Oakland Seeks Record Bailout for Schools

Times Staff Writer

Requesting the largest public school bailout in California history, Oakland officials Wednesday asked legislators for an emergency $100-million loan to keep the state’s sixth-largest district from possible bankruptcy. State education officials would send a special administrator to assume both economic and academic control of the 48,000-student district, demoting the 10-member school board to an advisory body under a bill introduced by state Sen. Don Perata (D-Oakland).

Without the bailout, the beleaguered Oakland school district is only assured of having enough money to meet its payroll through April, officials said.

Perata blamed the debacle on a series of ill-advised financial moves. Among other things, Oakland officials grossly overestimated state per-pupil revenues despite declining student enrollment and covertly borrowed from bond funds to cover the shortfall.


“It was really inexcusable mismanagement of the highest order,” he said. “The district ended up looking like it was running a Ponzi scheme, using one credit card to pay off another.”

Perata said Alameda County education officials will conduct an audit to determine how the financial problems developed. “School officials will look to see if any crimes were committed,” Perata said. “If so, the district attorney will take over.”

Oakland Mayor Jerry Brown said there is plenty of blame to go around: “The district had a lot of problems they didn’t want to face up to. Now somebody else has to clean up their mess. I think they need some discipline over there, some fiscal and academic talent to get them out of this.”

The Oakland school collapse is the latest crisis to confront the city. Over the last year, Oakland has grappled with near double-digit unemployment and a spiraling homicide rate.

In recent years, the school district has also been a center of controversy because of its academic policies. In 1996, a district task force created a furor by declaring that speech patterns of some African American students comprised a separate “genetically based” language called “Ebonics,” one it said deserved to be preserved in classrooms.

Months later, the same task force backed off from suggestions that teachers be trained to speak black English and that the district consider applying for federal bilingual education funds for black students.


The takeover request, however, focuses on the district’s finances.

At the center of the financial controversy is advice given to Oakland Supt. Dennis Chaconas and his staff by Peter Usides, a former deputy superintendent for business affairs who is now retired.

Following Usides’ guidance, Perata said, the district failed to account for a 4,300-student drop in enrollment over several years, a decrease that led to diminished state funding. Usides also recommended borrowing from bond money and county funds to make up the revenue difference, he said.

Chaconas said he hired Usides on the advice of state officials, who thought that the district needed financial guidance.

“His reputation was good. Everything was fine. At some point, you have to trust the people below you,” he said.

Chaconas said he expected the state to provide funds to bail out the district. Citing the success of a 1991 court case in which parents in Richmond, Calif., sued state officials who were about to allow that bankrupt district to close its doors, he said, “The state Constitution guarantees that the government fund public schools.”

Asked if the Oakland district would have to declare bankruptcy without a state bailout, Chaconas said, “We’ll cross that bridge when we come to it.”

The plea for a bailout is the fifth such move by a California district in a decade. Past requests have come from school districts in Compton, Richmond, the Imperial Valley and the East Bay, where in 2000 the Emery School District requested a $3-million bailout. All but the Emery district have since returned to solvency.

Before the Compton district was taken over by the state, its school test scores were consistently among the lowest in the state and the district was forced to seek $20 million in state loans.

In 2001, the state -- citing improvements in academic quality and financial management -- returned authority to Compton’s newly elected school board.

To cope with the district deficit, Chaconas has proposed cuts criticized by teachers as preserving high district salaries at the expense of student health and safety.

His plan to make $50 million in budget cuts includes halving the number of security officers in the crime-plagued urban district and laying off scores of teachers and custodians, increasing class sizes, consolidating some schools and shutting down hot-meal cafeterias at two elementary schools.

In a conciliatory move mocked by the teachers union, Chaconas offered to accept a 10% cut of his $240,000 annual salary and has requested that all nonunion workers making more than $100,000 a year follow suit. Meanwhile, Chaconas said that about $6 million in increased health-care costs would be passed on to employees.

Sheila Quintana, president of the 4,000-member teachers union, blamed Chaconas for ignoring numerous warnings and driving the struggling school system into an economic ditch.

“I blame the superintendent and his staff for this mess,” she said. “And I consider his pay cut offer to be the biggest joke of all. In a district where teachers make $45,000 a year, he brings home a fortune. Even with his cut, he’ll still make $220,000 plus benefits and expenses. That’s more than the president of the United States, and Chaconas can’t even manage a school district, let alone a country.” (President George W. Bush actually received a recent raise to $400,000 annually.)

Chaconas said Wednesday that “ultimately, I’m responsible for this deficit. When I found out about it, I was totally blown away.”

Teachers union officials said the financial fiasco was foreshadowed in February 2000. One month before Chaconas took office, a $750,000 report funded by taxpayers warned that the district would have to make drastic administrative cuts to afford raising teacher salaries by a planned 24% and to follow through with several new academic programs.

Although Chaconas cut his central office staff by 40%, the savings were not enough to counter spending.

“The superintendent was told very clearly what it would take to avoid disaster, but he ignored some very high-priced advice to do things his way,” Quintana said.

Scott Plotkin, executive director of the California School Boards Assn., said it is not time for Oakland officials to panic.

“It’s important for everybody to stay calm,” he said.

“These kinds of bailouts have happened before so there’s a model to follow to keep everybody whole and preserve programs,” Plotkin said.

He applauded Chaconas’ efforts, saying that the administrator made the schools a model of urban reform. Under his direction, student testing levels rose at every grade level in every school, Plotkin said. But he also cited what he called a “monumental error in basic accounting.”