State Budget Update: State Delays Payments to Schools and Counties

Delayed payments will force counties and schools to borrow funds to cover their bills Interest payments would drive up school costs and take money that could be used for children's education.

Legislation passed earlier this year gave state officials the ability to enact a cash management plan that involved delaying payments to counties, school districts, county offices of education, and charter schools. Each deferred payment could total as much as $2.5 billion, with a maximum of three deferrals during the fiscal year. Under the new law, payment deferrals could also be implemented a month earlier if necessary. The legislation is intended to deal with immediate budget concerns and is set to expire in September 2011.

The first payment deferral was implemented in July, with another scheduled for October. But without a budget in place, finance officials are now announcing that October payment deferrals will take place in September. A third delay in payment is planned for March 2011.

"The more you borrow, the more interest you have to pay," Pratt said.

Children in Los Angeles will be hard hit by the state payment delays. According to a California Department of Education document, L.A. schools are slated for more than $756 million in delayed payments in September alone. A number of L.A. County programs serving children will also be affected by the deferrals; more than $500 million in payments would be deferred for local services such as CalWORKs, Foster Care, Child Welfare, and Child Abuse Prevention. It is unclear at this time how deferred payments will impact these services. 

Additional Reading:

• Los Angeles Times:  State misses $2.5-billion payment to schools because of budget delay, August 24, 2010
• Official Notice re: Cash Management Deferral Acceleration Plan, August 23, 2010
• California Department of Education Payment Schedule
• State Controller, State Treasurer, and Department of Finance Joint Declaration Letter, March 20, 2010
• L.A. County Memo: Sacramento Update, March 12, 2010 (lists programs and services impacted by payment deferral)