Santa Monica-Malibu Board Scrambles to Meet Expenses : School District Faces $800,000 Deficit

Political pressure, wishful thinking and serious management mistakes have combined to produce a $800,000 deficit in the Santa Monica-Malibu Unified School District that has forced officials to search for money to pay salaries and other expenses through June.

District Supt. Eugene Tucker said the blame for the financial deficit has to be shared.

“The (school) board had indications (of the problem), but the board relies on management to provide the right information,” he said. “Certainly in this district there is a high demand from the community to maintain valuable programs and there has been political pressure to retain programs that are far richer than (we can) afford. It is a combination of political pressure, both internally and externally, some wishful thinking and some serious management mistakes.”

If district officials do not find the money, they will seek state legislation authorizing an emergency loan to make ends meet, district business manager Michael McCarty said.

The gloomy third-quarter financial report released this week paints “the most difficult financial picture” ever faced by the district, said school board President Mary Kay Kamath. “This is the most depressing financial condition that we have ever been in.”

When Kamath and other board members approved the $39-million spending package last year, the budget was narrowly balanced with $300,784 in reserve funds. But as the fiscal year draws to a close June 30, few of the assumptions made then are holding up.

“The board has to deal with the numbers in good faith,” board member Robert Holbrook said. “I certainly thought when I voted to adopt a budget last fall, I voted on a balanced budget.”

A recent audit, however, has shown that the budget contained serious miscalculations. Auditors have determined that there was only $76,882 in reserve funds.

As a result, McCarty said, the district spent money it did not have. It also embarked on a pattern of other budgeting errors, overestimating revenues and underestimating expenses, resulting in a projected $805,842 shortfall.

McCarty said the first priority in the next couple of weeks will be to determine whether the district has enough money to meet its obligations through June 30. If it does, then a program allowing the district to pay off debts next year will be worked out with the Office of the Los Angeles County Superintendent of Schools, he said.

If it is unable to come up with the money, the district will be forced to follow what McCarty describes as the “worst-case scenario” and seek special legislation for a loan from the state. He said the state would require the district to undergo an “intense audit and very strict and stringent guidelines for recovery.”

“From our point of view, we are hoping that we can work out our troubles with the county,” McCarty said.

In the meantime, school officials have placed a freeze on spending. District staff will be reduced through attrition and temporary teachers will not be invited back in September.

The district will have a difficult time reducing its permanent teaching staff through layoffs because notices were not sent out by March 15, as mandated by law. Layoffs are one of the few ways a district can reduce costs because salaries are 85% of the budget. “We do not have a great many ways to turn,” Kamath said. “There is very little we can do.”

Supt. Tucker described as a “management screw-up” the failure of the district to file a $244,000 deferred maintenance plan in 1985. Because of this, the district was not reimbursed by the state for maintenance of facilities.

Nurse’s Pay Overlooked

School officials had attempted to save money last year by eliminating a nurse from the budget, but complaints by parents forced the district to reinstate the position. However, the financial office neglected to add the $34,000 salary to the budget.

On other items, the district overestimated by more than $200,000 the amount of revenue it would receive in state lottery funds, and estimated by $80,000 the amount it expected to receive in revenues from the rental of school properties. The district also failed to make adequate provisions for overtime pay, employee absences and substitute teachers.

In each case, McCarty said the district’s expenditures were correct and the budget seemed to be incorrect.

Tucker, who was hired by the district last year, did not write the current budget. McCarty is new as business manager and the district also has a new fiscal services director, A. Sepi Richardson.

While the district was reviewing its problems, the state auditor issued a report stating that the Santa Monica-Malibu Unified School District is in poor financial health. The March report found that many school districts are facing financial problems because of “poor fiscal management.”

Board member Connie Jenkins said the new management team will add credibility to the district. “We may be in a belt-tightening mode, but we all expect that the money that we have will be used much more effectively than it has been in the past,” she said.