State Emergency LoansInformation on emergency loans made to school districts.
Assembly Bill 1840 (Chapter 426, Statues of 2018) made several changes to the emergency loan process effective September 17, 2018, including shifting a number of responsibilities from the State Superintendent of Pubilc Instruction (SSPI) to the County Superintendent of Schools (CSS), with concurrence of the SSPI and President of the State Board of Education (SBE).
If a school district governing board determines during a fiscal year that it has insufficient funds to meet its current obligations, it may request an emergency apportionment loan. Statute specifies legislative intent that emergency apportionment loans are to be provided only through a legislative appropriation.
General statutory conditions for acceptance of a loan that exceeds 200 percent of the amount of the district's recommended reserve include:
- The CSS shall assume all the legal rights, duties, and powers of the governing board of the district.
- The CSS, with concurrence from the SSPI and President of the SBE, shall appoint an administrator to act on behalf of the CSS.
- The school district governing board shall be advisory only and report to the administrator.
- The authority of the CSS and administrator shall continue until certain conditions are met. At that time, the CSS, SSPI, and President of the SBE shall appoint, by majority vote, a trustee to replace the administrator. Trustee authority is addressed below.
General statutory conditions for acceptance of a loan that equals or is less than 200 percent of the amount of the district's recommended reserve include:
- The CSS, SSPI, and President of the SBE shall appoint, by majority vote, a trustee to monitor and review the operation of the district.
- The school district governing board shall retain governing authority but the trustee shall have the authority to stay and rescind any action of the local district governing board that, in the judgment of the trustee, may affect the financial condition of the district.
- The authority of the appointed trustee shall continue until the district has adequate fiscal systems and controls in place, the SSPI has determined that the district's future compliance with the fiscal plan approved for the district is probable, the trustee has served at least three years, and the CSS, SSPI, and President of the SBE terminate the appointment. After the trustee is terminated and until the emergency loan is repaid, the CSS shall have the authority to stay and rescind any action of the local governing board that affects the financial condition of the district.