CSBA’s cash reserve program throws out a lifeline in horrific fiscal times
Published: November 22, 2011
These are especially difficult fiscal times for California’s public schools—after weathering $18 billion in devastating budget reductions and years of late payments from the state—school districts and county offices of education now face the growing threat of mid-year trigger cuts that could total $2 billion and hit K-12 schools especially hard. The Nov. 16 report from the state’s Legislative Analyst estimated that if the Legislature activates the budget trigger in 2012, schools could expect $1.4 billion in cuts to K-12 funding.
CSBA’s Cash Reserve Program provides a way for districts and county offices to deal with deferred state payments and to manage cash flow problems that arise when payments are delayed and massive cuts loom on the horizon. For more than two decades, CSBA’s Cash Reserve Program has given school districts, county offices of education and community colleges a streamlined, cost-effective way to issue tax and revenue anticipation notes or TRANs. Proceeds from the sales of these TRANs generate the cash local educational agencies need to manage cash flow and pay their bills during lean budget years.
“Cash management has become a critical function in the operation of K-14 districts and county offices of education,” said Mark Farell, managing director of Piper Jaffray & Co., a financial services company that partners with CSBA’s Financial Services Corporation and Orrick, Herrington & Sutcliffe to offer the program.
“With approximately 40 percent of state apportionment payments to schools deferred across the end of the fiscal year and the revenue forecast from the LAO making mid-year cuts more likely, cash management in the second half of 2011-12 will be extremely challenging for many districts and county offices of education,” Farell continued. “Issuing tax and revenue anticipation notes through the Cash Reserve Program offers districts and county offices an efficient and cost-effective tool to meet cash needs when internal borrowing is no longer sufficient.”
The Cash Reserve program will also issue a TRANs in early July 2012 to help districts and county offices deal with cash flow shortages through the first half of the 2012-13 fiscal year. Issuing tax revenue anticipation notes in the 2011-12 cross-fiscal-year (proceeds from TRANs sale available in late Feb. 2012) does not preclude a district from participating again in the 2012-13 Fiscal Year pool (proceeds available late July 2012).
It costs nothing to apply, but districts need to meet a number of deadlines between now and next February—when the tax anticipation notes are scheduled to be sold and proceeds from the sale become available to districts and county offices.
Applying to participate in the Cash Reserve Program is a straightforward but lengthy process that requires advance planning and school board approval. Sample board resolutions are available now. Adopting such a resolution does not obligate a district or county office to participate in the program.
Board resolution, application and TRANs issuance timeline:
- November 2011: District requests board adoption package
- December 2011: District adopts TRAN issuance resolution
- January 2012: Finalize cash flow projection and TRAN sizing
- February 2012: TRANs sold to investors and proceeds available for district/county office use
Easy link:
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CSBA district and financial services