The California Department of Education (CDE) received an inquiry from an local educational agency about the following guidance in the November 9, 2010 Common Message:
Please note that school districts had until June 30, 2010, the ability to sweep restricted ending balances as of June 30, 2008… If the school district did not sweep these restricted program balances by June 30, 2010, the remaining funds must be expended in accordance with the original program requirement if not automatically unrestricted. As of 2010-11, the SACS software no longer provides resource codes for these programs. If a school district did not sweep these balances by June 30, 2010, locally restricted resource codes must be used.
The CDE has discussed this guidance with the primary author of the Common Message, and anticipates that it will be corrected in the next version of the Common Message. Meanwhile, we offer the following clarification:
First, moving “unswept” flexed balances to a restricted resource code would be an improper use of SACS. The balances are not restricted.
Second, “unswept” flexed balances do not become restricted again, either after June 30, 2010, or after the end of 2012-13. There is no requirement to spend remaining flexed balances in accordance with original program requirements.
As the CDE’s April 17, 2009 letter [http://www.cde.ca.gov/fg/ac/co/] explained, flexed balances were transformed from restricted to unrestricted at the moment that SBX3 4 and later ABX4 2 were enacted into law. From that point, it became only a matter for local educational agencies (LEAs) to report those balances in a manner consistent with their newly-unrestricted character, that is, in an unrestricted resource. The CDE is aware that some LEAs did not change their accounting for flexed balances, but the manner in which the LEA has accounted for the flexed balances does not change their unrestricted character.
The CDE gave exhaustive consideration to the guidance in the letter before we issued it. Through multiple meetings with Department of Finance, Legislative Analyst’s Office, and legislative staff working groups, it became apparent that both the restricted balances eligible for flexibility, and the ongoing funding for the 39 flexed budget items, were changed from restricted to unrestricted by the legislature's action. Even where an LEA chose to continue to operate a formerly restricted program, that choice was an exercise of the LEA’s flexibility is its use of the newly-unrestricted funds.
Naturally LEAs were, and are, welcome to account for flexed balances and flexed funding in a locally-defined unrestricted resource code (0001–0999) if they wish. The CDE neither requires nor recommends this.