Oakland School Loan Backed

Times Staff Writer

The California Senate voted reluctantly Thursday to rescue the financially ailing Oakland Unified School District with a record $100-million state loan.

The action provided a fresh example of the persistent demands on the state treasury for funds, even as state government itself sinks deeper into the quicksand of its own budget shortage.

The Oakland school district appealed to Gov. Gray Davis and the Legislature for the emergency loan in January, after it became clear that it did not have enough money to cover the costs of a recently negotiated three-year, 24.4% teacher salary increase, along with higher health-care bills.

At the same time, it suffered a loss of state aid because of declining enrollment and reductions related to the budget crunch.

Along with the loan, the bill also would order the state Department of Education to operate the district until the district's fiscal affairs are in order. A similar bailout of the Compton school district occurred in the early 1990s. Compton repaid its $20-million loan in 2001.

Without the loan, which officials called the biggest of its kind, the struggling Oakland district said it faced the prospect of running out of money next month and being unable to pay the salaries of teachers and other employees. The district has about 50,000 students.

Sen. Don Perata (D-Alameda) said that the Oakland schools' financial circumstance was similar to that of the state. "This is one unhappy challenge," he said.

Perata had to beg colleagues for votes. "I've been walking on my knees for two weeks," Perata said.

Heeding warnings that the schoolchildren of Oakland would be the innocent victims if the bill were defeated, the Senate grudgingly sent it to the Assembly on a 27-8 vote, the bare two-thirds margin required. Davis has set aside $100 million in his proposed state budget for the loan.

"We cannot turn our back ... on the children of the Oakland schools," said Sen. Jack Scott (D-Altadena).

Sen. Wesley Chesbro (D-Arcata), chairman of the Senate Budget Committee, cast what he called a reluctant favorable vote. But he indicated that the funds for Oakland may come at the expense of programs and services for developmentally disabled Californians, who also face severe budget cuts.

The Oakland Board of Education has said that, unlike other school bailouts, theirs was not a result of fraud or "intentional" mismanagement. Instead, board members said, the worsening financial affairs of Oakland had been "hidden" by what they called an "inadequate system of checks and balances" in the district's fiscal operations.

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