Dear County and District Superintendents, County and District Chief Business Officials, and Charter School Administrators:
REVISED CRITERIA AND STANDARDS FOR FISCAL SOLVENCY
FOR BUDGET AND INTERIM FINANCIAL REPORTS EFFECTIVE 2014–15
The criteria and standards for fiscal solvency used to develop, review, and assess school district and county office of education budgets and interim financial reports have been revised pursuant to Assembly Bill 97 (AB 97) (Chapter 47, Statutes of 2013), as amended by Senate Bill 91 (Chapter 49, Statutes of 2013), and Senate Bill 97 (Chapter 357, Statutes of 2013). These bills enacted the Local Control Funding Formula (LCFF). The LCFF legislation requires that each school district and county office of education adopt a Local Control and Accountability Plan (LCAP), and requires that the LCAP be taken into consideration during the budget review process. The revisions take effect in fiscal year 2014–15.
Education Code Section 33127(c) required the State Superintendent of Public Instruction (SSPI), the Controller, and the Director of Finance to update the criteria and standards to address the LCAP requirements on or before January 1, 2014 for the 2014–15 fiscal year. Accordingly, the SSPI convened the criteria and standards committee pursuant to Education Code Section 33127 to incorporate the required changes. The committee, which includes representatives from local educational agencies, state agencies, and relevant labor and professional organizations, met and developed its recommendations for revisions in September 2013.
The committee limited its scope to those changes required by EC 33127(c), plus certain additional changes necessitated by the LCFF to eliminate, replace, or modify criteria related to the former funding formula, plus minor terminology changes necessary to conform to recent accounting standards. The committee did not address other policy matters or changes.
The State Board of Education approved the recommended revisions on November 7, 2013. A summary of the substantive revisions is enclosed. The revisions will be incorporated into Title 5 of the California Code of Regulations, and the revised criteria and standards will be posted to the California Department of Education (CDE) Web site at http://www.cde.ca.gov/fg/fi/ss/.
The revisions will also be incorporated into the 2014–15 release of the CDE’s standardized account code structure (SACS) financial data collection software, which is used by local educational agencies to prepare, validate, and submit their budgets and interim reports and in which the complex analytical tools used to apply the criteria and standards are automated.
In developing the revisions, the committee recognized that in the first and second year under the new LCFF, some districts and county offices of education are likely to show exceptions to certain criteria that involve historical ratios and trends. The committee asked the CDE to communicate that these exceptions are not necessarily evidence of fiscal distress, but rather might reflect expected changes in trends due to the shift of some revenues from restricted to unrestricted under the LCFF.
If you have questions or would like additional information, please contact the Office of Financial Accountability and Information Services by telephone at 916-322-1770 or by e-mail at firstname.lastname@example.org.
Peter Foggiato, Director
School Fiscal Services Division