School finance proposal blasted in final days of budget talks

A last-minute proposal from Gov. Jerry Brown to limit the amount of money school districts can keep in their reserve accounts triggered an angry response in the closing days of budget negotiations.

“I think it’s stupid,” said Megan Reilly, the chief financial officer of the Los Angeles Unified School District. “The proposed legislation is fiscally irresponsible and potentially harmful to students.”

The esoteric proposal, part of a budget-related bill, has caught school officials and some lawmakers by surprise. A legislative analyst said he had not yet seen the measure when it was vetted on Wednesday night by the joint budget committee, which approved it.

If passed by the full Legislature, the proposal would only take effect if voters pass a ballot measure in November strengthening the state’s rainy-day fund. Since a portion of the statewide fund would be dedicated for schools, the proposal would limit the size of school districts’ individual reserves in years when there are deposits into the statewide fund.

Most districts would be required to keep their reserves at no more than 6% of their budgets. Los Angeles Unified would be capped at 3%.

“It doesn’t provide enough of a safety net,” Reilly said, noting that the district needed to rely on its savings during the recent recession.

Other advocacy groups, like the American Civil Liberties Union and Children Now, are also opposed to the proposal. But, it’s being backed by the California Teachers Assn., the state’s largest teacher union.

“Districts get public money for the purpose of spending it in the classroom, not for hoarding it,” said Mike Myslinski, a spokesman.

Assembly Republican leader Connie Conway (R-Tulare) criticized Democrats for “catering to special interests” with the measure.

“This could put more school districts on the brink of financial turmoil, especially in inner-city and rural school districts that have struggled with budget problems,” she said in a statement. “Pushing inner-city school districts to the brink of bankruptcy will only hurt efforts to turn around low-performing schools.”

Follow @chrismegerian for more updates from Sacramento.