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A Cautionary Tale Published 02/15/05 12:50:00 OAKLAND -- Twenty months after the state took over the Oakland Unified School District, anger boils here over losing control of the public school system, the outcome of years of fiscal mismanagement. Parents, teachers and Oakland residents regularly pack meeting halls and rally in the streets to protest the changes. Much of the resentment is leveled at Randolph Ward, the state-appointed administrator given complete control of the district in the takeover. Critics rail at Ward for closing five schools, calling him a dictator who wants to cut teacher pay and increase class sizes. His relationship with the community is so contentious that Ward goes nowhere for the district without an armed bodyguard. Sometimes, he has two. The Fresno Unified School District, wrestling with its own fiscal crisis, is at the threshold of a state takeover as well. In the next year, it will either follow Oakland Unified's demoralizing descent or claw its way back to financial stability. The lessons in Oakland are not lost on district leaders in Fresno. "It's not so much the fear of becoming Oakland as it is ... saying that we give up local control of our schools," says Luisa Medina, president of the Fresno Unified governing board. "We're doing everything possible to prevent that from happening." If officials don't change how the district operates, Fresno Unified will run out of cash to pay employees and bills by March or April of next year. Fresno would have to seek a state loan and forfeit all control, as Oakland did. The state has taken over seven districts since 1991, with takeovers typically lasting seven to 10 years. Most have been painful. In many ways, Fresno Unified is on the same precarious path as Oakland Unified. Both districts had several years of severe financial problems that resulted in deep cuts to programs, employees and reserves, leaving the districts depleted and the community disheartened. Enrollment is declining in both districts, with Fresno Unified losing about 1,000 students from 2002 to 2004 and Oakland Unified losing about 6,000 students in two years. Fresno Unified has about 80,000 students; Oakland Unified has about 46,000. Both districts also have had a high turnover in top leadership, contributing to instability. And both districts gave hefty employee raises in 2000 that critics later said they could not afford, with an 11% increase for Fresno Unified and a 24% increase for Oakland Unified. Financial problems in the districts escalated to the point where the state's Fiscal Crisis & Management Assistance Team stepped in to audit them and issued critical reports, Oakland Unified's in 2000 and Fresno Unified's in 2004. The state found significant deficiencies in Oakland Unified in a variety of areas, and expressed "serious concerns regarding the future stability of the district." It said Fresno Unified was in "serious fiscal crisis and approaching insolvency." The key difference between the two districts is that Fresno Unified still has time to fix its problems. Leaders in Fresno Unified say they're up to the task. Fresno is right to stay independent of the state, says Morris Tatum, an employee union leader in Oakland Unified. "Do not take the money," Tatum says. "It's just like dealing with the mob. ... That's what you're doing with the state."
Long road to takeover It took years for Oakland Unified to lose control. The district's problems and instability started long before its latest financial crisis with employee theft, teacher strikes, infighting among trustees and six superintendents in as many years. In 1990, a scathing state auditor general's report portrayed Oakland Unified as a district on the verge of financial collapse, plagued by political patronage, questionable hires and failure to apply for millions of dollars in grants. Despite those struggles, the district seemed to regain its financial footing by the mid-1990s. By the time Superintendent Dennis Chaconas came on board in 2000, he could focus on improving student achievement and signed off on a 24% pay raise for teachers. The raise reflected a considerable cost-of-living increase that the state passed on to districts and an attempt by Oakland Unified to make salaries more competitive, says Ben Visnick, president of the Oakland Education Association teachers union. Two years later, the district was in debt by more than $80 million, and no one seemed to know how it happened. A new financial accounting system began uncovering massive mistakes in the budget -- the cost of raises had been miscalculated, and cost overruns in special education programs overlooked. The state asked school finance consultant Ron Bennett to help. "The cuts couldn't be made fast enough to avoid getting the state loan," says Bennett, a former Fresno Unified business administrator who is now president of consulting group School Services of California. "They had tried, but they couldn't get the brakes on fast enough." District administrators unsuccessfully sought a 6% employee pay cut and chopped millions of dollars from the budget. But the district was nearly out of money, and in 2003, the school board voted to ask the state for a $100 million loan. When the California Legislature approved a bill granting the loan, state schools Superintendent Jack O'Connell immediately replaced Chaconas with Ward, who had been the administrator in the Compton Unified School District during the last years of that district's takeover. O'Connell also stripped school board members of their power, $750-a-month stipend and office staff. The board still holds meetings twice a month, but trustee attendance is inconsistent because board member interest has fallen, and Ward switches meeting days, says trustee Gregory Hodge. Ward is required to attend one meeting a month, but he doesn't have to act on suggestions from the community or board members. "You're in the desert as a voter, a parent and a teacher," says Oakland parent Katrina Brekke-Miesner. "There's no one who really cares what you're thinking." Ward declined interview requests, but he expresses determination on the district's Web site, saying he wouldn't have taken the Oakland job "if I didn't believe we could make this happen -- because the children deserve nothing less." Many parents, teachers and community members in the urban district are infuriated by Ward's decisions, especially the closure of five neighborhood schools that had 300 or fewer students. Ward also eliminated use of 500 district cell phones, laid off about 60 janitors and negotiated a 4% pay cut that included reducing the number of days teachers are paid to work by six. Teachers agreed to the decrease in a controversial, contested union vote. Acrimony continues this year over negotiations, Visnick says, with Ward attempting to cap what the district pays for health benefits at last year's level. Ward may close seven more schools that are struggling either academically or with enrollment. He is looking to make the district more efficient by consolidating schools and creating alternative programs to draw students, converting the closed campuses to house specialty schools or programs, including a small high school and classes for children with disabilities. Community members say the decisions were abrupt, with no chance for public input. Families say they were inconvenienced and confused about where their children would go the next year. "We knew nothing," says Tonia Nervis, whose four children had attended the now-closed Burbank Elementary School. "We left for Christmas vacation and came back, and this bombshell was dropped on us." Teachers and other employees wondered where they would be reassigned. Hundreds of people continue to crowd into meetings to protest Ward's decisions. Oakland trustee Dan Siegel, an attorney, helped file an unsuccessful lawsuit seeking to return some control to the school board. Other community members are circulating petitions to oust Ward. "I think people are really demoralized," Siegel says. "They feel like they just can't do anything to influence events and that things are working out at their school site because the principal continues to be a good principal and teachers continue to be good teachers." Ciera Flint, an Oakland Technical High School junior, says she hasn't seen anything good come out of the takeover. She says that Ward has cut programs, such as dance classes, that helped keep students in school. Gwendolyn Carr-Blalock, principal at Washington Elementary School, says the district has a better reading program and focus since the takeover, but overall the experience has been draining. "A lot of people are just tired of the chaos," she says. "They don't think their kids will get as good an education. That's one of the perceptions that goes along with receivership." Parent Pamela Drake says Ward "is probably the most hated person in Oakland these days." About a year ago, Ward requested a personal bodyguard from the California Highway Patrol at an estimated cost of $173,000 a year after a parent made a comment at a public meeting about bullets flying in Ward's direction. Ward also had a CHP bodyguard at his previous state-appointed administrator job in Compton. Supporters say Ward has been saddled with an immense challenge and is doing his best to stabilize the district. "It's early, but he's brought focus, and he's dealing with the hard problems. He's fighting against opposition on all sides," says Oakland Mayor Jerry Brown.
Parallel fiscal collapse Fresno Unified's troubles mirror those leading to Oakland Unified's collapse. It took Fresno Unified years to sink into a financial abyss, starting in the 1990s. Leadership turnover was high: nine superintendents or interim superintendents since 1984 and a string of chief financial officers. In the absence of consistent management, problems mushroomed. The biggest problem has been overspending. In 2000, flush with a substantial cost-of-living increase from the state, the Fresno Unified board approved an 11% raise for employees. Fresno County schools Superintendent Pete Mehas questioned whether the district could afford the raise. Santiago Wood was hired as superintendent in August and two months later ordered a hiring freeze and asked all departments to clamp down on expenses. At the time, he downplayed the significance of the belt-tightening; the district continued to expand some programs. In December, Mehas again sounded the alarm, saying district leaders needed to cut $34 million to pay for the raises. The board hired School Services of California, which in a sobering March 2001 report warned that the district was spending more than it took in and needed to take "immediate and bold action in order to right a fiscally precarious position." The report's findings have a familiar ring: Declining enrollment, increased costs and the raise had pushed the district's finances to the limit. The consultant also found that 21% of high school and middle school classes had fewer than 19 students. The board hired a consultant from School Services to help. By April 2001, the district had reassigned Chief Financial Officer Karen Willett and was scrambling to make $25 million in cuts, and the state had downgraded the district's fiscal status. At the same time, the district's power bills skyrocketed because of that year's energy crisis, enrollment was stagnant and the state cut school funding because of a downturn in the economy. The district, which had $28.5 million in reserves the year before, concluded 2000-01 with about $8 million in savings. While the district made millions of dollars in cuts over the next few years, it still spent more than it took in and failed to address escalating health-care costs or declining enrollment. Fresno Unified loses about $8 million in funding for every 1,000 fewer students. Fresno Unified's crisis deepened last year, and school leaders turned to school programs for cuts. They eliminated elementary music, cut library hours and reduced campus safety assistants and counselors. Since 2001-02, Fresno Unified has made $77.5 million in reductions. The community took notice. Parents were especially angry that elementary choirs and bands were scrapped. Last year, the voters elected three new board members, and the community created a task force to help guide school officials. Fresno Unified leaders appear determined to head off a state takeover and are intent on making the massive cost reductions that are necessary. They will decide Fresno Unified's future in the next month as they attempt to craft a long-term financial plan that cuts expenses but also restores programs such as music. The first step is to slash $35 million just to survive. Bringing back programs and increasing cash for unexpected costs in workers' compensation and health benefits will take an additional $13 million. To come up with $48 million, district officials are in closed-door discussions with employee union representatives to gain concessions on health-care costs, eliminate teacher positions by increasing class sizes and possibly cut salaries. If negotiations aren't successful, interim Superintendent Chuck McCully says he'll declare an impasse in talks with the unions. By state law, that triggers discussions using a state mediator. It the two sides still can't reach an agreement, the process goes to fact-finding, in which a state panel weighs documentation from both sides and issues a report. If that doesn't work, the district could impose a final offer on the union. Teachers could go on strike. McCully says he's no longer considering deeper cuts, such as eliminating athletics and extracurricular activities, more teachers, vice principals and buses. He's optimistic about negotiations. "We will prevent a state takeover," McCully says. "That will not happen." State's success stories Some troubled districts have managed to avoid takeovers. Fresno County schools Superintendent Mehas, granted oversight of Fresno Unified's finances because of the district's problems, says districts that avoid takeovers do it with teamwork. "Once the red flag goes up and they know it's negative ... we have seen them make the painful cuts, and they've had the bargaining units recognizing it's not in their best interest for a state takeover," Mehas says. The Berkeley Unified School District, with 8,870 students, was in a similar position to Fresno Unified in 2001. When the district couldn't balance its budget, the Alameda County Office of Education began overseeing Berkeley Unified's finances, and the state arrived to assess the problem. Superintendent Michele Lawrence says the district worked with the county and state on a three-year plan that meant painful cuts, including laying off teachers, cutting assistant superintendents from three to one, increasing the number of students in classes and getting rid of much of the library staffs. Turning the district around took cooperation from the unions, the community and the board, Lawrence says. In a recent progress report, the state said Berkeley Unified had made "notable progress in management of its financial operations." In November, voters passed a parcel tax -- a uniform tax on parcels not based on assessed value -- that eased some of the district's financial constraints. Though Lawrence says "we're still hanging on by a thread," the budget is balanced and the district is no longer facing a takeover. Seven other school districts weren't as successful at escaping receivership, including the 1,000-student West Fresno School District. The state took over West Fresno in 2003 with a $2 million loan after a series of upheavals that included fiscal mismanagement, criminal investigations and turnover in administrators. As the district works on its finances, Mehas says the educational climate "has substantially improved" and "the hemorrhaging has clearly stopped." Compton Unified, where Oakland's Ward first worked as a state administrator, took nearly 10 years to resurrect itself from a $20 million bailout. Compton, with about 33,000 students, raised academic performance and made campuses safer and better maintained, with Ward receiving much of the credit. The 800-student Emery Unified School District in the Bay Area pulled itself out of receivership in a relatively short three years. The district, whose superintendent was convicted of misusing public funds, was taken over in December 2001. The state was prepared to loan $2.3 million, but Emery's administrator got the job done for $1 million less and improved test scores. But it wasn't painless. Cuts included teachers, music and art. The middle school was consolidated with the high school, and enrollment dropped from nearly 1,000 to 800. The district's efforts, however, earned voter approval for a six-year parcel tax in June 2003, allowing the state administrator to restore programs. O'Connell, who returned local control in 2004, called it a "remarkable recovery that should serve as a model to other school districts." He credited sound management and cooperation with community and business leaders. In Fresno Unified, officials believe they have the essential guides to return the district to solvency: the state's report and citizens task force report issued in December. Both stressed the district's dire financial situation and that it must aggressively monitor enrollment, stop spending more than it takes in, contain health-care costs and stabilize leadership. As for a parcel tax, which would help the district dig out of its financial troubles, it's not on the immediate horizon. McCully and Peter Weber, a co-chairman of the citizens task force, say Fresno Unified needs to stabilize its finances before it asks the voters to pass a parcel tax. The district used a polling firm in 2003 to explore seeking a parcel tax, but the results were not encouraging. Medina says the seven-member board is committed to making changes: "I see a community solidly behind us." The reporters can be reached at aellis@fresnobee.com, fmatlosz@fresnobee.com or (559) 441-6330.
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