California Should Let School Districts Use Asset Sales to Close Budget Deficits: San Francisco Edition

The state of California has a perverse law that prevents school districts from using proceeds from assett sales of surplus property to pay for any district operational costs. The San Francisco school district has been criticized by a Civic Grand Jury for hoarding valuable real estate and then using city funds to fill the district’s budget deficit. However, even if the district sold the property, a California law would prevent the district from using the funds to fix the budget. Money from asset sales can only be used by school districts for facilities.

As yesterday’s San Francisco Chronicle reports:

With more than 19 million square feet of property, the district is a major player on the city’s Monopoly board with real estate holdings from Baltic Avenue to Boardwalk.

Most of that real estate will continue to see children doing things like playing four square or sorting out algebra problems and probably will never see a for-sale sign.

But across the San Francisco landscape are other district properties: a de facto dog park, long-abandoned school sites, parking lots and, most notably, much of the dirt under Nordstrom at the Westfield San Francisco Centre at Fifth and Market streets. . . .

The county grand jury took the district to task in a June report, saying school officials were failing to be good stewards of this valuable public resource.

“The fact of the matter is that too much real estate has been going unused for too long. This amounts to waste,” said grand jury member Abraham Simmons in an e-mail about the report.

The jury noted that the district’s school board members filled this year’s budget deficit with the help of the city’s rainy day fund and concluded that the city should deny future funds until the district sells its surplus land.

All told, the 10 surplus sites could bring San Francisco Unified $132 million.

Unfortunately for the many districts like San Francisco with surplus property in California, current state law prevents school districts from using such revenue for operational costs.

For example, Ventura Unified has $30 million from property the district already sold that cannot be used in the district’s operational budget. The district has been working to change the state law, at least for its own district. The district wants to use some of its $30 million from previous sales of surplus property to offset some of the district’s budget cuts. A bill working its way through the Legislature would allow just the Ventura district to use about $10 million over the next four years. This is a law that should be changed for every district in California.

California is projected to continue with large deficits that will impact education and districts face rising pension and benefit costs that encroach on operational costs. School districts should not be real estate tycoons, they should be able to sell surplus property to meet the financial needs of their districts.