Whittier District Seeks Relief After $1.8-Million Error

A $1.8-million accounting error by Los Angeles County is giving the Whittier Union High School District a financial headache, and school officials have appealed to the state for relief.

The district should have received the $1.8 million last July, at the start of the fiscal year. State officials have indicated that the money will be paid starting in March, but the nine-month delay may cost the district close to $200,000 in revenue from investing the money, said Assistant Supt. Lowell Shira.

This month, as required by state law, the district officials notified the California Department of Education that the district would be insolvent before the end of the school year if the $1.8 million is not received, Shira said.

“I feel reasonably confident they will begin correcting the error,” Shira said, “but I felt confident we would get our full apportionment last June, also.”

If the district is unable to recover the investment revenue, the school board will have to cut about $200,000 from next year’s already tight budget, Shira said.

Revenues Combined

The error occurred when the county auditor-controller’s department mistakenly combined the property tax revenues of the high school district with those of the Whittier City elementary school district, said Pat McMahon, the department’s accounting division chief. The county’s report said the district would receive $1.8 million more in property tax revenue than in the last fiscal year. The state Department of Education, in turn, cut back its contribution to the Whittier district by $1.8 million. The Whittier City district’s revenues were estimated correctly, McMahon said.

The state noticed that the Whittier district’s revenues were unusually high and called the county to check on the figure, said Robert Oliphant, manager of principal apportionments for the state Department of Education.

But county and state officials disagree about what happened next. Oliphant said the county maintained that the revenue estimate was correct, while McMahon said the county acknowledged the mistake and asked the state to change the figure.

McMahon said the state should pay the district for the $200,000 in interest in addition to the $1.8 million. The district estimates that it would have earned $100,000 from investing the $1.8 million, and another $100,000 in interest from a school fund that was partially depleted to make up for the lost $1.8 million, Shira said.

“The state got the benefit of keeping the money,” McMahon said. “They earned the interest.”

State Doesn’t Repay

The state doesn’t repay interest when an accounting error affects a district, nor does it ask for reimbursement if an error benefits the district, Oliphant said.

A mistake of this magnitude by the county is rare, Oliphant and McMahon said. Oliphant sympathized with the district’s need for the interest money, but said the state will not repay the $200,000.

“These guys were kind of blind-sided,” Oliphant said. “It was just one of those things.”

Whittier district officials believe the state should make an exception and pay the interest. “We’re continuing to be shorted,” Shira said. “We don’t think it’s fair.”

In an attempt to recover the interest money, the district has asked Assemblyman Frank Hill (R-Whittier) to sponsor legislation to require the state to pay the $200,000, Shira said.

Because of the Whittier district’s situation, Oliphant said he plans to change the way the state handles property tax reports from California counties. Starting with the next fiscal year, Oliphant said, his department will contact any school district whose property tax revenues are substantially different from the previous year.

Previously, the department had contacted the county about unusual property tax figures, but not the school districts, Oliphant said. “They’re sitting out there relying on the county and relying on us,” Oliphant said of the districts. “We want to try and see that this doesn’t happen again.”

The accounting error is the latest in a series of financial problems that have plagued the Whittier district, which serves about 8,800 high school students in Whittier and Santa Fe Springs.

The district had to pay for more than $1 million to repair facilities damaged in the Oct. 1, 1987 earthquake, and is faced with declining enrollment that will force budget cuts in the next fiscal year. Because of an enrollment drop of about 300 students, Shira said, the district will have to cut costs by $600,000 to $1.2 million. The cuts are necessary because the state funds districts based on enrollment. In the Whittier district, which dropped from about 9,100 to about 8,800 students this year, the allocation is $3,400 per student.

The district was counting on the $200,000 in interest money to reduce the extent of the cuts, Shira said. The district’s annual budget this year totaled $44 million.