April 26, 2012 / 11:01 AM / 8 years ago

More lay-offs for massive California school district

SAN FRANCISCO (Reuters) - California’s second-largest school district is preparing lay-off notices for roughly 2,600 of its credentialed and non-teaching staff if the state does not provide funds to help close its $122 million deficit.

The board of the 120,000-student San Diego Unified School District voted on Tuesday to send out the preliminary lay-off notices to clerical, food service and other employees. That followed warnings issued for teachers and other credentialed staff.

Layoffs would be effective for the school year beginning in September, a district spokesman said on Wednesday.

The district has cut about 2,000 positions since 2008, leaving its payroll at about 14,000, said Bernie Rhinerson, the district’s chief of staff. He cited shrinking financial help from state officials who have had to contend with weak revenue due to California’s recent hard times.

“That represents about $450 million in budget reductions,” Rhinerson said, adding that further payroll cuts may be unavoidable because the district cannot dip further into its reserves and federal stimulus dollars are no longer available.

The district has also slashed spending on operations and has few options remaining on that front.

“We’ve cut back on transportation and outside contracts and closed departments,” Rhinerson said. “We’re at the end of that rope. “We are not a top-heavy organization.”

The district’s finances were so weak last October that Superintendent Bill Kowba said the district risked insolvency and a state takeover, a warning followed by downgrades to the district’s credit rating.

Moody’s Investors Service later that month lowered its rating on the district’s general obligation debt by one notch to ‘Aa2’, citing its “narrowed financial flexibility after material draws on reserves in recent years.”

On the heels of that move, Standard & Poor’s Ratings Services lowered its rating on the district’s general obligation bonds to ‘AA-‘ from ‘AA’ based on a “constrained budget and structural deficit.”

S&P and Moody’s have negative outlooks for the district.

The downgrades have not, however, set the district back with investors. Rhinerson said the district had no problems with a $122 million deal in February to refund general obligation bonds that Moody’s rated ‘Aa2’.

Meanwhile, the district’s board has approved selling up to $150 million in bonds stemming from a $2.1 billion general obligation bond measure approved by voters in 2008. The district is mulling a measure for the November ballot that would seek $2 billion to $2.8 billion in general obligation debt for capital projects and to bolster its general fund.

The San Diego district is not unique in readying more job cuts because state officials determine how much state revenue and revenue from local property taxes go to public education.

Governor Jerry Brown in January unveiled a state budget plan that would close a deficit then projected at $9.2 billion with spending cuts and new revenue from a tax measure he expects voters will approve in November.

If voters reject the measure, schools and community colleges could face nearly $5 billion in additional funding cuts halfway into the school year under Brown’s plan.

Brown will present a revised budget plan next month but school district officials must prepare their budgets with a worst-case scenario in mind, Rhinerson said. “We can’t assume the ballot measure will pass.”

San Diego’s school district may be able to reduce lay-offs if its employees agree to concessions such as deferring scheduled raises and an extension of a five-day furlough that expires this year, Rhinerson said.

Reporting By Jim Christie; Editing by Dan Grebler

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