In July each year, local school districts and independent charter schools must submit to their local county superintendent the district’s preliminary budget. Based on their review, county superintendents can approve a district’s (or charter school’s) budget, approve it conditionally, or disapprove it. Districts with approved budgets proceed with the implementation of their programs as planned.
AB 2756, passed in 2004, requires the use of 15 predictors developed by the Fiscal Crisis and Management Assistance Team (FCMAT) as one basis for evaluating a district’s adopted budget. If an external reviewer has found more than three of the following in evidence, the county superintendent must withhold budget approval unless the district can provide adequate assurances that it is able to meet its financial obligations.
The official list of 15 predictors includes:
1. Governance crisis
2. Absence of communication to educational community
3. Lack of inter-agency cooperation
4. Failure to recognize year-to-year trends
5. Flawed average daily attendance (ADA) projections
6. Failure to maintain reserves
7. Insufficient consideration of long-term bargaining agreement effects
8. Flawed multi-year projections
9. Inaccurate revenue and expenditure estimates
10. Poor cash flow analysis and reconciliation
11. Bargaining agreements beyond state cost-of-living adjustment (COLA)
12. No integration of position control with payroll
13. Limited access to timely personnel, payroll, and budget control data and reports
14. Escalating General Fund encroachment
15. Lack of regular monitoring of categorical programs
In the case of a conditional approval, the county superintendent submits to the district governing board written recommendations for revising the budget, which may include specific budget adjustments. The county superintendent can also appoint a fiscal adviser and/or convene a committee to review those recommendations. The governing board of the district must submit a revised budget to the county office after holding a public hearing. The county at that point must either approve or disapprove the budget. If the county finds that the budget revisions were not sufficient or appropriate, it can use that as the basis for a qualified or negative certification when the district submits its next financial document, the first interim report in December. (The county can do this even if it decides to approve the revised budget.)
In the case of a budget disapproval, the county superintendent must call for the formation of a budget review committee (BRC). With approval of the California Department of Education (CDE), the county and district can agree to waive this requirement. If the BRC is waived or if both the BRC and the state superintendent disapprove the budget, the county superintendent must, in consultation with the state superintendent and the district governing board, develop and adopt a budget and fiscal plan for the district. The county superintendent may also stay or rescind any school district action that is inconsistent with the adopted budget.
If a district does not submit a budget to the county superintendent, the county superintendent is to develop a budget for that district by Sept. 15 at district expense. The state superintendent is required to report to the Legislature and the state director of finance if any district does not have an adopted budget by Nov. 30.
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