SMMUSD HDQTRS — The complicated process of unraveling Santa Monica’s Redevelopment Agency has claimed an unexpected victim: The Santa Monica-Malibu Unified School District.

The state has cut off funding to the district as a result of a calculation by the Department of Finance which assumes the public schools will take in $17 million of former Redevelopment Agency money that local and county officials doubt will ever materialize.

That estimation means the district is facing a $10 million cash shortfall by July which will have to be made up with loans, said Jan Maez, the district’s chief financial officer.

“I don’t know where they got the estimates from,” Maez said. “They weren’t the complete picture of what was really going to happen.”

Lawmakers touted the end of redevelopment agencies on Feb. 1 as a boon to local schools because the agencies received property taxes that would otherwise have gone to education.

However, as that money instead fills school coffers, the state has less obligation to put money into districts, which results in savings to Sacramento. It leaves most schools no better or worse off than they would otherwise have been.

A handful of districts actually get more money out of the deal because their property taxes would exceed the funding they would otherwise have gotten from the state. These districts are called “basic aid,” meaning that they get as much or more than the amount of money guaranteed them by the state from their own property taxes.

According to officials from the state Department of Finance, SMMUSD should receive $16.9 million in new property taxes, which exceeds the $13 million contributed by the state for education and pushes the district into “basic aid” status.

Unfortunately, it is extremely unlikely that the district will actually get the money this fiscal year because of certain contractual obligations made by Santa Monica’s RDA that need to be paid off first. And therein lies the problem.

After redevelopment agencies across the state expired, successor agencies were chosen to pay off some of the debts incurred using the former RDA’s tax money.

In general, those debts include some signed contracts, bond payments and some employee costs, among other things.

City officials compiled a list of potential payments which will need to be vetted by an oversight committee and later the state Department of Finance.

That list, approved by the City Council on Feb. 28, includes $44,957,023 in expenditures through June 30, 2012 and another $40,278,235 between July 1 and Dec. 31.

The exact amount of money available to Santa Monica is “speculative,” and school districts only get a portion of what remains after the list of obligations is met, said John Naimo, assistant auditor controller with Los Angeles County.

Santa Monica’s RDA brought in roughly $73.7 million a year when it was active, and half of that has already been paid out, Naimo said.

The remaining half is all that’s left to meet the first round of obligations through June 30. If those expenditures are approved in their entirety, there will be no money to distribute to the schools between now and the end of the fiscal year.

“The issue everyone is faced with will be timing,” Naimo said.

But the state has already cut off school funding to Santa Monica-Malibu.

If no more money comes in from redevelopment, the state will owe SMMUSD money at the end of the fiscal year, according to state finance officials.

That’s only scant comfort to a district facing a severe cash shortage.

The district can borrow money, but it comes at a price, Maez said.

First, there’s simply the cost of borrowing in terms of interest. Second, the district is losing the chance it had to accrue interest using money it already had in the bank.

“It always costs money to borrow money,” Maez said. “What that’s going to be I couldn’t tell you right now.”

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