State Applies Pressure to Bailout 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 bailout 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 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.

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 rejects the plan or concludes 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.

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.

The same bailout 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.

But Peralta’s main problem, according to both state auditors and district administrators, is its drop in enrollment.

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.