Funding status flips for San Carlos School District

The distinction in funding designation changes where a district receives its dollars to properly provide its services to each student. A community funded district receives such designation when it can reach this amount solely through its property taxes. If a district’s property taxes do not meet that threshold, the school is then appropriated state funds. 

The district was considered community-funded for four years between 2016 and 2020, then designated as basic aid for three years and just recently flipped back, according to the San Mateo County Controller’s Office.

Though each designation requires the same minimum amount of funding to be allocated to each school, the act of flipping between the two designations proves to be a problem. 

“This results in cash problems for districts when that happens because they receive their dollars at different time periods in each of those statuses,” County Superintendent Nancy Magee said.

Basic aid funding is distributed in December and April. State-funded status means the money will now be sourced by the Educational Revenue Augmentation Funds and in the Vehicle License Fee obligation calculation. This funding does not start until February. 

The district’s status was estimated to be basic aid at the beginning of the fiscal year, but changed after reports from the first appropriation period. If a status is changed during the fiscal year, the County Controller’s Office takes back allocated property taxes that were paid to date, and the VLF obligation depletes all funding. 

The designation flip has resulted in the district not receiving any cash payments for nine months in the current fiscal year. 

District Superintendent Jennifer Frentress said this makes it difficult to plan ahead because of an uncertainty over funding status. 

“You also have to posture differently with what you’re doing with programs,” she said. “You have to be really careful you’re not overspending resources.”

A school’s funding designation is based on factors such as average daily attendance and property tax collections. Periodical reports on these numbers can change in the middle of the school year. 

For the district, Chief Financial Officer Denice Lacroix said the redesignation is primarily related to supplemental property taxes. While property taxes are secure, supplemental pieces can vary widely throughout the year because they are based on factors such as how many homes are sold in a given area. 

“It’s complicated to predict because it’s based on the market,” Lacroix said. 

The varying amount of supplemental taxes is one cause for a district to be pushed one way or another in funding designation if they’re close to the calculated LCFF amount through their secure property taxes. 

Kevin Bultema, deputy superintendent of Business Services for the Office of Education, said a district could be in this limbo until its secured taxes surpass the threshold. 

However, predicting these designation changes is difficult, Bultema said SCSD has managed the flipping well so far by planning ahead and requesting a loan from the Office of Education to avoid the financial concern. 

The short-term loan is not to exceed $5 million and be paid back by July 31. In approving the loan, the Board of Education raised discussion about putting an end to the financial consequences when districts flip between funding statuses.

“I’m delighted that we have this reserve to do this, but is there any discussion about putting an end to this nonsense,” Trustee Susan Alvaro said.  

Magee said that state Sen. Josh Becker, D-San Mateo, has worked for several years to shape legislation that might provide more stability to a district experiencing these flips. Bultema has also met with Becker’s staff to look for solutions to address this problem. 

Although finding a way to avoid financial hardships as districts flip in funding designations is difficult because of the complicated nature of property tax distribution, Bultema still hopes they can find a way to avoid this in the future.

“This is a problem that has real impact on our districts and we will continue to see if we can come up with a solution,” Bultema said.