College District Gets $5-Million Bail-Out
The financially strapped Los Angeles Community College District will get an emergency $5-million loan from the county to meet today’s payroll, but the unprecedented bail-out was accompanied by a scolding Thursday from members of the Board of Supervisors.
“Fiscally irresponsible,” “outrageous” and “appalling” were among the blunt adjectives supervisors used as they voted unanimously to approve a mechanism whereby the district--through the county--will be able to borrow $5 million to pay wages of several thousand non-teaching employees.
Board members Michael Antonovich and Kenneth Hahn waxed indignant at what they concluded were political reasons behind the timing of the district’s emergency loan request, which was made by telephone last Friday to county Treasurer-Tax Collector Richard Dixon.
The supervisors also accused the district of mismanagement.
No officials of the district were present.
Several state legislators and committee aides have told The Times that college district officials deliberately withheld information on their fiscal crisis as long as possible for fear of harming the chances of two community college trustees who were running for office in Tuesday’s election. In that balloting, one trustee, Rick Tuttle, was elected city controller. Another, Arthur Bronson, won reelection to the district’s board.
Dixon said after Thursday’s board vote that the supervisors had lacked legal authority to reject the college district’s request for the bail-out, aimed at tiding over the district until the July 1 start of the next fiscal year.
But that lack of authority did not stand in the way of individual board members stating exactly how they felt about the loan request.
Antonovich, a former college trustee, said information about the district’s lack of funds was “put under the carpet and hidden from public discussion.” He added that it was “strange” that Tuttle was able to campaign against loser Dan Shapiro on a record of fiscal experience as a trustee when the nine-college district is in poor financial shape.
Antonovich had endorsed Shapiro for the post. Tuttle told The Times that he had been unaware of the cash-flow problem until Wednesday.
In a similar vein, Hahn said that had the district announced the anticipated shortfall earlier, “it might have had great repercussions on the election.”
When Dixon said that the district had posted a notice of the loan request early Monday afternoon--the day before the election--Hahn replied sarcastically, “This was not shouted from the rooftops.” Hahn also criticized district officials for making the loan request by telephone last Friday instead of making a formal written request.
In addition to their concern that politics may have been behind the loan request’s timing, board members lashed out at what they said was financial mismanagement by the college district.
Supervisor Deane Dana described as “outrageous” the district’s borrowing money through what are technically called tax and revenue anticipation notes, secured by future property tax income, at an interest rate nearly twice as high as usual.
Lost Money to Interest
Dixon agreed, telling the supervisors that if the district had not been in an emergency situation it would have been able to borrow at 5% or 6% interest instead of at commercial rates of about 11%. The difference in the two rates could have saved the strapped district about $300,000 a year, Dixon added.
Dixon joined in the criticism, saying that the district’s request “is not what we would expect from a professionally run operation.” He said that county officials will be working with the district, which gets its money from property taxes funneled from the state through the county, to prevent future shortfalls.
District officials said the shortfall was the result of trustees’ voting last fall to grant teachers a 6% pay increase despite warnings that the raises would result in a year-end deficit.
Dixon later said that he has received assurances that the emergency loan, unprecedented in the 16-year history of the district, would satisfy the district’s payroll needs through June 30, the end of the current fiscal year.