Failing in Math : School District Struggles to Recover From $19-Million Debt

The test scores were low, the school buildings falling apart, but in June, 1992, the Compton school district had good reason to believe that better days lay ahead.

Against all odds, the budget appeared to be sound.

At a time when many school districts were cutting programs and delivering layoff notices, Compton Unified boasted of a $4.1-million reserve and enough cash on hand to put a computer lab in every elementary school, hire new administrators to improve academic programs, and increase the pay of nearly all employees by 9% to 17%.

But within months, the district’s budget collapsed like a house of cards in a gale.

That $4.1-million reserve reported in the summer of 1992 was an illusion. At the time, Compton Unified was actually $1 million in the hole.

The school system’s debt surpassed $19 million by June, 1993, according to just-completed audit reports. That debt is expected to rise unless officials enact painful program cuts, salary reductions and layoffs to balance the district’s $91.8-million budget. The moves threaten to obliterate the beginnings of an improved academic program in a district that serves crime-plagued, economically depressed neighborhoods in desperate need of schools that work.

“The painful reductions we’re going through make it more and more difficult to achieve the mission of the school district,” said Assistant Supt. Elisa L. Sanchez. “We need to keep and attract top qualified people to teach our children. We need to increase salaries.”

Documents and interviews with current and former school officials tell the story of a financial accountability system that had disintegrated by the time it was most needed, of officials who did not know how to do their jobs or had concerns other than than balancing the budget or educating children. The district also was brought to its knees by a bad economy, exploding costs and shortsighted decisions.

In particular:

* Officials fell into the annual habit of plugging in budget numbers that bore little relation to what the district was actually spending.

* District expenses, such as damage from vandalism, escalated to levels far beyond what other school systems experienced.

* Administrators proposed ambitious programs, raised salaries, hired staff and borrowed money for construction projects and computer purchases without fully calculating the cost of their decisions.

* The business department suffered heavy turnover and was run at various times by officials who exaggerated their training or experience. Some officials had little business background or received inadequate training. Others were removed for incompetence.

* The school board did not know of or did not understand the extent of the district’s financial problems, then failed to act decisively when these problems became clear. Auditors did not shout loudly enough, and state and county officials rubber-stamped unsound practices.

The budget problems prompted the district to seek an emergency state loan, which resulted in a controversial state takeover six months ago.

Since that time, a team of district employees, county advisers and consultants have pieced together a budget, reorganized the district and sketched the beginnings of a hard-times recovery plan that is guaranteed to please no one entirely.

One of the first changes made was to correct the way the district has been preparing its budget. In the past, planners made expenses equal revenues only on paper.

“You can keep putting numbers together to balance a budget on paper, but if it doesn’t mean anything and you’re really spending more than that, eventually you run out of money; eventually you end up in this hole,” said Theresa Morrison-Givens, who became the district controller in February.

A prime example is the workers’ compensation fund, which is the account used to pay the district’s share of medical and disability costs for injured district employees.

In 1990, the district budgeted $4.3 million, but spent $6.3 million. In 1991, the district budgeted $3.7 million, but spent $4.5 million. In 1992, the district budgeted $3.6 million, but spent $5.3 million.

The problems were compounded in 1992 because the district failed to set aside any workers’ compensation money despite what the budget indicated, Morrison-Givens said. By last June, the tab was $5.3 million, but the district had no money to pay it.

Estimates of legal fees and other accounts reveal a similar pattern. In 1992, the district spent more than $800,000 for legal fees, officials said, more than triple what it had budgeted.

District officials concede that the 1992 budget was a “carry-over budget,” meaning that the already flawed numbers from the previous year were simply plugged in with little adjustment.

“The district had always overspent,” said former board member John Steward, a longtime critic of district spending practices. He said he suspected administrators of inflating enrollment projections to justify hiring more staff and spending more money. “We did not build budgets based on the previous year’s spending. We built budgets based on what the administration wanted to accomplish in the next year.”

Compounding the problem were costs that ran far above what other school districts experienced. District legal fees in 1992 were $828,029. Legal fees in Norwalk-La Mirada Unified, about two-thirds the size of Compton, were $98,625. Expenses in workers’ compensation also ran well above what other area districts are paying.

“It would appear that there are more lawsuit-happy individuals here hoping for a windfall than anyplace I’ve seen,” said Stanley G. Oswalt, the district’s state-appointed administrator. “And this is the most injury-prone district I have seen.”

The district also suffered about $2.2-million worth of damage last year from vandalism and theft. By contrast, Montebello Unified, a larger school district, reported $33,785 of vandalism damage.

While these expenses soared, administrators won approval for ambitious, costly programs. Then-Supt. J. L. Handy set out to put a computer lab into every elementary school, for example. The computer purchases resulted in a long-term debt of more than $4 million.

But staff did not fully calculate other costs associated with the labs, such as fixing leaking roofs to protect the equipment, safeguarding doors and windows to prevent theft, training teachers to use the computers and paying for staff to operate the computers, several officials said.

The district leased four different kinds of educational software to see which would work best. But instead of testing the computer programs in one or two places, the district paid to install the software in all the labs. Many staff members never learned how to use the programs, and most were never used. Yet the district renewed the lease for all four brands of software and kept all the programs in all the schools, Oswalt said.

This spending occurred at a time when state school funding no longer kept pace with inflation.

“As the dollars began to shrink at the state level, Compton did not begin to look at areas where they needed to cut back. Instead they began spending more,” said Joyce Brooks, executive director of the Compton teachers union.

The lack of financial planning even extended to the hiring of top administrators, said Acting Supt. Harold L. Cebrun, who came to Compton in 1991 as one of three area superintendents.

“In most districts, when you take a job, the district has defined that job,” Cebrun said. “Most people here didn’t even know what we were supposed to do.” Cebrun added that no money was budgeted to set up the three area offices.

“I’m thinking initially that if these guys don’t have a budget, how is the money going to come about? But then you begin to think this district must have the money, and they can operate that way. It didn’t take long to realize that the district didn’t have the money.”

The school board made a pivotal decision in 1990, when it approved across-the-board raises for all employees to end a bitter, protracted labor dispute. Salaries make up the lion’s share of the district’s budget, and the raises proved to be more than the budget could bear. Teachers, for example, received a 17% pay raise to elevate them from the lowest-paid teachers in the county to slightly below average. But district revenues rose only 3% that year.

Compton Unified could have afforded the pay raises, provided the district operated more efficiently and cut the budget in other areas, officials said. This never happened.

Turmoil and turnover in the business department also contributed to the district’s financial woes. Controller John Benham, who helped manage district finances from 1977 to 1990, was seriously ill for much of his last two years with the district, hampering his ability to oversee the budget.

“John was always up to date on the budget and legislation,” said ex-board member Kelvin D. Filer. “He always made the board aware of where we stood.”

Another controller, George Offerman, retired after a dispute with other top officials. Offerman reportedly warned the district that it could not afford the pay raises without cutting costs elsewhere.

Other business managers also left under unhappy circumstances. Assistant Supt. James H. Turner resigned in 1990 amid allegations that he falsified his resume to exaggerate his managerial experience and education. The district removed another business director for alleged incompetence in January, 1992.

Some members of the business staff worked in positions for which they were never fully trained, several officials said.

The 1992 budget was completed months behind schedule, and was filled with inaccuracies, many of them repetitions of mistakes from previous years. Then-Supt. Handy finally put Assistant Supt. Sanchez in charge of business operations in the fall of 1992.

“It didn’t take me very long to determine that the budget data I was receiving early on was incorrect,” she said.

Her background, however, was more in developing and managing programs than in crunching numbers. “She’s bright, a quick learner,” one administrator said. “But the kind of things that she needed to know in crunch time, she didn’t know yet. We were in a financial war. That’s not the time to train the general.”

Sanchez and her staff discovered one surprise after another: The district owed $750,000 in back taxes and penalties and $3.6 million to the county education office for three years of services to disabled Compton students.

The lack of proper procedure and monitoring added costs to virtually every endeavor of the school system. The building of Compton High’s Ramsaur Stadium, begun in 1987, cost more than $4 million, at least $1.5 million over budget.

The weight rooms remain unfinished, the track is already deteriorating. The stadium’s seating capacity of 1,300 is about half of what the school needs, officials said. The racing oval has eight lanes instead of the nine required by the local athletic conference, so records set on the track won’t be recognized.

Despite these and other problems, the district hired the same architect to renovate seven of its schools. Officials recently dismissed that firm after concluding that the renovation plans were deficient. The plans will have to be done over, at additional cost.

The cafeteria fund had a deficit of more than $5.3 million during a three-year period when it was run by an outside firm.

Officials routinely approved overtime without keeping records of who was paid what. Administrators are looking into allegations that a worker clocked 75 hours of overtime for the 48-hour weekend.

Other practices also resulted in unnecessary costs. The district has its own print shop, but routinely paid outside merchants for printing. For example, state and district records show that Compton Unified paid more than $57,000 last year to a printing company co-owned by school administrator Fred Easter. Last year, Easter was an assistant superintendent. This year, he is the principal of Dominguez High School.

Easter did nothing illegal because he did not authorize the use of his own company and because he notified the district of his ties to the business, said district spokeswoman Arianna Barrios. Easter could not be reached for comment.

The district print shop, however, could have done most of the printing that was sent out, said Craig Butler, a print shop worker. Part of the problem was that the print shop turned away many orders. Butler said the tactic was a negotiating ploy of a past supervisor who wanted to justify a larger staff and budget.

Certain department heads were regularly allowed to exceed their budgets by hiring more employees, officials said.

Some administrators said the district sometimes operated more like an employment service than an education agency. Last year, the district had significantly more non-teaching employees per student than other local school systems surveyed. Compton Unified had 9.4 non-teaching employees per 100 students, compared to 4.6 in the ABC Unified School District, for example.

State Administrator Oswalt said Compton, unlike other districts, employed teacher aides at the middle and high school levels. In addition, Compton subsidized health benefits for its aides, a practice other school systems consider too expensive.

“The district was an employment mill when you look at all the positions people were holding and saw what they were doing,” said a veteran district administrator who requested anonymity. “Many of them were not doing anything.”

At the same time, employees have complained that senior officials punished financial whistle-blowers in the past by transferring them, forcing them out of jobs or denying promotions.

Auditors concluded that the practice of concealing bad news permeated top levels of the administration. Former Supt. Handy, who was replaced a year ago, said he had no idea that the district was in grave financial trouble.

Current and former board members insist that they learned too late of the district’s financial problems. By late 1992, the problems were obvious, but several board members still resisted calls by then-board members Filer and Steward to approve necessary program cuts and layoffs.

The foot-dragging may have been tied to politics. Many of the district’s employees live in Compton, and they are considered to be among the city’s most diligent voters.

In addition, board members reportedly battled for hours in closed session to save the jobs of friends, and rarely could reach a consensus on sweeping cuts.

The board finally approved a $4.9-million budget reduction in September, 1992. But most of these cuts never took effect because of administrative snafus, such as failing to mail layoff notices in time.

Some officials also blame outside agencies for the financial debacle. The county and state allowed the school district to operate with a lower cash reserve than the law requires. Auditors pointed out the problems but never characterized them as an impending catastrophe.

“They use accountants’ language because they are accountants,” ex-board member Filer said. “They aren’t going to say, ‘You must do this, and you must do that,’ because the next thing you know, their contract is up to be renewed.”

Parents, community members and employees remain stunned by the amount of debt, angry over the cutbacks and distraught over a district that spent much and got comparatively little.

Oswalt said he can’t blame people for being upset. “I am not aware of an award-winning academic program of any kind in the district. We have teacher salaries that are below average. We have large class sizes. We have facilities that need millions of dollars of renovation.”

What did the children of the school system get for all the overspending?

Oswalt paused and answered quietly: “Nothing.”

Cutting Costs in Compton Schools

Cuts: Lay off about 60 non-teaching employees, reassign some teachers, suspend most hiring. Status: Proposed Projected Savings: $1,000,000 * Reduce salaries of teachers and other employees by 7%. Would take effect in early 1994, but apply to entire school year’s pay. Status: Proposed Projected Savings: $3,900,000 * Freeze the purchase of most equipment, including typewriters, police cars and computers. Status: Proposed Projected Savings: $700,000 * Return leased photocopiers and cut the cost of service contracts. Status: Under negotiation Projected Savings: $300,000 * Reduce salaries of managers and administrators by 7%. Status: Adopted Projected Savings: $562,323 * Lay off 61 non-teaching employees, reassign about 50 others. Status: Adopted Projected Savings: $1,600,000 * Impose monitoring system on all overtime expenses. Status: Adopted Projected Savings: Undetermined * Cut management positions or decrease salaries for them. Status: Adopted Projected Savings: $170,626 * Eliminate stipend and benefits for school board members. Status: Adopted Projected Savings: $76,230 * Source: Compton Unified School District

Unbudgeted Expenses in Compton Schools

Year(s) Program or Fund Not Budgeted 1991 Adult education $881,657 1992 Workers’ compensation $5,300,000* 1990-91 Workers’ compensation $2,846,816 1990-92 Special education $3,597,000 1987-present Compton High stadium $1,500,000** 1992 Legal fees $536,469 1992 Unpaid taxes and penalties $750,000 1990-present Fire-damaged buildings $1,500,000*** 1988-90 Cafeteria fund $5,350,000 1991 Computer labs $254,000

* About $3.6 million was budgeted, but the money was never set aside.

** The stadium remains unfinished, needing an estimated $450,000 worth of work.

*** The school district’s insurance policy requires it to pay the first $250,000 of loss for any incidents of vandalism.

Source: Compton Unified School District

Comparing School Districts

1992-93 Compton ABC Long Beach Montebello Enrollment 28,635 21,292 75,414 32,763 Budget* $91,800,000 $78,000,000 $215,000,000 $94,286,637 Legal fees $828,028 $200,000 $761,380 $378,942 Workers’ comp $5,300,000 $2,100,000 $4,560,132 $1,352,532 Vandalism $2,158,825 $198,000 $1,745,144 $33,785 Administrators per 100 teachers** 7.4 5.7 7.3 5.2 Non-teaching employees per 100 students 9.4 4.6 5.8 3.8 Average class size 32.8 29.1 32.5 32.8

1992-93 Norwalk -La Mirada Enrollment 19,698 Budget* $63,044,241 Legal fees $98,625 Workers’ comp $1,527,885 Vandalism $23,329 Administrators per 100 teachers** 5.4 Non-teaching employees per 100 students 5.2 Average class size 28.3

* The number used for the budget is the unrestricted general fund.

** Includes only administrators with teaching credentials.

Source: California Department of Education and individual school districts.