The Morning Report
Get the news and information you need to take on the day.
An unassuming white-haired man in a suit walked up to the podium at a board meeting for Sweetwater Union High School District on Dec. 17. To those in the audience, he looked like any mid-level functionary – probably about to give a drab presentation on some aspect of school workings.
Sweetwater officials were in the middle of a fiscal crisis brought on by $30 million in overspending. They had been insisting it was all the result of innocent bookkeeping errors and dysfunctional software. But Michael Fine, the man in the suit, wanted to tell a different story. Fine, who is the chief executive officer of California’s Fiscal Crisis and Management Assistance Team, stepped up to the microphone and delivered a scathing indictment of the district’s role in the crisis.
He described suspicious entries in the district’s budget system and – as if the board room had suddenly been delivered into the middle a procedural crime drama – said, “That, my friends and colleagues, is a cover-up.” The public collectively gasped. A board member’s jaw literally dropped.
The fiscal crisis agency, an independent and obscure state organization, was created in 1991 to expose difficult truths like these. Its function is similar to the internal affairs division of a police department. School districts don’t tend to do a transparent and comprehensive job of investigating themselves. So when a district is in financial distress, like Sweetwater, the fiscal crisis agency automatically steps in to figure out what’s going wrong.
“Lots of people call us the truth-tellers. We’re going to give districts the truth whether they like it or not,” Fine told me. “Part of being truthful is being transparent and candid. We want to model that behavior for districts. … It’s important for us to do that because we see this as the people’s business. Districts are entrusted to do the people’s business.”
In Sweetwater’s case, members of the public had been hungry for transparency and accountability for weeks. They wanted to know exactly what had gone wrong and who was at fault. But district officials wouldn’t address those questions. They were resolute in their talking points: We’re trying to move forward. We want to move forward in a positive way.
The fiscal crisis agency’s report in December finally gave the community answers. More than 300 doctored entries in the district’s budgeting software had created the impression Sweetwater had more money than it really did. Later, officials with the fiscal crisis agency confirmed to Voice of San Diego that top officials in the district were made aware of budget problems months before they came to light.
Fine did not hold back in assigning responsibility for the crisis: “Your governance and leadership team is solely responsible for the district’s financial dealings and financial stability. It rests with you right there. Nobody else. Just you,” he said to board members.
Since then, community members have frequently quoted Fine’s words to board trustees and the superintendent.
Sweetwater officials have pointed out that the fiscal crisis agency’s analysis looked at the practices that led to its current crisis. They say they have changed many of their past practices and that their financial department now has new leadership and is implementing best practices.
The fiscal crisis agency was created as part of an early warning and oversight system intended to prevent school districts from reaching financial collapse. At the time, several school districts were in financial peril, and Richmond School District had filed for bankruptcy. State leaders wanted to ensure that similar meltdowns would be avoided in the future. Over the years, they have added certain triggers that require the fiscal crisis agency to step in and help stabilize a district.
Since the creation of the agency, only eight districts in the state have gone bust. It’s possible that without the agency and the early warning system that number would be higher, Fine has said. (When a district runs out of cash now, the state issues it an emergency loan. The state also unseats the local board of education, fires the superintendent and installs an emergency manager to run the district. Fine told Sweetwater’s board of trustees that the district is in danger of such a takeover.)
When state leaders created the fiscal crisis agency, they tried to insulate it from political pressure – since local leaders would have an obvious interest in keeping certain information out of the public eye. Rather than reporting straight to the Department of Education, the agency is governed by its own board made up of county and district-level superintendents. Board members are appointed by various superintendents’ organizations, instead of the governor or the Legislature.
Several years ago, the state created a sister organization – the California Collaborative for Educational Excellence – that would focus on accountability in academics, much as the fiscal crisis agency does in school finance. But the collaborative hasn’t yet established the same reputation for telling difficult truths as the fiscal crisis agency. Fine acknowledges the political appetite for accountability in academics has fluctuated greatly over time. Meanwhile, the state has consistently increased the fiscal crisis agency’s ability to step in when districts are in danger of becoming insolvent.
Fine likes to make sure people don’t forget the “Management Assistance” part of his agency’s title. Roughly 20 percent of the agency’s duties involve performing mandatory risk analyses and fraud audits, as in Sweetwater. But the majority of work is done for districts that are asking for assistance before their problems have gotten out of hand. Districts that have invited them in tend to be much more receptive to the difficult truths, Fine said.
In his quest to help districts improve, Fine likes to cite one of the most well-known lessons of Alcoholics Anonymous: It is impossible to fix a problem without acknowledging it first. But the districts he works with don’t always agree. Fine saw firsthand how Sweetwater officials didn’t want to acknowledge the scope of their problems before his agency got involved. He sat at the back of the board room at an earlier meeting in October, before anyone knew who he was, and watched as administration officials tried to obscure the true extent of their financial crisis.
“Step one [is] admitting you have a problem,” he told board members in December. “Tonight if you do nothing else, you leave here with an absolute sense of urgency about the magnitude of the problem you’re dealing with.”