Will School Districts Go Bankrupt?

If the state's budget crisis seems far away, it shouldn't. The latest evidence is a scary report from the California Department of Education that lists 174 school districts in the state as fiscally troubled.

What does that mean? Those are districts that, according to state projections, may be unable to "meet their financial obligations" -- that is, pay their bills, including debt service, for the just concluded school year and the school year that begins this fall. Frighteningly, the state's largest school district, Los Angeles Unified, with an annual budget of more than $6.3 billion, is on this list.

The education departments singles out 14 of those districts as in particularly bad shape, saying that they "will not meet financial obligations." The three biggest of these districts are in Vallejo and Hayward (both in the Bay Area) and Lynwood (in Los Angeles County).

The number of schools on this watch list has jumped by 38 percent this year over the previous year. And if these schools think the state can bail them out of trouble, think again. More education cuts are almost certainly coming.

School districts will likely respond with layoffs and other budget measures (likely shortening the school year) to save money. But if these trends continue, it may be time that we see the unthinkable: school district bankruptcies in California.

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