Oakland and Inglewood among four financially distressed California districts seeking state relief

Oakland teachers picketing for raises in downtown Oakland on April 24, 2018.

Justin Allen/EdSource Today

As state legislators hammer out a budget with the governor, four school districts could receive lifelines that would help them get on better financial footing.

The four districts have been taken over by the state in the past 15 years and are repaying state loans that they were forced to accept so they could continue operating.

Oakland has been paying back its $100 million loan since 2003 and expects to continue paying about $6 million a year through 2024 to retire its debt. Although the superintendent and school board now run the district, a state trustee continues to have veto power over financial decisions. Inglewood, which went into state receivership in 2012, is paying $1.8 million a year to retire its $29 million state loan debt and is still under the control of a state-appointed administrator.

A proposed deal that could give the districts a five-year deferment on those loans might avert a teachers’ strike in Inglewood Unified, where the district and union have reached a tentative agreement that is contingent on the district being able to receive $4 million in “state relief” for at least two years. But to reach the $4 million, Inglewood would need additional relief beyond deferred loan payments.

Oakland Unified, which is also looking to stave off a possible teachers’ strike after reaching a bargaining impasse with its teachers due to budget constraints, wants to be included in whatever deal is offered to Inglewood. 

“To continue to offer high quality education to the young people of Oakland, we believe that our leadership needs this temporary budget relief so that they can make strategic choices to preserve the financial integrity of our district,” said Oakland Superintendent Kyla Johnson-Trammell. “The alternative could lead to draconian cuts that would hurt all students in our city.”

Vallejo City Unified and the South Monterey County Joint Union High School District could also benefit from a possible deal, since they are on the hook for annual state loan payments as well.

But things are still very much in flux in the legislature, as members of the assembly and senate are negotiating with the governor’s office on details of a budget that must be approved by the Legislature by June 15.

Assemblyman Rob Bonta, D-Oakland is working with legislators from all four districts to provide the same relief to all of them. “There’s just a request. It may get through. It may not.”

Ideas being discussed that would ease the districts’ budget woes include deferring loan payments for five years, allowing the districts to sell or lease surplus property without having to first offer it to charter schools and keeping Average Daily Attendance allocations at the same level for five years in districts with declining enrollment.

In addition, negotiations include requirements for accountability and transparency from the districts, Bonta said.

The independent Fiscal Crisis Management and Assistance Team, or FCMAT, evaluated how much money could be saved by these ideas, which were generated by several organizations involved in discussions about Inglewood as a way to temporarily help relieve the district of some of its financial obligations and help it reach a contract agreement with its teachers’ union, said Michael Fine, CEO of the agency. Although Fine said his agency does not advocate on behalf of districts, its fiscal reviews of Inglewood and Oakland show that Inglewood needs this type of relief more than Oakland or the other two districts because Inglewood doesn’t have the funds to meet its budget, while the other three have ample funds to continue operating. 

Inglewood, located in the Los Angeles area, has seen its enrollment drop from 10,242 in 2014-15 to 8,560 this year. Oakland’s enrollment has stabilized and declined slightly in the other two districts. Oakland Unified and Vallejo City Unified are in the Bay Area, with enrollment this year at about 37,096 and 12,578 respectively. The South Monterey County Joint Union High School District, formerly called the King City Joint Union High district, near the Central Coast, enrolled 2,302 students this year.

Oakland recovered after going into state receivership but is “having new problems,” Fine said referring to structural fiscal problems. Conversely, Inglewood is in the early stages of recovery but is losing 500 to 600 students a year for a variety of reasons, including parents sending their children to other districts and changing demographics due to gentrification and an aging population.

“They’ve not gotten their feet on the ground,” Fine said. “The other issue, which is at the core, is the percentage of school-age children in the community is dropping and the percentage of those that are still there attending Inglewood schools is dropping.”

Charter schools are less of an issue for Inglewood than they are for Oakland, he added. About 26.1 percent of students in Oakland attend charter schools.

“For the districts that find themselves in these circumstances,” he said, “part of it is community members don’t want to put their kids in schools that they think are struggling.”

FCMAT has been working with both the Inglewood and Oakland districts to help them overcome budget problems, which included closing an $8 million budget gap in Inglewood. Oakland made $9.3 million in cuts this year and must cut another $10 million next year, according to district reports.

Fine said a just–completed analysis of district finances to be posted online soon shows that Oakland can meet its financial obligations at this time without state assistance. 

“It’s in distress,” he said, “but Oakland doesn’t need this relief right now.”

Oakland officials and teachers disagree, however. 

“We know we would really benefit from relief from the state debt as we put our financial house in order,” said Jody London, who serves on the Oakland Unified school board.

When Oakland teachers and school district leaders heard about the relief being proposed for Inglewood from Inglewood teachers and a district lobbyist, they rallied their communities to seek the same remedies in their district. London sent a message to her constituents urging them to call their local legislators to make Oakland part of any budget deal for Inglewood.

“OUSD needs temporary relief from the state in order to avoid having to make draconian budget reductions that will hurt Oakland students,” her statement said.

The Oakland Educational Association, the teachers union, mobilized a phone bank to call legislators to be sure their district is included in a budget deal, which could help the district reach a contract agreement with its teachers.

Trish Gorham, president of the union, said Oakland may not have as much leverage in the state budget deal as Inglewood, which is still being run by the state and has included the state budget relief as part of its tentative agreement with the teachers union.

“If Inglewood doesn’t get this, they will not have a settled contract and will probably go to strike,” she said. “This would provide some monetary relief to help them, which is not unlike Oakland. We need the same kind of relief so we can get a stable footing.”

Even if the proposed relief isn’t included in the budget bill, AB 3228 — authored by Assemblywoman Autumn Burke, D-Inglewood — would allow the four districts to sell or lease their surplus property to help pay off their state loans. The state senate is currently reviewing the legislation, which is sponsored by Tom Torlakson, the State Superintendent of Public Instruction.

“These districts are balancing between paying back the loan and keeping schools operating, which depletes critical financial resources that could otherwise be used in the classroom to support student learning,” Torlakson said, in a statement of support. “By allowing these districts to lease or sell surplus property, AB 3228 is providing them with other options to raise money to repay the loan and minimize the impact on the classroom.”

Andrew Staiano, the California Teachers’ Association staff member working with Inglewood Unified, said teachers will likely walk off their jobs if the district doesn’t receive the $4 million in relief it is seeking for the next two years.

“We don’t have any assurances at all,” he said referring to the proposed funding deal. “We’re waiting to ratify the agreement until that funding is secured. So, we’re going to wait until the fall, because we still could very well be on strike if that contingency falls apart.”

Bonta said he has been advocating on behalf of Oakland Unified with Assembly Budget Chair Phil Ting, D-San Francisco. Bonta said he has not heard of pushback from legislators on the proposal to treat all four districts paying back debt from state takeovers the same.

“We’re trying to create parity and equity for everyone that’s in the same boat — for all the districts — working together,” he said.

However, he said the governor’s administration might not agree that Oakland needs the same kind of relief as Inglewood, in part because FCMAT has criticized Oakland’s fiscal management.

“The state is not sympathetic to Oakland’s situation,” he said. “I think there’s definitely push back from the administration on this, otherwise it would have been granted by now.”

The state, Bonta said, sees Oakland as being in a better financial situation than Inglewood, “which is about to run out of cash.”

“So, it may be that Inglewood gets some relief, but Oakland doesn’t,” Bonta said.

H.D. Palmer, spokesman for the state Department of Finance, said the budget conference committee did not meet Thursday and so far there was nothing in either the assembly’s or senate’s budget proposals dealing with the fiscal conditions of the four districts paying back state loans. 

“Tune in tomorrow,” he said.