Bailout Nears for Oakland Schools

State legislators are expected to put the finishing touches today on a bill to provide an emergency $100-million state loan for the insolvent Oakland Unified School District, a step that would lead to a state takeover of the 48,000-student school system.

Backers were hoping to push an amended version of the bill through the state Senate to provide the largest financial bailout of a school district in California history. The Assembly already approved the measure and a spokesman said Gov. Gray Davis is likely to sign the bill.

The loan would buoy the Oakland district, which is $82 million in the hole and unable to meet its monthly payroll without borrowing from accounts that are supposed to be used for campus construction and repairs.

“This district needs a bailout. We’re going to bail it out,” said state Sen. Don Perata (D-Alameda), who wrote the bill. “I think there’s a good opportunity here for Oakland. It’s a brand-new start.”

The hitch is that a state-appointed administrator will take control of the district, relegating the 10-member school board to advisory status. The yet-to-be-named administrator could also fire current superintendent Dennis Chaconas and others.

Oakland district officials acknowledged their poor handling of finances, which resulted in part from giving big raises to teachers while student enrollment, and thus state funding, was declining. They reluctantly accept a state overseer on money matters.

But they and some parents tried to limit state control of academic programs, saying cutting costs might threaten important classroom reforms -- such as new phonics reading programs in elementary schools.

“This is like the Christmas nightmare,” said Greg Hodge, president of the Board of Education. “You’re hoping for the best. But once you undo the ribbon, you don’t know what you’re going to get.

“We’re going to work to make a good situation out of a bad one,” Hodge added.

Legislators from other parts of the state said that such a big loan must be accompanied by complete state control, as has occurred with takeovers of other troubled districts, including Compton.

The bill authorizing the $100-million line of credit for the Oakland district’s new state administrator narrowly passed through the Senate and Assembly earlier this year. Recently, Perata introduced an amended bill, facing a Senate vote today, that would allow the state administrator to sell district buildings, including two warehouses and two central office structures thought to be worth a total of about $30 million.

“The district is insolvent now,” said Joel Montero, deputy executive officer of the Fiscal Crisis and Management Assistance Team, an agency assigned by Alameda County school officials to keep an eye on Oakland Unified’s finances. “We have to get the spending under control in this district. They have a three-year history of not being able to do this.”

In 2000, the school system gave its teachers a 24% raise over three years. But officials failed to accurately calculate how much the raises would cost. At the same time, district officials overestimated state per-pupil revenues as enrollment declined. Meanwhile, the costs of special education and employee health benefits surged, officials said.

Oakland Unified is borrowing from school construction accounts to meet its $32-million monthly payroll. Montero estimated that the district needs $82 million to balance its budget this year and an additional $64 million to break even next year.

The district this month issued pink slips for next year to 330 teachers, counselors and other employees. And district officials have proposed a 6% teacher pay cut and a plan to have teachers pick up more of their health-care costs.

Chaconas said he takes responsibility, although he and others blame it on bad financial advice from a former Oakland Unified deputy superintendent for business affairs. Chaconas said he would not speculate on his future but continue to work toward improving the district.

The financial collapse is the latest round of bad publicity for Oakland Unified.

The school system faced intense criticism nearly a decade ago when a district task force declared that the speech patterns of some African American students formed a separate genetically based language called Ebonics -- which it believed deserved to be preserved in classrooms. Facing ridicule, the plan was not adopted.

If approved, the bailout would be the sixth such move at a California district in a decade. In 1993, Compton, for example, received $20 million in state loans and a state overseer to improve its failing academics and financial situation. In 2001, the state -- citing improvements -- returned authority to Compton’s newly elected school board.