L.A. College District Asking for $5-Million Loan to Meet Payroll

The Los Angeles Community College District said Wednesday that it needs a $5-million emergency loan to pay its bills. The announcement was made one day after two of its trustees won citywide elections.

The college district is seeking a transfer of funds from the county and a loan from the state so that it will have enough money on hand to pay several thousand of its non-teaching employees Friday.

In November, the college trustees gave the instructors and other employees a 6% raise, even though the district did not have enough money to cover the increase, budget officials admitted Wednesday.

Meanwhile, in Sacramento, several legislators and committee aides said word of the budget shortfall was delayed to avoid hurting the campaigns of Trustee Rick Tuttle, who won the city controller’s post on Tuesday, and board President Arthur Bronson, who won a runoff election to retain his seat.

‘Appears to Be a Connection’

“There obviously appears to be a connection,” said Assemblyman Tom Hayden (D-Santa Monica), chairman of the Assembly subcommittee on higher education. “Were this information known during the campaign, it might have provided someone with an issue, mismanagement for example.”

Other legislators, who refused to be quoted by name, said they were told by lobbyists for the Los Angeles college district that the needed loan was not to be discussed until Election Day.

“They (the lobbyists) said they were told to keep quiet about it,” one legislator said. “After all, how can you run for reelection on a platform of fiscal responsibility when you’ve just run up a huge deficit?”

Experience Cited

During his successful campaign, Tuttle said his experience as a community college trustee overseeing a $200-million budget qualifies him to manage the city’s finances.

Bronson, who defeated conservative Richard Ferraro, frequently said his experience as a “business-minded” trustee justify his reelection.

Both trustees said they did not learn of the magnitude of the problem until recently.

“I just heard about it this morning,” Tuttle said. “If someone made that decision (to withhold the announcement), I didn’t know anything about it.”

Bronson said he “was aware there was a cash-flow problem, but nobody asked me about it during the campaign. The seven of us on the board knew we had a problem and the staff knew it, so it wasn’t a secret.”

Earlier Projection

Thomas Fallo, vice chancellor for business services, told the trustees in March that he was projecting a $2.7-million deficit by the end of June unless budget cutbacks were made.

In his end-of-the-year presentation at a board meeting Wednesday, Fallo said his staff was unable to save enough to balance the budget, and he blamed a 3.5% salary raise last spring followed by the 6% raise in November. The cost for salaries and benefits among the nine colleges turned out to be $9.7 million more than what the budget called for, he said.

“The salary increase for employees was approved even though the district did not have funds appropriated to pay for it,” according to the budget report.

Since 1982, the nine community colleges in Los Angeles have lost about one-third of their students, and Fallo said the district’s budget, when adjusted for inflation, has fallen 37% since the passage of Proposition 13 in 1978.

District Chancellor Leslie Koltai, who was unavailable for comment Wednesday, recently announced that he was seeking to “downsize our operation” to reflect the loss of students. Although full-time faculty have not been laid off, the number of instructors and district employees has shrunk 21% since 1981 and needs to shrink further, Koltai said.

Fallo said Wednesday that county officials are willing to “float tax anticipation notes so we can have the $5 million by Friday.”

California community college Chancellor Gerald Hayward, who received the emergency loan request from Los Angeles officials, said the district “will have to jump through a lot of hoops” to get the state loan to pay off the notes.

The district must undergo an independent audit and set up a repayment plan before the loan can be arranged. It must also get the approval of the Legislature and the governor, he added.

“I can’t grant them a loan until all these steps have been followed,” said Hayward, the outgoing state chancellor. “I’m not in a position to judge whether the board should have taken some steps earlier to cut their budget. But, I do know they have some very serious, difficult decisions ahead of them.”