School District Requests Bailout of $18.4 Million : Education: If approved, the state could take over operation of the troubled district. Without the loan, May and June payrolls will not be met.

School officials have decided to seek an emergency state loan to keep Compton schools open into the fall. The school system will need to borrow up to $18.4 million, county analysts estimated.

If the bailout is approved, state education officials will automatically have the power to run the Compton Unified School District for one to 10 years.

The dilemma is a bitter pill for board members, employees and parents who fought off an earlier attempted state takeover for academic reasons. Gov. Pete Wilson last fall vetoed a takeover bill to give district administrators one more chance to improve students’ academic performance, which typically ranks among the worst in the state.

The district moved quickly this week to seek the loan. If the money does not arrive soon, the district will be unable to meet its May and June payrolls. The loan package also is needed to restore the district’s financial health, which has suffered from faulty accounting and overspending for at least three years, according to analysts from the Los Angeles County Office of Education.

In the current academic year alone, the school system will spend about $8.2 million more than it receives. In addition, the district ended last year about $1 million in the red. Both deficits must be paid in the next few months and likely would be part of the state loan, county officials said.

The district also needs $3.5 million to pay money owed the county education office and $3.7 million for a reserve fund required by law.

The total of the anticipated loan, including past deficits, is $16.4 million, said Patricia Meyer, a business administrator with the county education office. But another $2 million would be needed if the school system plans to move forward with longstanding renovation plans for 10 aging Compton schools. The $2 million would be the district’s share of costs for projects that are funded mostly by the state. The district stands to lose millions of dollars in state construction funds if it cannot come up with the $2 million.

With little comment, the board voted 6 to 0 to seek a state bailout. Board member Amen Rahh abstained.

Under rules of state intervention, the elected school board and its appointed administrators would lose their authority to direct the district until the state relinquishes control.

“It’s distressing and disappointing to say the least,” board member Lynn Dymally said after the meeting. “I think every board member has wanted to serve to be a part of the solution to the problems in this district.”

The county education office formally presented the grim news to the district at Tuesday’s board meeting. With each announcement of a multimillion-dollar deficit or debt, a pensive crowd of more than 250 murmured and jostled. A line of speakers then stepped up to castigate district officials over the school system’s predicament.

“Every one of you up there ought to be man and woman enough to vacate your seat,” said Maggie Trimble, whose grandchildren attend district schools.

Board member John Steward said the criticism is justified.

“The board should lose control,” Steward said outside the meeting. “We’re the overseers of the district. Why give us $16 million and let us blow it again?”

Board members also complained about having to make policy and financial decisions with faulty information. County analysts confirmed that district accounting methods resulted in multimillion-dollar mistakes.

The school district business office, for example, overestimated district reserves by $5 million on July 1, 1992, the start of the current budget year.

Such business office problems contributed to the board’s December decision to replace then-Supt. J. L. Handy.

Handy said this week that he was as much in the dark about the true financial picture as anyone. “I was stating the information that was given to me by my accounting department,” Handy said. “You think I wasn’t embarrassed telling people we had a $4.1-million reserve and then finding out we barely had a dollar?”

County analysts also have questioned the prudence of large salary increases granted in 1990. Teachers, for example, received a 17% raise, even though district funding increased only about 3% that year.

Union representatives pointed out that Compton salaries were the lowest in the county before the settlement and are currently in line with other school districts.

In September the school board approved $4.9 million in cuts aimed at resolving the financial crisis by reducing the district’s budget to $84 million. But the savings failed to materialize. Some layoffs occurred more slowly than anticipated; some did not occur at all. Officials discovered that spending had actually increased more than $3 million over the district’s original budget.

Other financial problems this year have included the need to pay about $1 million in back taxes and penalties for missed payroll deposits. Administrators also discovered a $3.5-million debt, accumulated over three years, owed to the county education office for services provided to disabled Compton students.

As required by law, the district will have a public hearing on its loan application next week. Then the district must seek a legislative sponsor for the emergency loan. Officials said that area Assembly and Senate representatives have volunteered to carry the legislation.

If the loan is approved, the state has the authority to appoint an administrator to run the school system for at least one year. The administrator could call the shots for as long as 10 years, which is the maximum repayment term allowed for such a state loan.