School Debt Under Fiscal Surveillance: A Policy Analysis of State Audits of California Districts

• In Event: Constructing New Visions in K-12 School Finance: The Past, Present, and Future of State Interventions into District Finances

Abstract

Public schools face the “perfect storm of financial chaos” as federal pandemic relief funds wind down, student enrollment fluctuates, and state revenue continues to decline following decades of disinvestment (Roza & Silberstein, 2023). Some struggling school districts undergo a “takeover” of their local public schools, a policy mechanism where a democratically-elected school board is replaced with a single state administrator to govern the district. The public schools most affected by fiscal accountability policies are overwhelmingly in working class communities of color with historically Black leadership, including Newark, New Orleans, Detroit, and Inglewood (Morel, 2018). Urban districts in particular have served as sites for market-based policy experiments where superintendents are expected to turn around a failing district through various reform projects, sometimes met with community protests and occupations of schools slated for closure (Ewing, 2019). The politics of school debt illuminate deep-rooted racial tensions underpinning American democracy, where local, democratic control of public education is framed as an obstacle to districts’ fiscal stability.

In California, the creation of the Fiscal Crisis Management and Assistance Team (FCMAT) in 1991 was pivotal in reshaping district governance and politics by empowering an independent, yet state-authorized, audit agency with fiscal control of local governments. Whereas low test score performance can trigger takeover in other states, California law focuses on school districts under “fiscal crisis.” How audit agencies define "fiscal vitality" and exercise "crisis management" in school districts remains underexamined in the school takeover scholarship and little understood by the public. Therefore, I ask: How does FCMAT define and identify “fiscal insolvency” in local California school districts? How do state officials choose to intervene and take control of local school districts based on perceived fiscal insolvency? I employ a critical policy analysis (Diem et al., 2019) of audits of local districts receiving state intervention in financial decisions. I draw on fiscal surveillance (Kissell, 2023) to explain the disciplinary logics and technologies that define local perceptions and policy decisions surrounding debt and fiscal crisis more broadly. This sociological approach to school finance examines the actors, actions, context for action, and rules for governing action (Carruthers & Kim, 2011, p. 240).

Preliminary findings indicate that there are inconsistencies in the metrics that determine which districts are fiscally insolvent. The requirements for ending state receivership and restoring local control are unclear as FCMAT introduces new categories of improvement, such as academic outcomes and community engagement. Findings also reveal that an industry of private sector expertise extended the apparatus of audit culture through bond ratings, credit scores, and, eventually, test outcomes. Amid ongoing concerns across the country about school budget cuts, amplified by the Trump administration’s dismantling of major agencies, my paper illuminates the policy tools, metrics, and logics that measure and assess the fiscal crisis facing public schools, which in turn legitimize local governance redesign and budget decisions. California is an ideal case site where the state has a separate audit agency, FCMAT, which has spurred an ecology of accountability standards, consultants, loan intermediaries, and audit culture.

Author

• René Espinoza Kissell, University of California - Santa Cruz