Schools on the Credit Card

Joe Raedle, Getty Images

Has the state, by adding education spending via IOUs, put school districts in jeopardy of bankruptcy?

Quite possibly, says John Fensterwald, in this thoughtful post over at the blog Educated Guess. The amount of dollars destined for schools that are paid by deferral -- essentially IOUs, in which this year's spending is paid out of next year's money -- has gone from $1 billion to more than $7 billion over the past three years.

This is an issue because school districts, when they get the promise of funding without the actual cash, must resort to various methods -- in many cases external borrowing -- to come up with the cash. And districts may not be able to do that forever. The fear is that they could get over-extended. Eventually, schools won't be able to produce the cash against the state promises -- and the deferrals could become budget cuts.

It's another piece of the California budget crisis that is getting worse -- and must be watched.

Contact Us