Fewer School Districts Face Insolvency Risk : Education: Number reporting to be in financial peril has dropped from 32 to three despite fiscal crunch, panel is told. Most systems manage to make painful cuts needed to live within their means.

Despite a steadily worsening fiscal crunch, most of California’s 1,012 public school districts are doing the belt-tightening required to live within their means, state school finance experts said Wednesday.

Only three of the 32 districts that filed reports last year noting they would have trouble ending the 1991-92 budget year in the black are having difficulty balancing their books again this year, state Controller Gray Davis told a hearing of the state’s Little Hoover Commission.

Two of the three--Montebello Unified in Los Angeles County and Colfax Elementary in Placer County--already have taken steps to erase their projected deficits. The third, Coachella Valley Unified, is getting a $7.5-million loan, along with fiscal oversight, from the state. Moreover, the number of districts reporting some degree of difficulties to date is down to 23, Davis said.

But the schools have paid a high price to stay solvent--with teacher layoffs, program cuts, reduced nursing and other services and increased class sizes--and face in 1992-93 what Davis called “unquestionably the most challenging year for schools since the Great Depression.”

His testimony came during the advisory, government-watchdog commission’s more than four-hour hearing on the financial condition of California schools. It included a sometimes-hostile grilling of Los Angeles school officials and, in re-treading often-covered ground, added little to the complex debate about the conditions of public education in this state.

As it has in the past, the Little Hoover group, known formally as the Commission on California State Government Organization and Economy, provided a platform for its chairman, developer Nathan Shapell, to reiterate his view that many public schools are wasteful, inefficient institutions that are top-heavy with overpaid administrators.

Noting that the taxpayers next year will spend close to $29 billion to educate 5.3 million students and the state faces a mounting budget deficit, Shapell called for districts to “learn how to operate more efficiently because there just isn’t enough money.”

With a projected shortfall of nearly $11 billion, state budget writers are considering cutting as much as $2.3 billion from the $18.4 billion the governor earmarked earlier for kindergarten through community colleges. That would leave the schools with less to spend in the coming year than they had this year, despite an anticipated 200,000 gain in enrollment.

But the hearing also provided a forum for public school advocates to plead their case--that they have been making progress in student achievement despite a school population explosion and a series of budget cuts necessitated by falling revenues from the state, which provides three-fourths of local districts’ operating funds.

Davis released a list of 23 schools that have notified the state they are in some degree of difficulty. Of those, 21 had a “qualified report status”--the milder of two categories used to gauge a district’s fiscal fitness. In Southern California, they were Montebello Unified and Baker Valley Unified in San Bernardino County. Only two districts fit the more serious “negative report status” category. They were Coachella Valley in Riverside County and the Antelope Valley Union High School District in Los Angeles County, which did not file a negative report last year. Both are getting financial advice from the state, Davis said.

Davis praised the qualifications of the Los Angeles Unified School District financial staff, despite a midyear budget shortage that required $130 million more in cuts from its $3.9-billion spending package. But he said many small districts’ promotion practices often get them into trouble. The problem, he said, comes when school board members rely too much on the advice of people who may have been excellent teachers or principals but, as financial officers or superintendents, do not have sufficient financial expertise to tend the budget.

Norman E. Miller of School Services of California, a private consulting firm that has studied the finances of many public school districts, testified he felt it was important to correct a popular perception that many school districts are mismanaging their affairs.