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KAI RYSSDAL: Here's a real-life problem for students in Econ 101 this semester. Let's say you're a community college -- with a lot more students than usual because the four-year school down the road has raised tuition. Problem is, you've got less cash because the state has cut spending. And, if you happen to be in California, you can't even get your hands on that money. Politicians are more than two months late with the state budget. So, for extra credit, what does that community college do?
From one campus near San Francisco, KPCC's Julie Small has the answer.
JULIE SMALL: Clerks at the book store for Diablo Valley College ring up textbooks and school supplies for a steady line of students.
CLERK: Next in line.
The college is in its fourth week of classes and all appears normal, but that's only because Kindred Murillo hasn't been sleeping much lately.
Kindred Murillo: I'll have to tell you, the last three weeks have been scary for me because I want to know that I can make payroll.
Murillo manages finances for the school district that oversees Diablo Valley College. It's been a tough job recently. The state hasn't given the school the money it usually provides.
MURILLO: There has not been a payment in July. There has not been a payment in August. And we're anticipating not getting a payment in September. So the $20 million we had in reserves have basically paid the payroll for the last two months. So now we've depleted that.
And that's just the payroll. Murillo has had to scrounge dollars for all the college's other operating expenses too. She asked the board of trustees to borrow money from employees' pensions. She got an advance from the county government. And she got a loan from a bank. The credit crunch made it tough: banks are reluctant to lend without high interest rates. In all, the college will pay over $50,000 in interest to get through the end of November.
Erik Skinner: It's a tremendous waste of time, energy and money.
That's Erik Skinner with the chancellor's office for California Community Colleges. He says California owes the schools $600 million, collectively. That figure could rise to a billion dollars by the end of the month if the legislature doesn't break the budget impasse. Most colleges, like Diablo Valley, will have to borrow some money to fill in the gap.
Skinner: The financing costs associated with borrowing are unanticipated costs. There's no compensation from the state for those expenses.
Skinner says college's will pay the interest with classroom dollars. And that means . . .
SKINNER: Fewer resources will be available to pay faculty, to buy instructional equipment, and otherwise offer education. That's definitely one of the casualties of this impasse.
Another casualty is state student aid. California's lowest-income students rely on $1,500 grants from the state. Those checks haven't been issued.
Angelina Demondan: I got a letter saying that it wasn't going to come until the budget got passed. So I freaked out.
Twenty-year-old Angelina Demondan is getting her associate degree at Diablo Valley College to become an ultrasound technician. She says she relies on grant money to support her 2-year-old son.
Demondan: It's just scary to think about, you know, that it's not going to come when I need it to pay bills. I need it to take care of groceries, and I need it to, you know, buy things for my son that he does need on a daily basis.
Demondan hadn't heard yet, but Diablo Valley College just decided to front state grant payments to students. The checks go out next week. Roughly a quarter of California's 110 community colleges have also decided to front money to students. The rest just can't afford the extra millions it would cost them.
I'm Julie Small for Marketplace.