Policy & Finance > State Education Policy

Legislative Analyst urges conditions on selling property



The Legislative Analyst’s Office is taking issue with Gov. Jerry Brown’s proposal to remove restrictions limiting how school districts can use money from the sale of district property. The LAO wants to add a condition intended to make a district carefully weigh the option of selling district property to plug a hole in its general operating budget.

Condominums replaced the Carl Sandburg School, whose sale brought in $30 million for San Bruno Park School District.

Condominiums replaced the Carl Sandburg School, whose sale brought in $30 million for San Bruno Park School District.

Until the recession, with few exceptions, districts had to put money from the sale of district land and buildings into a capital account for building repairs or future construction. But in 2009, to give districts more options to deal with the recession, the Legislature temporarily allowed districts to spend the proceeds from the sale of property purchased entirely with district funds on one-time general operating expenses. These are defined as “costs that are nonrecurring in nature and do not commit the school district to incur costs in the future.” Only eight districts have taken advantage of the offer so far, according to LAO analyst Paul Golaszewski. San Bruno Park School District in San Mateo County was among them and spent $12 million from the sale of a shuttered school site  on textbooks, technology upgrades and non-capital equipment – among the uses permitted, according to an interim report by the State Office of Public School Construction.

Last month, to help close an estimated $88 million deficit and avoid issuing preliminary layoff notices for the fifth straight year, trustees of San Diego Unified voted 4-1 to raise an estimated $51 million by selling a parcel and a former school. Using money to pay for ongoing staffing costs is clearly not one of the allowable purposes under the statute, but, according to the San Diego Union-Tribune, it was clear from school board discussions that most of the additional revenue would go toward restoring teacher furlough days and enacting pay increases that the board negotiated in 2010.  Nonetheless, the budget for San Diego Unified, the state’s second-largest district, is so large that the district will be able to designate the sale of the properties to one-time permissible purchases, according to district officials. In other words, smart finance officials will likely be able to figure out ways to use revenues from property sales however trustees decide.

The Legislature’s exemption on the use of proceeds for operating expenses expires at the end of this year. Brown proposes to make the flexibility permanent for those properties bought with districts’ own money.

The LAO says it’s conceivable that districts would sell land and buildings, use the money for operating expenses, and then turn around and seek state building aid to help buy additional land and build a new school. To deter that, the LAO recommends making districts that divert proceeds from property sales to the general fund ineligible for state construction and modernization funds for at least five years. “This higher stakes trade-off” would force districts to think hard about selling off assets to pay current bills and better ensure that the state’s facilities funds are spent wisely, the LAO said.

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One Response to “Legislative Analyst urges conditions on selling property”

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  1. navigio on March 22, 2013 at 4:47 pm03/22/2013 4:47 pm

    • 000

    I find this story so tragic I am almost at a loss for words…

    almost…

    How is it that we have gotten to the place where we value real estate interests more than one of the most fundamental concepts of community: the setting aside of resources dedicated forever to the education of our children.

    There is a long history of land being set aside for public education. Even as far back as the Land Ordinance of 1785 (“There shall be reserved the lot N 16, of every township, for the maintenance of public schools”) and the Northwest Ordinance of 1787 (“Religion, morality and knowledge, being necessary to good government and the happiness of mankind, schools and the means of education shall forever be encouraged.”). As states were created, these documents provided a framework by which the feds created a trust relationship with states by granting them federal land under certain conditions, including very specifically public education or schools. The ratio specified in 1785 document was increased over time. However, states also liberally interpreted what it meant to support schools and many of the granted lands have been sold off (CA has less than 10%–maybe as low as 7%– of our originally granted ‘public schools’ land as of a survey study done a decade or so ago). Other states still get significant income from much of this granted land (As recently as 2006 ND still got about 10% of its state education funding from trust land revenue). NM still had about 75% of its land as of a decade ago, AZ, over 90%.

    I guess most disheartening is that not only are we putting increasing pressure on local entities to essentially give up on this land or our kids forever, but that we are doing it in concert with a whole slew of ‘educational reforms’ that are having the very real impact of increasing segregation of our schools, which, in my view, cause increased pressure to sell off land. This kind of segregation can lead to much smaller schools than might otherwise be considered ‘optimal’ or efficient when seen in a budgetary light. Even as parents often intentionally choose small schools for a desired environment, and as research shows all sorts of positive effects of smaller schools; both academically and safety-wise (Miramonte, an elementary school, had well over 2,000 students a bit over a handful of years ago), we continually hear the arguments that smaller schools are less efficient to run. In fact, even too inefficient to bother to keep open. I cant tell you how many times I have heard, ‘it goes against every fiber of my being as an educator, but the budget says…’ prior to a vote on school closure or consolidation. I have even heard the argument from school leaders that their best way to resist being closed is to fight for facilities bond money to increase enrollment capacity (obviously at the expense of free and open space on campus–kids be darned, naturally).

    It is unfortunate that virtually nobody seems to see the relationship between the dynamics of school movement and the plugging of funding gaps by selling school land. Specifically, that these forces that tend to try to shoehorn more and more kids into more and more crowded campuses, equally work to create ‘impossible to fund’ small school environments, thus creating new potential real-estate revenue sources.. Even that some districts who might not be so pro-charter, would work to sell off land before ever letting a charter get their hands on it. Of course the problem with not seeing this stuff is that we can never work to avoid it, and our public school system will continue to ‘adapt’ to the economic forces at hand until one day all our schools are renting school space from the local real estate agent.

    Regarding the story, I would be interested in understanding more about the state aid in buy-back options for districts. How much do school districts have to compete for real estate at market values if they need to increase their capacity? Is the aid merely a loan? Or is it a grant; and to what extent? Do we know how much of the state trust land is being used for actual school properties (vs simply as a revenue generator)?

    And thank you for covering this issue. It deserves even much more thought that it is currently getting.

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