Grace Rubenstein for The Bay Citizen

Third graders in the Oakland Unified School District, which was taken over by the state in 2003

The number of California school districts at risk of financial collapse has tripled over the last five years, according to state figures.

There are 110 school districts on the state's watch list that could be headed for insolvency, up from 37 five years earlier, according to the most recent figures available.

The distressed districts may face state takeovers that are expensive for taxpayers and often force schools to increase class sizes and eliminate programs like art and music.

A combination of rising costs and shrinking budgets is responsible for the districts' financial plight. Federal stimulus funding for school districts will be exhausted by the end of this school year, and a growing number of districts are draining their reserve funds to make up for deep state budget cuts. Meanwhile, employee compensation and pension costs continue to spiral.

Nearly half of California's most troubled school districts are in the Bay Area. Based on financial reports from the 2010-11 school year, 13 districts statewide received negative certifications from the state, meaning they were not expected to be able to meet all of their financial obligations in the short term. Six of those districts were in the Bay Area, including Vallejo City Unified and Healdsburg Unified.

Ninety-seven other school districts were identified as being in danger of not meeting their financial obligations over several years.

“This is the worst I’ve seen it,” said John Gray, vice president of School Services of California, a firm that provides financial services to public school districts. “We are at a historic high for the number of schools districts in financial distress. We are going to have a whole generation of students whose education has been shortchanged by the state of California.”

Under California law, school districts are not permitted to file for bankruptcy. Instead, state administrators are appointed to shore up the finances of troubled school districts. Often that means deep cuts to staff or educational programs. School districts also receive emergency bank loans, which they must repay at a relatively high interest rate, preventing many from recovering quickly.

The Oakland Unified School District, which ran up a debt of about $100 million — the largest of any school district in the state’s history — was taken over by the state in 2003. While the district regained some local control in 2009, taxpayers are still paying off that loan. The district still owes about $69 million, which it expects to repay by 2023. Until then, the district will have a state trustee overseeing its budget.

“We are repaying the bank $6 million a year, which could go a long way toward helping students,” said Troy Flint, a spokesman for the Oakland Unified School District. “It is less money our schools are getting for professional development, after-school programs and tutoring. Class sizes have also risen at every level over the last two years.”

The Hayward Unified School District illustrates the sacrifices required of school districts hoping to avoid a state takeover. After landing on the state’s fiscal watch list three years ago, the district saved about $26 million by shedding staff, increasing class sizes and slicing some music programs for fifth graders. Like last year, teachers and administrators will be required to take three to seven furlough days this year. The cuts improved the district’s financial standing last summer, but its finances remain “qualified” by the state, meaning it may not be able to pay its bills within several years.

“We didn’t want to be in a position where we had to take a loan, so it’s a relief that our finances are improving,” said Janis Duran, superintendent of the Hayward Unified School District, which has about 21,000 students in kindergarten through 12th grade. “But we had to make sacrifices. There is no doubt that it affected children.”

Classrooms are more crowded, Duran said, which “means less contact with teachers, and this will affect students’ learning.”

With the state facing possible midyear budget cuts, school districts may have to absorb additional cutbacks, forcing more of them to the financial brink.

“If we see a continued problem in the economy and have to face additional reductions in future years, it raises additional concerns that more school districts will be insolvent,” said Edgar Cabral, an education policy analyst at the nonpartisan state Legislative Analyst’s Office. “It also raises questions about whether the state could assist all those school districts with their finances at the same time.”