State takes closer look at district

Several members of the state panel that oversees funding for new schools said Wednesday that they wanted a full review to determine if Riverside County’s Val Verde Unified School District misspent state funds.

One member also expressed concern that the district’s growing debt may put it in financial peril.

“I think we have a train wreck coming financially,” said State Allocation Board member Sen. Bob Margett (R-Arcadia). “From the information that I have, they just -- financially -- are over their heads.”

State officials are looking into whether the district should be docked as much as $90 million on future construction projects.

At issue is the millions of dollars in school construction bonds Val Verde issued while it received hundreds of millions of dollars in special state assistance to districts in financial hardship.

Since 1999, the Val Verde district has qualified as a “hardship” school district, meaning that it has declared it does not have the revenue or debt capacity to pay 50% of new school planning and construction costs. As a result, the state has paid 100% of the cost of building most of the district’s new schools.

The state board took no action Wednesday but plans to call district officials to its May meeting for a more thorough review of the district’s finances.

Val Verde Supt. C. Fred Workman said this week that concerns about the district’s spending and financial situation were unwarranted and that the district was nowhere near bankruptcy. The school district includes Perris, Moreno Valley and Mead Valley.

On Wednesday, board Chairwoman Anne Sheehan said it was unfair to try a school district in the “court of public opinion.” She and several other members complained that a draft report prepared by state school construction officials that was critical of Val Verde’s spending practices had been disclosed to the media.

In the widely distributed draft report, which was obtained by The Times, officials at the Office of Public School Construction blamed cost overruns at some district schools on nonessential perks, including a 5,000-square-foot weight room at a high school, state-of-the-art stadiums, elaborate locker rooms and larger schools than required. Val Verde officials have said that the expenses questioned were essential to give their students the same advantages as the students in wealthier districts.

The state has provided $340 million to the Val Verde district for 26 projects. But in 2005, state auditors discovered the district had been issuing bonds to supplement state school construction funding.

The district argues the debt was necessary to pay for more than $20 million in cost overruns on projects because the state’s grants were inadequate to build the schools.

Under state regulations, districts that have certified they are a financial hardship case could have their state funding reduced if they issue bonds.

Board member Sen. Jack Scott (D-Altadena) said the panel should not lose sight of the fact that all financial hardship districts should be held accountable.

“We, as the state of California, gave a substantial sum of money to a school district -- we did it on the basis that it was a financial hardship, which means that we gave twice as much money to that district as we did to a normal district, and that does carry with it some responsibility,” Scott said.

Riverside County Office of Education officials notified the district in a letter this month that they think the $136.5 million in debt the district had issued in bonds was high for a district of its size and could jeopardize the district’s financial solvency.

Workman acknowledged that it would be a huge blow to the district if the state allocation board decides the district has to make as much as $90 million available for future projects. That kind of state penalty would force the district to halt construction on ongoing projects and would result in overcrowded, unproductive schools, he said.

maeve.reston@latimes.com