Wednesday, Sept. 23, 2009 | It was a stunning change of fortune. Months ago, as San Diego Unified struggled to cope with massive budget cuts, it suddenly discovered that the problem wasn’t as bad as it thought.

Budget staffers found that their expected shortfall had suddenly dropped from $180 million to $106 million — a 40 percent change — after they added up new numbers for state funding and the actual savings from freezing spending.

It was good news — but it made skeptical observers even more skeptical of the numbers. And as San Diego Unified heads into another year of budget cuts, analysts say its budgets remain unreliable.

Outside experts hired by the district to pore over the budget found that the system is still riddled with problems, according to a draft report obtained by Employees frequently have to enter and sort budget data by hand, increasing the chance of errors. Millions of dollars have been put in the wrong place as a result. And the school district has trouble tracking the costs of individual employees. That makes it harder for schools to know where the fat is — and cut it so the things that students and parents plead for can be spared.

Such concerns are nothing new. In fact, the same analysts brought up the same problems a year ago. Top San Diego Unified employees say those problems will soon be fixed. New data systems will be unrolled, ending the need for employees to painstakingly work with numbers by hand and reducing the chance of mistakes.

But another issue could prove troublesome. The outside analysts questioned whether the school district charged the wrong fund for routine upkeep of schools and violated state rules about how the money can be used. If California regulators agree that the school district erred, San Diego Unified could be forced to find and transfer an estimated $15 million in its budget, controller Ken Leighton said.

Transferring money from one fund to another might seem like a painless move for the school district. But San Diego Unified, like all California school districts, has a slew of different funds that can only be used for specific purposes. Being forced to put more money into one fund means that others must be squeezed, giving the school district less freedom with its budget in an already tight year. Staffers are unsure where the money would come from, if they are forced to find it.

That would be an unwelcome hassle as financial woes persist: San Diego Unified projected in June that it would have to cut nearly $64.7 million from its budget for next school year. Board member Richard Barrera argues that schools need the freedom to relax the state rules over dollars as budgets dwindle.

The outside group declined to comment on the latest report because it’s still a draft awaiting the district’s feedback. But school officials don’t agree that they made missteps.

“That’s what their professional opinion is,” said James Masias, chief financial officer for San Diego Unified. “We happen to have an opinion that differs from them.”

San Diego Unified hired the analysts from the Fiscal Crisis and Management Assistance Team for $52,000 in the spring. The team, created by California legislators to help school districts follow the tangle of state financial rules, has analyzed San Diego Unified’s budget and made financial projections. Their outside analysis was supposed to help smooth discussions with labor unions, which have repeatedly questioned budget estimates the school district has used.

The teachers union had not yet seen the draft report, which was sent to school board members, top cabinet officials and former Superintendent Terry Grier. But its president, Camille Zombro, said she wasn’t surprised by the findings.

“It validates what we’ve known all along,” Zombro said. “They’re working from an antiquated system.”

The analysts wrote that as of June, the school district had no consistent way to track individual employees, making it difficult to answer basic questions such as how many jobs are vacant at a specific school. Budget workers must download information from several different systems and put it into spreadsheets to answer that question, said Deborah Deal, a fiscal intervention specialist with the group. Sorting the information by hand “leaves the district vulnerable to errors,” the report stated.

“We don’t know where anybody is,” said John de Beck, a longtime school board member. “We don’t have a clue. It’s basically bad management.”

Outside analysts turned up one such error that left $6.9 million sitting in the wrong fund. School board members spent months arguing over whether they should transfer money from an account used to buy textbooks into the general fund, which can be used for any purpose. Shifting the funds was unpopular among parents and staffers who fretted about dated, decrepit textbooks.

After months of debate, the school board finally decided to transfer the money, arguing that the extra money was worth the delayed books. Yet the change was never actually made. The dollars stayed put.

“It’s been these sort of horror stories we’ve been hearing for several months now,” Barrera said. He added, “I continue to believe that this district hemorrhages money right and left on things that were not budgeted or things that were not critical. The money gets spent because we’re not tracking it properly.”

Masias said the problems are being fixed. The school district bought a computer program designed to put an end to using spreadsheets to pull together information for reports. It also is changing its systems for tracking individual workers, each with their own number that is used for payroll and budgeting. Interim Superintendent William Kowba said schools are “very close” to a solution.

“This is not all theoretical, like somebody designing blueprints right now,” Kowba said. “I’m as anxious as anyone is to get a result. And we’re getting there.”

Masias added that the budget crisis made it difficult for the school district to fix the problems sooner. Budget department employees had to devote their time instead to calculating cuts as the school district grappled with frequently changing numbers from the state and as board members pushed for information.

While those nagging issues are being solved, the school district and the outside group are now sparring over a different issue: How San Diego Unified spent a specific set of state dollars.

For at least two years, the school district has charged some costs for maintaining school buildings, such as repairing plumbing or replacing heating and ventilation systems, to a state fund. Those expenses would otherwise be charged to a special account for building maintenance, which schools have to keep funded at a specific level — a rule that has since been relaxed because of budget pressures on schools.

The analysts wrote that they couldn’t finish their report because they were unsure whether the school district had violated state rules on how the money can be used and how maintenance should be funded. The group is pressing San Diego Unified to get a state agency to confirm that it followed the rules.

Masias, the school district CFO, counters that San Diego Unified already has state approval and that outside attorneys backed the practice. School officials are trying to meet with the analysts and the state Office of Public School Construction in October to resolve the issue. OPSC declined to comment. It is unclear whether San Diego Unified will have to shift any funding to assuage their worries but Leighton said the potential amount was $15 million.

“It wasn’t like we were trying to hide anything,” Leighton said.

Barrera said the schools must push the state to wave off the rule so that the school district doesn’t have to scramble to find and transfer the money, which could squeeze other accounts. His biggest worry is that putting money back in one fund could ultimately hurt the district’s bottom line.

“We can’t afford a single dollar hit to our general fund,” he said.

Please contact Emily Alpert directly at and follow her on Twitter: And set the tone of the debate with a letter to the editor.

Emily Alpert was formerly the education reporter for Voice of San Diego.

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