LOS ANGELES — Assuming California Gov. Jerry Brown signs off, a Los Angeles-area school district with an enrollment of 15,000 students will receive a state loan it needs to remain solvent.
California state legislators voted unanimously on Friday, the last day of their session, to approve $55 million in emergency funding for the Inglewood Unified School District.
The district passed a resolution saying the school would be insolvent by December, which led hometown state Senator Roderick Wright to craft the legislation.
“The county superintendent and state financial analysts agreed that they were in financial trouble,” said Wright, an Inglewood Democrat.
The IUSD is expected to have an operating deficit of $4.86 million for fiscal 2011-12. Based on current trends, that gap would grow to $24 million in 2013-14 and $36.29 million by 2014-15 without the emergency funding, according to a report from the state’s fiscal analysts.
The bailout legislation now goes to Brown, who has 30 days to sign the measure, along with 200-plus other bills.
As with previous school districts that required state emergency loans to remain solvent, the state superintendent of public instruction would assume the duties of the Inglewood school board, which would take on an advisory role. The school’s superintendent would be replaced by a state-appointed administrator appointed by state superintendent Tom Torlakson.
Gary McHenry, the Inglewood district’s superintendent, failed to return calls seeking comment.
The bill appropriates $29 million for an emergency loan to the school district and authorizes an additional $26 million of lease-bond financing through the California Infrastructure and Economic Development Bank.
“This is not the first school district to get a state loan and probably will not be the last,” Wright said. “At the end of the day, it is about making sure the students of Inglewood receive the education they are entitled to.”
Currently, the Oakland Unified School District, Vallejo City Unified School District and King City Joint Union High School District have emergency loans outstanding, according to the analysis of SB 533.
“It has the same challenges all urban school districts have,” Wright said of Inglewood. The district’s declining enrollment numbers coupled with a decline in state funding “overwhelmed them,” but a number of school districts have fallen below the state requirement of having two years of reserves, he said.
“Inglewood has lot of company,” Wright said. “They just made the declaration first.”
The school district has $139.7 million in long term debt including general obligation bonds, certificates of participation and capital leases, according to the district’s audited financial statement dated June 30, 2011.
Moody’s Investor Service on June 28 downgraded the district’s GO bond rating from A3 to Baa1 and gave the bonds a negative outlook. Standard & Poor’s affirmed its BBB-plus underlying rating with a negative outlook on the district’s GOs on April 25.
In November, the IUSD plans to ask voters to approve Measure GG, a $90 million bond proposal to finance renovations and new construction on facilities, which have an average age of 65 years old, according to Jon Isom, the school district’s financial advisor, and a principal of Urban Futures Inc.
The funds would enable the district to make the buildings more energy-efficient, capturing savings, construct new science and computer labs, and replace 100 portable classrooms.
Isom said he doesn’t think the district’s financial woes will affect its ability to pass the bond measure, or sell the bonds if it does pass.
“General obligation bonds are secured by the local tax base from the property owners in the district boundaries, not by the school district’s general fund,” he said. “Districts like Oakland and Compton have been able to sell bonds.”
California’s financial woes and cutbacks in state education also have not affected the ability of state school districts to sell bonds, according to Isom.
“We are in the market selling GO bonds to investors and they continue to hit historic low interest rates,” he said. “It shows there is interest in California school bonds.”