A former Financial Oversight Committee member says local school district is hiding information.
By Jonathan Friedman / Assistant Editor
A financial consultant’s report approving the Santa Monica-Malibu Unified School District’s 5 percent raise for teachers, which was hailed last month by school board members, received a significantly less optimistic reception from the district’s Financial Oversight Committee at its meeting on Monday. Several committee members and a former member attending the meeting called the report “troubling,” and said it pointed to a dark financial future for the district unless radical changes are made. But there was no suggestion that the school board should reject the proposed raise.
The report, written by a private consultant named Fiscal Crisis and Management Assistance Team, states that the SMMUSD must shift some monies among its various accounts so it will be able to afford the raise for the teachers while being able to maintain a state-mandated 3 percent reserve fund in each of the three years of the contract, 2006-07 to 2008-09. But the report also states that the continuing slide in district enrollment means the district will see its revenue drop further, since state funding is based on daily attendance.
With revenue decreasing and expenditures exceeding that revenue, the district must take money out of its General Fund to make up for the loss, a policy known as deficit spending. According to Fiscal Crisis’ projection, in 2008-09 the district will need to use $4.5 million of its own money, leaving the SMMUSD with just less than $900,000 in spare cash at the end of that fiscal year (not including the 3 percent reserve). In comparison, the district will have nearly $7 million at the end of this fiscal year.
“When I read the [Fiscal Crisis] report, I don’t say, ‘Well the district is going to be solvent in three years,'” said committee member Patricia Hoffman. “What I say is that the district is on notice and that it has to take a fairly dramatic step in order to be solvent in three years.”
Several other committee members expressed similar concerns. Many of them work in the financial world, and said the current situation would severely harm the district’s bond rating.
“The picture painted here is not a very promising one,” said committee member Cynthia Torres. “There are a lot of serious questions. I wonder what kind of a statement we are making to the markets.”
Perhaps the harshest remarks came from a former FOC member who attended the meeting, Chris Harding. He made waves last month when he wrote a lengthy piece for a Santa Monica news Web site that criticized the district and pointed out portions of the Fiscal Crisis report that alarmed him. The school board swiftly responded with a press release that praised the Fiscal Crisis report and the district’s handling of the situation.
“I think information is being obscured by lots of political spin and unfortunate public relations stuff that has impeded a thoughtful look at what has happened,” Harding said. Harding went on to say that he found it odd that the budget analysis in the Fiscal Crisis report does not specify what effect the teachers’ salary increase has on the budget projections, only mentioning that the district can afford the raise.
“It’s just not here, and I have to believe that is not by accident,” Harding said. “That’s simply not being straight with the public. And I think the district’s primary problem is not financial, it’s credibility. And I think that’s an important thing to be clear about.”
Harding also brought up the issue of the mysterious resignation of former district CFO Winston Braham. In November, shortly after Braham refused to support the teachers’ raise, going against Superintendent Dianne Talarico, he resigned. It was later revealed that as part of his resignation deal, he received approximately $190,000 and agreed not to discuss the district’s financial matters with any third party, unless given permission by the school board or the superintendent. At a Santa Monica City Council meeting last month, some council members said they were reluctant to increase the city’s annual donation to the district (which could go up as much as $1 million) unless it heard from Braham.
“The message the City Council has received is ‘We’re afraid of what he might say,'” Harding said. “Why is he [Braham] the only person on the planet that can’t make a comment on the [Fiscal Crisis] report? I think it’s really harming the credibility of the school board … When you silence a person in that fashion, you create an air of suspicion and an air of distrust that needs to be eliminated as soon as possible.”
Committee Chair Paul Silvern said he did not believe that the topic was one the FOC should deal with. Hoffman added that she did not believe the Santa Monica City Council should “have the power of subpoena.”
“Mr. Braham, who I have a great deal of respect for, is historical,” Hoffman said. “And he’s not part of what we’re doing moving forward. How additional funding might be spent has nothing to do with Mr. Braham.”
This Thursday, the school board will review a document that must be sent to the Los Angeles County Office of Education stating how the district will afford the teachers’ raise. This is a revised version of a document the district sent to LACOE last fall. That copy was rejected, and the SMMUSD was asked to come up with a proposal for how it would be able to afford the teachers’ raise. The new document uses much of the information it received from Fiscal Crisis. It also addresses the issue of sinking revenue due to declining enrollment.
“The district currently has 1,700 students from inter-district transfers and has a waiting list of over 1,000 students wanting to transfer into the district,” the SMMUSD document states. “The district will either increase enrollment or decrease projected [amount of teachers employed] commensurate with declining enrollment.”
The board will vote on the document at its March 15 meeting. At that time, it will also vote on the contract with the teachers. Steve Hodgson, the district’s interim chief financial officer, said at Monday’s FOC meeting, that this month discussions will also begin on how the district will meet the challenges of its long-term financial future.