplus real estate is minimal. And over the state as a whole, it is not clear now much surplus land owned by school districts was paid for entirely through local funds. However, such properties certainly do exist, and at least one or two school boards have already met in closed session to mull over this new option. But given the likelihood that reductions in state funding are likely to impact local school district budgets for the next three year or longer, it remains to be seen whether local school boards that own qualifying surplus properties will want to sell them for a one-time purpose. While the sale of an eligible property might generate several million dollars for the school district, that money might only cover a year’s worth of salaries under a given program, effectively postponing (but not preventing) staff reductions that would nonetheless occur a year or two later. Editor's Note: Jeff Hudson is the editor of EdBrief and an award-winning education reporter and writer in print, radio and television media. |
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