How City Schools Pushed Themselves Towards the Precipice of Insolvency

How City Schools Pushed Themselves Towards the Precipice of Insolvency

Photo by Sam Hodgson

Superintendent Bill Kowba (center) chats with San Diego Unified trustees and staffers before a 2010 school board meeting. Recently, he's been warning that the district is on the brink of insolvency.

 

This summer, San Diego Unified School District trustees were asked to make a difficult decision.

The district had prepared to lay off 1,400 employees, including about 800 teachers — about 10 percent of its entire workforce. Then the state offered a lifeline, issuing newly optimistic economic forecasts and telling districts to rehire teachers.

With the extra money, the district could now afford to bring back more than 300 teachers who had previously been told they’d be laid off. That would help keep cherished class sizes down at some of the district’s most challenged schools, and, in board President Richard Barrera’s words, prevent the district from “blowing up” programs that had been making significant headway.

But hiring back those teachers would mean spending a tenuous $25 million in already tight budget times. It would mean relying on optimistic projections from the state that far more revenue would come into California’s coffers than the year before. If the board chose to spend that money and the state’s projections didn’t come true, the district’s budget deficit for the following year would balloon from about $60 million to almost $115 million. And, once it had made the decision to rehire them, the district wouldn’t be able to jettison the teachers it had brought back, forcing it to cut elsewhere in an already ravaged budget if the money didn’t come through.

The other option was to play it safe.

Instead of spending the money, the district could instead choose to wait until the state was sure that it could actually afford to send San Diego the extra money. But that would mean class sizes for kids in kindergarten and second and third grades in some struggling schools would increase significantly, something nobody on the board wanted.

The board members decided to take the risk. They voted 4-1 to hire back the teachers.

Trustee Scott Barnett, the only member to vote against the decision, called it “one of the riskiest budgets ever approved by the district.”

Now, just three months after making that choice, it looks unlikely that the state will meet those optimistic projections, raising the likelihood of deep cuts that have led Superintendent Bill Kowba to wage a public campaign warning that the district is “at the edge of the cliff, looking over and down at insolvency.”

He and Barrera are now on a mission to spread the word of the damage midyear cuts would do to local schools. They say that absent vast changes the district is on the road to a state takeover, whereby California would be forced to bail out the district and local control would be lost. The superintendent would be fired. The board would become an advisory council to an appointed leader who would run the state’s second-largest school district unilaterally.

They blame the state and are demanding statewide solutions. But while California has decimated local education funding over the last few years, the board’s own decision to spend, not save, Sacramento’s imaginary money is one of a series of decisions that has helped move it towards that precipice of insolvency.

San Diego Unified’s board, like school boards around the state, has always known there was no guarantee of getting the extra cash from the state. And they’ve always known that if the state didn’t meet its rosy projections, an already grim financial picture would grow even bleaker.

When the state announced its budget gimmick in the summer, other more conservative school districts erred on the side of caution. That’s what Los Angeles Unified did. It chose not to include the cash into its budget until the state made good on its projections.

And that’s what San Diego’s chief financial officer, and to a lesser extent Kowba, advised the school board to do. CFO Ron Little repeatedly warned the board that spending the projected money on reducing class sizes could mean dire consequences for the district in the years to come.

None of that stopped the board from spending it.

The trustees plugged the projected revenue from the state into its budget and hired back the teachers. Those employees can’t be laid off until the end of the year, which means the district’s committed to paying their salaries.

Meanwhile, the prospect of the state making cuts to the district’s budget in the middle of the year has become more likely as every month goes by. The state’s already about $700 million short of what it needs in revenue to avoid those cuts.

The school board’s decision “pushed us closer to the edge of the cliff sooner than would have happened otherwise,” said Barnett, who believes there’s a “50/50 chance” the district gets taken over.

On June 28, the school board passed a budget spelling out where all those original 1,400 layoffs would come from. But the trustees also pledged to hire back hundreds of teachers if the state made more revenue available to them in the future.

A few days later, the state made more revenue available to them. Kind of.

State legislators predicted that California would bring in $4 billion more revenue over the next year than it had the year before. They essentially gambled that the economy would pick up and more money would flow to the state’s coffers, a move that meant they could avoid making any cuts to education spending.

Because school districts make their budget decisions based on how much money the state says it will be able to send them, the predicted extra revenue meant San Diego Unified suddenly had a lot more money to plug into its budget.

But there was a serious caveat.

If the $4 billion didn’t materialize, state lawmakers would be forced to shortchange social services, including education, midway through the year.

There were also confusing instructions to school districts about how to spend the projected extra revenue that had appeared.

The legislation told districts to use the money specifically to avoid laying off teachers, rather than stashing the money away in their reserves. But Gov. Jerry Brown also issued a rare signing message when he signed the bill urging school boards to “take all reasonable steps to balance their budgets and to maintain positive cash balances.”

For San Diego Unified, those instructions posed an inherent paradox and underscored the decision it had to make.

Ron Bennett, CEO of financial consultancy School Services of California, said his advice to districts in the light of the confusing messages coming from Sacramento was clear.

He said he told districts that despite the fact that the law said not to store the money away, “do it anyway.”

Los Angeles Unified School District did that. San Diego Unified didn’t.

Now that the money’s been spent, the district’s got to figure out what it will do if the state does, indeed, make midyear cuts to its budget. The solution floated by the state would be to shorten the school year by an additional seven days, but districts like San Diego Unified can’t do that without re-starting negotiations with unions.

The district has tried to re-start negotiations with its teachers union to renegotiate pay increases that take effect next year, but union officials have so far rebuffed those advances.

Will Carless is an investigative reporter at voiceofsandiego.org. You can reach him at will.carless@voiceofsandiego.org or 619.550.5670.

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Will Carless

Will Carless

Will Carless is the former head of investigations at Voice of San Diego. He currently lives in Montevideo, Uruguay, where he is a freelance foreign correspondent and occasional contributor to VOSD. You can reach him at will.carless.work@gmail.com.

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8 comments
Paul M Bowers
Paul M Bowers subscriber

Look at the comments here on VOSD. The tide is turning. The weakness of management is showing- parents and taxpayers are mad as hell and not going to take it anymore.

Paul M Bowers
Paul M Bowers

Look at the comments here on VOSD. The tide is turning. The weakness of management is showing- parents and taxpayers are mad as hell and not going to take it anymore.

mlaiuppa
mlaiuppa subscriber

I'm sure going to vote for that.

mlaiuppa
mlaiuppa

I'm sure going to vote for that.

mlaiuppa
mlaiuppa subscriber

Three for three?

Mark Giffin
Mark Giffin subscribermember

It would certainly temper my perspective

mgland
mgland

It would certainly temper my perspective