Over the past few days, there has been some discussion in the media about a loan of $12 million that is being offered to the Sweetwater Union High School District by the San Diego County Office of Education. We’d like to take a few moments and share some additional information with our community about this matter.
As most of the community is aware, the 2018-2019 school year was a challenging one for the Sweetwater District. However, with the hard work of all of our stakeholders and the implementation of ongoing budget solutions, our Board of Trustees passed a balanced budget for the 2019-2020 school year.
During the development of our district budget for the 2019-20 school year, several aspects of the district finances were shared, including the district’s practice of temporary borrowing from other funds within the district, specifically the Community Facilities District Fund (Fund 49 – also known as the Mello-Roos Fund).
Since the Sweetwater Union High School District does not receive enough funding from the State to cover payroll expenses in the months of July and August, it is necessary to borrow money to pay our staff.
California Education Code 42603 permits school districts to temporarily borrow from other district funds to address the timing of cash received with certain conditions. Any and all dollars borrowed by the district’s General Fund must be repaid with interest to the fund that was borrowed, thereby increasing the total dollars in the fund upon repayment. Sweetwater has typically borrowed upwards of $70 million from Fund 49 and then repaid it, with interest, once State revenue is received during the school year.
Beginning early in 2019, during presentations to the Board of Trustees, the district shared publicly there would be a balance of between $8 to 14 million still owed to Fund 49 at the end of the fiscal year (June 30, 2019). The final amount owed to Fund 49 as of June 30, 2019 was $12 million.
The fiscal stabilization plan created by the Sweetwater District accounted for this balance. Per the 2019/20 budgeted cash projections the balance is projected to be at $0 by June 30, 2020.
On July 10, 2019, the San Diego County Office of Education (SDCOE) emailed the Sweetwater District with an offer to immediately pay the $12 million back to Fund 49 and Sweetwater would have until June 30, 2020 to pay back the $12 million, plus interest to the SDCOE – approximately $200,000-300,000. The SDCOE Board approved this offer on July 24, 2019 at their regularly scheduled Board Meeting.
Because the Sweetwater District had a balance as of June 30, 2019 there is a finding that will be mentioned in a future financial audit of the district (per California Education Code 42603). Although Sweetwater very much appreciates the willingness of the SDCOE to support our efforts, a loan any time after June 30, 2019 does not change the audit finding.
The next step is for the Sweetwater Board of Trustees to consider the offer made by the SDCOE at a future board meeting, determining if it is in the best interest of the district to borrow these funds. While there are several considerations to take into account, a major factor is repayment of interest. As mentioned earlier, when the district borrows from its own funds and makes repayments with interest, those funds stay within the district. A loan from SDCOE would also have to be repaid with interest, and those funds would go to the SDCOE.
We will continue to update the community as we are able, and we thank you for your continued support of the Sweetwater Union High School District.