School District Transfers Millions

The Santa Ana Unified School District has borrowed $15 million from its school construction fund to help cover a shortfall in its operations budget because of the state’s financial crisis.

The decision will have no effect on $411 million worth of pending construction, district officials said, because the money will be returned before it is needed in a year or so.

But some in the district, including trustee John Palacio, are critical of the move, saying it jeopardizes long-awaited school construction in the chronically overcrowded 61,000-student district. They also note the district isn’t required to return the funds.

Santa Ana Unified’s beleaguered construction program has yet to yield a campus three years after voters approved a major school bond measure.

The borrowed cash comes from a $60-million legal settlement the district reached last year with the city of Tustin for a chunk of the former Marine Corps Air Station. When the federal government announced base closures a decade ago, it pledged some of the land to local public schools, and part of the base falls within the Santa Ana district.

Instead of land, Santa Ana Unified got cash. The money was added to the district’s construction program, which includes matching state funds and $145 million from Measure C, which voters passed in 1999.

“We are using monies that we said were going to build schools for something other than building schools,” said Palacio, who, for medical reasons, missed the March board meeting when the transfer was approved. “That is not what we told the public, and that is not what we told the city of Tustin.”

The board voted 4 to 0 at the end of the lengthy meeting, after most of the public had left.

Tustin officials, who battled with the district for years over the disputed land, said they hoped the money would be used for school construction.

“I respect their decision, since they have facts that I don’t have in front of me,” Tustin Councilman Jeffery Thomas said of the school board’s decision. “But ... the money was for schools and not budgetary shortfalls. It was the whole premise of the lawsuit.”

District officials say the borrowed money is being used only to maintain state-mandated reserves of about $9 million and to help the district’s general-fund cash flow. None of the borrowed amount will be spent.

“We transfer money all the time” between funds, Supt. Al Mijares said.

In fact, the state Department of Education recommended last month that school districts consider ways to stem cash-flow problems created by the state’s budget deficit, including borrowing from specific funds or seeking short-term loans.

“Every district will be in this boat or has been in this boat,” said Don Stabler, Santa Ana’s assistant superintendent of business services. “In our case, we had the money and ... we could transfer it over” without paying interest on a loan or losing interest on the money since it is only a paper transfer between accounts.

In January, Stabler told trustees the district needed to cut $17 million from its $440-million budget before July. Now, Mijares and Stabler said, the district will make cuts of $5 million to $7 million for the fiscal year ending June 30. The district expects to have to cut an additional $27 million to $30 million from the 2003-04 budget. The cuts will make it possible to replenish the construction fund.

But there is no guarantee the district will be able to make those cuts, and it is under no legal obligation to return the funds to construction projects.

“It is really worrisome whether the money will actually get back,” said Kim Gerda, a district parent and local education activist. “This board hasn’t really talked openly about where they are going to make cuts” in the operational budget.

Santa Ana Unified has 24 planned projects, including six new campuses and several modernization and expansion jobs that officials believe can be built in the next few years with the $411-million construction fund.

But, Palacio said, by borrowing money from it, the district is delaying projects that are ready to move forward, including the expansion of Kennedy Elementary and Carr Intermediate schools, budgeted for a combined $18 million.

Palacio has been criticized for micromanaging the program and failing to move swiftly to build schools. He was part of the board’s former majority, which was accused of delaying projects while the district selected architect firms, some of which were asked for campaign contributions by Palacio and ousted trustee Nativo V. Lopez. No laws were broken and both men maintain they acted properly.

In any case, district officials say the Kennedy and Carr projects can wait because they first need to ensure they have enough funds for higher priority projects, such as new high schools.

Mijares conceded the state’s budget problems make school finances look bleak, but he said his district’s construction plans will not be affected.

“The potential is there for a lot of things to happen,” Mijares said. “But the importance of school construction is so great I cannot see us using [the Tustin settlement money] for any other purpose but to build schools.”