California poised to help Oakland and Inglewood dig out of budget deficits but with strings attached

August 31, 2018

Kyla Johnson-Trammell (left), superintendent of Oakland Unified, discusses the district's budget challenges during the first meeting of the school board's Special Committee on Fiscal Vitality on Aug. 29, 2018.

The Oakland and Inglewood school districts may get state help to dig out of their budget deficits, but only if they act now to balance their current budgets and plan for the future.

If they follow the steps outlined in legislation making its way through the state Assembly and Senate in Sacramento, the districts can expect to get state money to cover a portion of their deficits from 2019 through 2022.

The bailout is outlined in amendments to education finance trailer bills that the Legislature is considering. The deadline for the Legislature to approve the bills is midnight Friday, before sending them to the governor for his signature.

But the districts should not view the money as “a blank check,” said Michael Fine, CEO of Fiscal Crisis and Management Assistance Team, or FCMAT, a state agency that advises districts on financial matters. Instead, the districts will be required to develop short and long-term financial plans based on reasonable and accurate assumptions and past expenditures, and to update facilities plans to ensure they are reasonable, accurate and aligned with long-term fiscal solvency plans.

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Oakland Unified will also be required to make tough budget cuts, which could include consolidating schools, selling or leasing surplus property and increasing its budget reserves. The district must come up with its budget solutions for 2019-20 by March 1 in order to receive an allocation in next year’s budget.

Both Oakland and Inglewood are currently paying back state loans, with oversight from state-appointed trustees or administrators.

Although the amendments to AB 1840 and SB 874 were proposed by the state’s Department of Finance, legislators who represent Oakland had a hand in bringing relief to the district, said state Sen. Nancy Skinner, D-Berkeley.

“I and Assemblymembers (Tony) Thurmond and (Rob) Bonta worked tirelessly to put the children of Oakland first and get state help for OUSD’s financial issues,” Skinner said. “The provisions in the trailer bill aren’t just a bailout, they require OUSD to take decisive steps toward financial health and accountability.”

The amendments would provide up to 75 percent of the district’s projected operating deficit in 2019-20, as determined by FCMAT, the state agency that helps districts with finances, along with the state Department of Finance. The state would provide up to 50 percent of the projected operating deficit in 2020-21 and up to 25 percent of the operating deficit the following year, according to the legislation.

Oakland Unified officials point to recent steps to create a fiscal vitality plan and to consolidate schools to cut costs. The district was recently criticized in reports from FCMAT and the Alameda County Civil Grand Jury for fiscally unsound practices.

“The truth is, even with this support, we will need to continue making hard decisions to reduce our budget, right-size the district and continue improving our financial practices,” said district spokeswoman Valerie Goode. “The state support provides relief in the near term, giving us the opportunity to implement longer term strategies to create a sustainable, quality school district for years to come.”

The amendments would also change the way state administrators are assigned to districts that receive state loans, shifting more responsibility to county offices of education and requiring FCMAT to evaluate the effectiveness of county oversight.

The bills would also allow districts that are paying back state loans — including the Monterey Joint Union High School District and Vallejo City Unified District — to sell surplus property to help meet those obligations.

Superintendent Kyla Johnson-Trammell said the district’s school board has already begun addressing some of the benchmarks set by the state to ensure accountability and sound fiscal practices.

The district faces budget deficits of $20.3 million in 2019-20 and $59 million in 2020-21 if it doesn’t make $30 million in ongoing cuts a year from now.

The Alameda County Office of Education recently rejected the district’s three-year budget, saying it did not adequately address needed budget reductions. The board has established a special committee on fiscal vitality to recommend about $30 million in budget cuts in 2019-20 to avoid future deficits.

“We must act with urgency,” Johnson-Trammell said at the committee’s first meeting Wednesday night. “We’ve simply run out of time.”

In response to the county, the board agreed to consider eliminating up to 340 positions in the 2019-20 school year to balance the district’s budget, but has not yet identified which jobs might be cut. The fiscal solvency committee may identify more than $30 million in cuts to carve out money for teachers raises, said board member James Harris, who is a committee member.

Editor’s Note:  As a special project, EdSource is tracking developments this year in the Oakland Unified and West Contra Costa Unified School Districts as a way to illustrate some of the most urgent challenges facing many urban districts in California.  West Contra Costa Unified includes Richmond, El Cerrito and several other East Bay communities.

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