State Applies Pressure to Bail-Out Plan for Colleges

The Peralta Community College District may soon break new ground for California’s two-year colleges.

Due to what its officials call a run of bad luck--but what others characterize as “gross mismanagement” and “appalling incompetence”--the five-college district based in Oakland is more than $3 million in debt. Without a bail-out loan from the state, Peralta officials say they will have to issue IOUs to employees, beginning April 1.

But the Assembly Ways and Means Committee, upset by the locally elected trustees who are seeking a second loan in two years, said last week that it won’t give out the money unless Peralta accepts a state monitor to oversee its operation.

State Relies on Officials

State officials say Peralta is an example of how wrong things can go under the current governance system in the community colleges. The local trustees, reacting to the employee unions that helped elect them, have been reluctant to lay off employees in the face of a sharp drop in enrollment. But the state, which pays the bills for two-year colleges, has to count on the local officials to balance their budgets.

“The (Peralta) trustees have simply defaulted on their responsibility. They have also set a horrible example for the community colleges,” said Assemblyman Charles Bader (R-Pomona).

“We’re seeing a trail of politicized mismanagement,” said Berkeley education Prof. James Guthrie, referring to both the Oakland school district and the community colleges. “You have boards there that are more interested in job creation than education.”

Peralta’s managers contend that their problems are basically the same as other urban colleges that have suffered sharp enrollment declines since the state imposed a $50-per-semester fee for students. Moreover, they suggest that much of the criticism of the black-run district is racially motivated.

Loan Is Approved

On Wednesday, the Assembly committee approved a $3.3-million loan for Peralta but specified that the district must submit a financial and educational restructuring plan to a state monitor. If the monitor, who will be chosen by California community college Chancellor Joshua Smith, rejects the plan or concludes later that Peralta is not following it, the state will take over the operation of the colleges.

“There’s no question this will set a precedent for us,” said Smith, adding that it could provide a model for state overseeing of the local colleges. However, Smith said he has been reluctant to jump into what he called the “unpleasant situation” in the Oakland college district.

Most of those involved with Peralta’s troubles don’t describe it so mildly.

“Our problem is gross mismanagement. If I were a member of the Legislature, I would not be willing to give this district a loan without appointing a state manager to see that it is well spent,” said Peralta board member Darrell Carter, a University of California professor of optometry.

Carter, one of three people on the seven-member board who oppose the current Peralta administration, said the district’s managers have consistently overestimated their revenues and underestimated their expenses.

“In one year and four months on this board, I’ve seen so many error-ridden, contradictory financial documents that I don’t believe anything that comes from the Peralta management,” said Carter, one of the developers of soft contact lenses.

Last year, the Legislature voted a $2-million loan for Peralta, but the district never received the money because it did not submit a required repayment plan to the state.

Loan for $5 Million

The same bail-out bill included a $5-million loan for the Los Angeles Community College District that was vetoed by Gov. George Deukmejian. As a result, Los Angeles community college trustees have been forced to make several rounds of budget cuts, including the layoff of 142 tenured instructors. Now, however, the budget for the nine-college district is balanced.

By contrast, the Peralta finances are still badly out of balance, and the auditor general’s office concluded in January that the district’s projections are unrealistic. The salary accounts did not include, for example, a 5% pay raise recently granted by the trustees, nor did the revenue projection take into account the latest drop in student enrollment.

In a stinging two-part series published Feb. 2-3, the Oakland Tribune called the Peralta district “an institution spiraling toward disaster, badly weakened by financial blundering and all but paralyzed by endless infighting among trustees, administrators and union officials.”

‘Gross Mismanagement’

Over the last five years, the colleges have been “plagued by gross mismanagement, slipshod financial controls, hundreds of cases of theft, excessive spending, (and) questionable personnel practices,” the newspaper said. One college president stayed on the payroll as a counselor after admitting that he had solicited burglaries and accepted stolen property. Last year, the district had to pay a $100,000 out-of-court settlement for a second president who was accused of sexually harassing an employee.

One of Peralta’s five colleges is in Plumas County, 250 miles north of Oakland, a small school annexed by the district in the early 1970s when the community colleges were funded by local property taxes.

“It probably looked pretty good then because they had a lot of cattle land and very few students,” Carter said.

But as a result of Proposition 13, funding is now based on enrollment, and Feather River College is costing the district “between $500,000 and $1 million a year,” said Peralta Controller Al Harrison.

Enrollment Drop Hurts

But Peralta’s main problem, according to both state auditors and district administrators, is its drop in enrollment, the same problem that plagues urban colleges throughout the state.

Since 1982, the number of students enrolled in the five colleges has fallen from 40,000 to fewer than 27,000. The auditor general’s report said the district enrollment declined by 26% over the last three years, but staffing has been reduced by only 5.6%.

“Our problems emanated from state funding (declines) and the loss of students,” Peralta Chancellor Donald Godbold said in an interview. “Our problems are the same ones that are facing other community college districts.”

He firmly rejected the charge that mismanagement has anything to do with the district’s troubles, although he acknowledged that his “highly politicized board” has been slow to lay off faculty, administrators or other employees.

‘Can’t Hide Mistakes’

“This district is better managed at this time in every aspect than at any time in its history,” Godbold said. “Everything we do is up front. We can’t hide any mistakes.” The district’s troubles, he contended, are being exaggerated by union officials and trustees who want to oust him.

“We feel that all of this is an orchestrated effort by some special-interest groups to discredit this administration,” Godbold said.

Faculty union leaders say they are upset by the Peralta management and have scheduled a no-confidence vote on Godbold.

The chancellor said he enjoys the support of Oakland’s political leaders, ministers and four members of the board.

The board majority recently denounced the Legislature for its attempt to manage the district’s finances.

Board President Michael (Doc) Preston said appointing a state monitor was “an insult to the Peralta trustees” that “strikes at the heart of one of the community college’s greatest strengths--local control.” Trustee Harley White called the state action “politically racist” because it “undermines black board members” in Oakland.

The Legislature’s irritation with Peralta officials broke into the open Feb. 19, when college officials failed to show up for a Ways and Means Committee hearing on the district’s loan bill.

‘Appalling Incompetence’

Committee Chairman John Vasconcellos (D-Santa Clara) said he was exasperated by the “appalling level of incompetence” in the district, while Assemblyman William P. Baker (R-Danville) referred to Peralta officials as “jerks.”

Arriving after the hearing ended, Godbold explained that he and his aides had been delayed by heavy rains. However, several committee members, including Vasconcellos, noted that they had come from the Bay Area that morning and arrived on time.

Nevertheless, the committee last week was able to work out a loan bill that passed on a 13-3 vote.

“I think we have worked out a plan that will apply to all community colleges that get in trouble,” said Assemblyman Tom Bates (D-Oakland), sponsor of the Peralta loan. “For the next three years, Peralta is not going to do much that isn’t specifically approved by the state chancellor.”

Bates predicted that the loan bill will get quick approval in the Assembly, but that it may run into trouble in the Senate.

“I expect some people over there (in the Senate) will raise some criticisms. The dirty laundry (from Peralta) will be aired again before it’s over,” he said.