Intern Lissette Rodriguez covered a speech today by SUSD Superintendent Steve Lowder to an audience of no more than 30 people at El Concilio. Rodriguez reported when she returned to the office that Lowder told the audience “bankruptcy” was a possibility for SUSD and other school districts if Gov. Brown’s tax initiative is defeated in November. Lowder suggested the number of impacted districts could be in the hundreds.
Rodriguez said there was an audible gasp when Lowder invoked bankruptcy. For some strange reason “bankruptcy” is a loaded concept in Stockton these days.
I called Lowder to ask him about his choice of words. He explained that he was simply trying to make his remarks relevant and understandable to his audience.
Technically, school districts do not declare bankruptcy when they go broke. They become insolvent and go into receivership. In such situations, the superintendent and school board are removed and the California Department of Education appoints a trustee. The district’s debt is sold on the open market. Most notably this happened in Oakland a few years back.
“I said many districts would become bankrupt,” Lowder said. “We would likely be good for a year or a year and a half before we would be bankrupt.” SUSD’s fate would be postponed because it has set aside millions of dollars in reserve, Lowder said.
But he also acknowledged that those reserves are paper assets and are not in the district bank account. The reason for that is that the state has been deferring millions of dollars in funding to districts for several years. So SUSD would have to borrow to maintain services.
Ultimately, school districts might be left with the option of slashing 20-25 days from their 180-day calendars. But that would be easier said than done because employee unions would have to agree to machete the calendar.
Lowder said he wasn’t trying to cause angst by invoking bankruptcy.
“If it causes a big emotional storm, that was never my intention,” Lowder said. “I was really trying to be clear to people with some context they would understand.”
So what happens if the tax plan is defeated?
“School will work,” he said. “School will be in session. But things will change.”