Compton Schools May Face Insolvency Amid $4.9-Million Deficit

The Compton Unified School District is facing an unanticipated $4.9-million deficit that could force it into bankruptcy before year’s end and expose it to a takeover by county or state education officials.

Officials disclosed the deficit at a school board meeting Wednesday. “This district will not likely be able to meet its financial obligations for the remainder of the year,” said the report, sent to the Los Angeles County Office of Education.

Under recently enacted legislation, the finding automatically gives county Supt. Stuart Gothold authority to impose changes in the district’s budget or to rescind district actions that could jeopardize the school system’s solvency. Gothold has said that he wants to cooperate with the school board.

If the district has to borrow from the state to keep schools open this year, state education officials could step in. The state would then have the authority to hire and fire employees and make all program decisions without the consent of the elected school board.

“We are on economic life support,” board member Amen Rahh said at the board meeting. “It is not a joke. We are in serious economic problems.”

The newest threat to Compton’s independence comes less than a year after the district narrowly averted a state takeover on the grounds that it was failing academically. Poor standardized test scores were among its problems. Gov. Pete Wilson vetoed takeover legislation.

A bout $3 million of the deficit is owed to the county education office. This debt resulted from three years of unpaid bills for classes and other services that the county office provided to Compton children with physical, mental or emotional disabilities. District officials have not explained the failure to pay the bill.

Compton administrators attributed the rest of the red ink--about $1.9 million--to a variety of factors, including poor management, legal liabilities, state budget shortfalls and lower-than-expected enrollment.

School board President Kelvin Filer has called an emergency board meeting for Friday to discuss the district’s next move. Options include cutting programs, laying off employees, seeking loans and devising a plan to postpone paying some bills, Associate Supt. Elisa Sanchez said.

Last year, then-Supt. J. L. Handy boasted that the district of 28,000 students was $4.1 million in the black. But even then, there were signals that problems lay ahead.

A district-ordered audit concluded last year that the district had spent millions of dollars on mismanaged construction projects and overly expensive food service contracts. The audit also warned about an alarming lack of control over the use of district credit cards and overtime payments.

The district fired its business manager and reorganized its business department. But budget preparations for this year fell behind schedule, and numerous miscalculations crept into the hurriedly prepared district budget. Spending has continued at levels well above what the district can afford, school board member John Steward said.

The school board in September approved $4.9 million in cuts, but much of the savings never materialized. Some layoffs, such as those of nurses, had to be rescinded because the district had not followed legal guidelines, further straining the $84-million budget.

New problems continue to arise, including the need to pay about $1 million in back taxes and penalties for missed tax payments. Auditors also advised the district to set aside $500,000 for possible legal costs for a lawsuit involving the company that formerly managed school cafeterias.

The school district removed Handy for alleged mismanagement. His contract buyout will cost an estimated $200,000.