What’s New
The state apportionment deferrals enacted in the 2009-2010 California budget will create new cash flow challenges for many school districts, community college districts, and county offices of education around the state. These deferrals have created potential cash balance deficits at both the outset and close of the fiscal year, as well as the historical low cash period before property taxes are received in December. To address cash balance deficits at the end of the 2009-10 fiscal year, the Cash Reserve Program has developed a tax and revenue anticipation note (“TRAN”) financing that will be issued in April 2010, to provide access to funds for general fund cash flow purposes across the end of the fiscal year. In addition to this “Cross Fiscal Year” TRAN, the Cash Reserve Program will continue to offer a TRAN issued in July to address cash flow deficits projected to occur in the 2010-2011 fiscal year. Based on the timing of cash flow deficits, it is possible that districts may need to issue more than one series of TRANs in a fiscal or calendar year.
2009-2010 Cross Fiscal Year TRAN
In order to “balance” the state’s current budget, the state legislature deferred cash payments owed from the current 2009-2010 fiscal year and will make these payments in July and August of the 2010-2011 fiscal year. As a result of this action, significant cash flow challenges may be created for your local education agency that results in deficits crossing over two fiscal years. With expert knowledge of the existing revenue limit, state law and Internal Revenue Service rules, the Cash Reserve Program financing team has developed a TRANs financing to be issued in April 2010 to provide districts access to cash until the deferred payments are received. Due to state law limitations, the 2009-2010 cross fiscal year TRAN will not be available to address cash flow deficits that occur later in the 2010-2011 fiscal year; a separate 2010-2011 fiscal year TRAN must be issued to address those cash flow imbalances.
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December 2009: Issuance resolution and Board agenda package available
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January 2010 – February 2010: Adopt issuance resolution at board meeting
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February 2010: Provide financial data for TRAN sizing
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March 1, 2010: Deadline to return approved, signed, and certified board resolution
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March 2010: Finalize cash flow projections for TRAN sizing
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April 2010: Sell TRAN to investors and deliver TRAN proceeds for general fund cash flow use
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July 2010 – August 2010: Funds set aside for TRAN repayment
2010-2011 Fiscal Year TRAN
To address potential cash flow shortages at the beginning of the 2010-2011 fiscal year, the Cash Reserve Program will issue a TRAN for the 2010-2011 fiscal year in early July 2010. Due to a combination of the timing of the apportionment deferrals, state and federal tax laws, and marketability considerations, the TRAN issued in July 2010 will not provide access to funds that will cross over the end of the 2010-2011 fiscal year. Districts that do not project to experience cash balance deficits until the latter half of the 2010-2011 fiscal year will have an opportunity to issue a 2010-2011 cross fiscal year TRAN through the Cash Reserve Program later in the fiscal year.
Key Dates
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January 2010: Issuance resolution and Board agenda package available
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January 2010 – March 2010: Adopt issuance resolution at board meeting
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March 2010 – April 2010: Provide financial data for TRAN sizing
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April 5, 2010: Deadline to return approved, signed, and certified board resolution
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May 2010: Finalize cash flow projections for TRAN sizing
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June 2010: Sell TRAN to investors
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July 2010: Deliver TRAN proceeds for general fund cash flow use
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February 2011: Begin setting aside TRAN proceeds for repayment
The Program
The California School Boards Association proudly works with Piper Jaffray & Co. and Orrick, Herrington & Sutcliffe to provide the California Cash Reserve Program for school districts, community colleges, county offices of education and community college districts.
The Cash Reserve Program is a cash management tool designed to supplement your general fund cash reserves for the fiscal year and to act as a cushion for temporary cash flow needs. To create this reserve, a tax-exempt obligation (or TRAN) is issued.
School districts, as well as county offices of education, are often faced with the difficult situation of having to fund regular monthly expenditures with irregular receipt of state aid and property tax revenues. These imbalances are typically caused by the uneven or "lump sum" receipt of revenues (e.g., twice a year property tax receipts as compared to regular monthly expenditures) and the deferral of state apportionment payments.
Proceeds from the sale of a Cash Reserve Program TRAN issue may be used to fund imbalances caused by the mismatch between revenues and expenditures. This program meets cash-flow needs of schools in a cost-effective, efficient manner.
Contact Piper Jaffray & Co.
2321 Rosecrans Ave., Suite 3200
El Segundo, CA 90245
(800) 876-1854
(310) 297-6000
Fax: (310) 297-6001
Mark Farrell
Managing Director
mark.j.farrell@pjc.com