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LtrCOE-14: June Deferral Exemption

Letter Head: Tom Torlakson, State Superintendent of Public Instruction, California Department of Education

March 3, 2014

Dear County Superintendents of Schools, County Chief Business Officials, District Superintendents, District Chief Business Officials, and Charter School Administrators:

EXEMPTION FROM THE APPORTIONMENT DEFERRAL IN JUNE 2014

California Education Code (EC) Section 14041.7 provides the opportunity for school districts and charter schools to apply for a dollar-limited exemption from the deferral of the June principal apportionment payment to July. There is no exemption provision for county offices of education. Exemptions totaling up to $100 million may be approved by the Department of Finance (DOF). If requests for exemptions exceed $100 million, the State Controller, State Treasurer, and DOF may authorize exemptions totaling up to $300 million. If requests exceed the amount available, payments will be made in order based upon the earliest date and time that the complete application was received via e-mail or mail.

Applications are due per statute no later than April 1, 2014.

The purpose of this letter is to provide you with information regarding the process for applying for an exemption. Below we describe separately the deferral exemption application processes for school districts and charter schools because their submission and certification requirements differ. Following that discussion, we provide resources that will help school districts and charter schools prepare a cash flow projection that is a required part of every application.

School District Applications for Exemption from the June 2014 Deferral

Subject to the approval of the DOF, in order for a school district to be exempt from the June 2014 deferral, its county superintendent of schools must certify to the State Superintendent of Public Instruction (SSPI) and DOF on or before April 1, 2014, that the deferral of payments will result in the school district being unable to meet its expenditure obligations for June 2014 and provide an estimate of the amount of additional funds necessary for the school district to meet its expenditure obligations for the month of June. If approved, the district will receive the lesser of (1) the total amount of additional funds necessary to meet its expenditure obligations for the month of June or (2) the total June principal apportionment payment the district is entitled to receive in July 2014. Statute requires the California Department of Education (CDE) to make an apportionment of funds to exempt local educational agencies (LEAs) by June 20. The Second Principal (P-2) Apportionment will not be certified by this date, which determines the June principal apportionment payment. Therefore, the amount an LEA is entitled to receive in June, for this purpose, is equal to 20 percent of the balance due amount calculated as of the First Principal (P-1) Apportionment. This amount is reflected on the First Principal (P-1) Apportionment Payment Schedule LEA Detail Excel file located on the CDE Web page at http://www.cde.ca.gov/fg/aa/pa/documents/payschedlea13p1.xls, and is the same as the May 2014 pre-deferral payment amount. Any additional amount owed as a result of the P-2 certification will be paid in July.

To request an exemption, a school district must complete the form entitled “Application and Certification to Exempt a School District from the June 2014 Apportionment Deferral.” The form can be found by selecting the appropriate link on the CDE Web site at http://www.cde.ca.gov/fg/fi/ir/.

As directed on the form, school districts must submit narrative and/or documents that demonstrate that the school district has exhausted all internal and external sources of borrowing and will need a state emergency loan in order to meet its financial obligations for June 2014. A school district that is qualified or negative in certification status is not deemed to automatically meet the above criteria. A cash flow projection for fiscal year 2013–14 must be included in that documentation. The cash flow projection for June must include only those expenditure obligations that must be paid in June 2014. In addition, the cash flow projection must recognize the inflow and repayment of all sources of borrowing such that the ending cash balance in June equals the additional funds necessary to meet the expenditure obligations for June 2014.

School districts must submit the completed form and supporting documentation as described above to their county superintendent of schools for review, comments as appropriate, and certification. Applications that are submitted without the county office’s certification will not be accepted. The county superintendents must submit completed, certified application forms and supporting documentation for their school districts by April 1, 2014, to both the DOF and the CDE. Counties may send via e-mail attachment a scanned copy of the original to the DOF but the scan must be followed by the submission of the hard copy original. County offices should mail a copy or send via e-mail attachment a scanned copy to the CDE. The contact information is below.               

Send copy to:

California Department of Education
School Fiscal Services Division
Attention: Arlene Matsuura
1430 N Street, Suite 3800
Sacramento, CA 95814
Telephone: 916-327-0538
Scan: ab1200@cde.ca.gov

Send original to:

Department of Finance
Education Systems Unit
Attention: Laurie Carney
915 L Street, 7th Floor
Sacramento, CA 95814
Telephone: 916-445-0328
Scan: laurie.carney@dof.ca.gov

If you have questions regarding the application process for school districts, please call the CDE at 916-327-0538 to be connected to the staff person assigned to the school district’s county.

Charter School Applications for Exemption from the June 2014 Deferral

Subject to the approval of the DOF, in order for a charter school to be exempt from the June 2014 deferral, its governing board must certify, in consultation with the county superintendent of schools, to the SSPI and DOF on or before April 1, 2014, that the deferral of payments will result in the charter school being unable to meet its expenditure obligations for June 2014 and provide an estimate of the amount of additional funds necessary for the charter school to meet its expenditure obligations for the month of June. If approved, the charter school will receive the lesser of (1) the total amount of additional funds necessary to meet its expenditure obligations for the month of June or (2) the total June principal apportionment payment the charter school is entitled to receive in July 2014. Statute requires the CDE to make an apportionment of funds to exempt LEAs by June 20. The Second Principal (P-2) Apportionment will not be certified by this date, which determines the June principal apportionment payment. Therefore, the amount an LEA is entitled to receive in June, for this purpose, is equal to 20 percent of the balance due amount calculated as of the First Principal (P-1) Apportionment. This amount is reflected on the First Principal (P-1) Apportionment Payment Schedule LEA Detail Excel file which can be found on the CDE Web page at http://www.cde.ca.gov/fg/aa/pa/documents/payschedlea13p1.xls, and is the same as the May 2014 pre-deferral payment amount. Any additional amount owed as a result of the P-2 certification will be paid in July.

To request an exemption, a charter school must complete the form entitled “Application and Certification to Exempt a Charter School from the June 2014 Apportionment Deferral.” This form can be found by selecting the appropriate link on the CDE Web site at http://www.cde.ca.gov/fg/fi/ir/.

As directed on the form, charter schools must submit narrative and/or documents that demonstrate that the charter school has exhausted all internal and external sources of borrowing and will become insolvent and forced to cease operations given the deferral of payments. A cash flow projection for fiscal year 2013–14 must be included in that documentation. The cash flow projection for June must include only those expenditure obligations that must be paid in June 2014. In addition, the cash flow projection must recognize the inflow and repayment of all sources of borrowing such that the ending cash balance in June equals the additional funds necessary to meet the expenditure obligations for June 2014.

Charter schools must consult with their county superintendent of schools in preparing the deferral exemption application and must provide a copy of the certified application to their chartering authority. Charter schools must submit completed, certified application forms, and supporting documentation by April 1, 2014, to both the DOF and the CDE. Charter schools may send via e-mail attachment a scanned copy of the original to the DOF but the scan must be followed by the submission of a hard copy original. Charter schools should mail or send via e-mail attachment a scanned copy of the original to the CDE. The contact information is below.

Send copy to:

California Department of Education
School Fiscal Services Division
Attention: Arlene Matsuura
1430 N Street, Suite 3800
Sacramento, CA 95814
Telephone: 916-327-0538
Scan: ab1200@cde.ca.gov

Send original to:

Department of Finance
Education Systems Unit
Attention: Laurie Carney
915 L Street, 7th Floor
Sacramento, CA 95814
Telephone: 916-445-0328
Scan: laurie.carney@dof.ca.gov

If you have questions regarding the application process for charter schools, please call the CDE at 916-327-0538 to be connected to the staff person assigned to the charter school’s county.

All LEAs’ Applications for Exemption
Cash Flow Projections

All applications must be accompanied by a fiscal year 2013–14 cash flow projection. The cash flow projection should assume all enacted deferrals. To assist in the preparation of the projections, the CDE has posted a cash flow schedule on the CDE Web site at http://www.cde.ca.gov/fg/aa/ca. The schedule shows the statewide cash flow projections and assumptions that may be used in developing LEA-level projections. In addition, on the same Web page, the CDE posts entitlement and apportionment schedules for many categorical programs, which show the timing and amount of allocations by LEA.

Principal apportionment amounts by LEA through May 2014 can be found at http://www.cde.ca.gov/fg/aa/pa/pa1314.asp. LEAs should assume that their entire principal apportionment payment for June 2014 is deferred.

An LEA’s cash flow projection should include an estimate of the LEA’s Education Protection Account (EPA) entitlement. Information to help LEAs estimate the 2013–14 fiscal year EPA entitlement is available on the CDE’s web page at http://www.cde.ca.gov/fg/aa/pa/epa1314.asp.

A copy of this letter, the application forms, and legal references related to internal and external borrowing and the June deferral can be found on the CDE Web site at http://www.cde.ca.gov/fg/fi/ir/. After the DOF approves the LEAs for exemption, the CDE will post the list of exempted agencies on this Web page as well.

If you have further questions regarding the topics listed below, please contact the staff person listed for that topic:

  • For charter school or school district deferral exemptions, please call the CDE at 916-327-0538 and ask to speak with the staff person assigned to the charter school or school district’s county.
  • For cash flow planning for the principal apportionment, please contact Christina Kersey, Consultant, School Fiscal Services Division, by phone at 916-324-9806 or by e-mail at ckersey@cde.ca.gov.
  • For cash flow planning for categorical funds allocated by the CDE outside the principal apportionment, please contact Julie Klein Briggs, Consultant, by phone at 916-323-6191 or by e-mail at jbriggs@cde.ca.gov.

For general questions regarding this letter, please contact Arlene Matsuura, Administrator, School Fiscal Services Division, by phone at 916-327-0538 or by e-mail at amatsuur@cde.ca.gov.                                      

Sincerely,

 

Peter Foggiato, Director
School Fiscal Services Division

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