California Gov. Arnold Schwarzenegger signed a bill last week authorizing a state general fund loan to avoid the insolvency of the King City Joint Union High School District.
The bill provided an immediate $5 million emergency loan to the district that will eventually be supplanted by a bond issue of up to $13 million issued through the California Infrastructure and Economic Development Bank.
The 2,100-student district, which serves a predominantly agricultural inland area of Monterey County, experienced a financial crisis after losing an arbitration case with its teachers’ union, which was awarded millions of dollars in back wages, according to a state Senate staff report.
The district was already experiencing structural financial problems related to declining enrollment and a lack of reserves, according to the staff report, which noted that the district had supported general fund operations since February by borrowing from capital construction funds.
In return for the emergency loan, the district will give up all governing authority to a state administrator appointed by California’s superintendent for public instruction, Jack O’Connell.
