Oakland sure knows how to ring in the new year. Not only is the city reeling from a return to the homicide rates of the early ’90s, and a Super Bowl appearance that turned into a national disgrace, but now Oakland’s school district has asked for what is likely to be the largest bailout in the state’s history. Before the district broke its terrible news, the Richmond schools held that dubious distinction, having asked for a $29 million loan in 1991. But estimates of Oakland’s needs range from $62 million to $100 million. Not even Compton, California’s poster child for public-school ineptitude, approached such a scale. All the hopes for Oakland’s schoolchildren, so tenuously nurtured by Superintendent Dennis Chaconas through two years of rising test scores, have been dashed against the rocks of a bookkeeping nuclear Armageddon. And now, the task of figuring out what went wrong and how to fix it has been poisoned by the emerging feud between Chaconas and state Senator Don Perata.
It all started in the late summer, when deputy superintendent for business services Phil White fired up some new accounting software and tested the audit function. In minutes, the software uncooked the books, and revealed that what appeared to be a balanced budget was actually tens of millions of dollars of debt. Shocked school administrators began the agonizing process of trying to figure out what went wrong. After six months, they managed to narrow it down to four main causes.
The most crippling factor was, oddly, gentrification. As the price of housing boomed, blue-collar families fled the city for places such as Tracy and Sacramento, and young, childless, professional couples took their place. This eroded the district’s enrollment, and hence the amount of money it received from the state — upon which it depends for the vast preponderance of its operating budget. Administrators regularly commission a study to determine just how many students are likely to attend school in years to come. The latest study produced three possible outcomes — high-, medium-, and low-enrollment scenarios — and Chaconas went with the middle figure, which for last school year was estimated at 54,484. In fact, enrollment ultimately plunged to roughly 48,000 students, 2,000 fewer than even the most pessimistic projection. By the time district officials knew the whole truth, it already had cost them more than $15 million. Although they reduced their payroll by not replacing retiring teachers, state law prohibits districts from laying off teachers in the middle of a school year.
Not only was Oakland employing too many teachers, it also was paying them more than it could afford. Supposedly one of Chaconas’ greatest accomplishments was his 24 percent pay raise for teachers, which ensured that quality teachers would stand by Oakland kids for the long haul. It’s a laudable goal, but district officials made some remarkably idiotic math mistakes along the way. Not only did the district fail to make enough cuts elsewhere to finance the raises, which cost it between $8 million and $15 million a year, but it failed to anticipate that its high teacher vacancy rate would decrease once jobs there became more attractive. Meanwhile, health and dental benefits have continued their skyward march, increasing the district’s costs by $9.5 million in a single year.
Oakland also has been grappling with rising special-education costs and the costly popularity of charter schools, which take their own bite out of the budget. Finally, Oakland’s very success at hiring qualified teachers killed its bottom line. Over the last few years, 425 public-school babysitters were replaced with fully credentialed teachers, whose annual salaries and benefits averaged $10,000 more. That comes to $4.25 million in additional costs that the district didn’t take into account.
How could district administrators have failed to notice all these rising costs and declining revenues? Chaconas claims that an age-old system of accounting is to blame. Historically, he says, no one in the district’s accounting department examined costs and revenue on a monthly basis. Instead, they waited till the end of the year to close the books. Since enrollment had always risen, and lousy working conditions guaranteed teacher turnover, the district always had more money than it spent and could afford a half-assed accounting system. But thanks to Chaconas’ reforms and the city’s demographic trends, the gap between revenue and expenditures first narrowed, then flipped, over the course of nine months in 2001-02. Because no one had bothered to change a bookkeeping system that appeared to work under very specific circumstances, no one caught it until it was far too late.
Still, one of the most infuriating problems in public education is the absolute lack of public accountability for system administrators. Berkeley superintendent Jack McLaughlin spent his district $6 million into the hole, and where is he now? He serves as superintendent of education for the state of Nevada. J.L. Handy bankrupted the Compton school district, and what happened to him? The Emeryville school board hired him and let him destroy their district as well. Walter Marks forced the West Contra Costa district to beg Sacramento for a $29 million bailout and soon thereafter the Kansas City school district hired him as its new superintendent.
If the East Bay’s public schools are to do their jobs, this rotation of incompetent administrators has got to stop. The men and women responsible for these fiascos must be flogged in the city square before mobs bearing tar and feathers, or this will only happen again. Which begs the question: Who’s really responsible for the Oakland mess?
It’s Romi Selfaison’s fault. As controller for the Oakland school district, his job was to examine each month’s finances. But since his office wasn’t giving the district’s budget office monthly reports of rising costs or sinking revenue, budget planners had no idea that their numbers were drastically out of whack. Selfaison, who could not be reached for comment, has since left the district. (Since publication of this article, Selfaison contacted this newspaper and said he did provide the budget office with regular, quarterly information. He also claimed that the actual responsibility for tracking the money lay with the city’s budget office. Phil White, the district finance chief during the crisis, claims that neither Selfaison nor budget office head Edna Tidwell provided adequate information to one another. Tidwell refused to comment.) But Selfaison had a boss, a man responsible for overseeing his performance, who was supposed to care enough to double-check the controller’s work. And that means …
It’s Pete Yasitis’ fault. In 1999, the school board and state Senator Don Perata asked the state’s public school overseers to determine what in the Oakland schools needed fixing. Several months and $750,000 later, the overseers returned with an answer: everything. Chaconas threw himself into reforming the academic program and hired Yasitis as deputy superintendent of business services to clean up the finances. But while Chaconas cleaned out the academic deadwood by firing dozens of principals and staffers, Yasitis didn’t dismiss a single soul on the business side. In fact, he quit after just fifteen months, and by the time his replacement got up to speed, the damage already had been done. But Yasitis had his own boss, a man who allegedly had been warned that he was not the golden boy his reputation indicated. And that means …
It’s Dennis Chaconas’ fault. When Chaconas hired Yasitis away from the county office of education, the district’s new employee was hailed far and wide as an administrative and financial wunderkind. But according to county Superintendent Sheila Jordan, there was a darker side to Yasitis — one she warned Chaconas about early on. In fact, Yasitis left a budget mess when he quit the county, Jordan says, and she made sure Chaconas knew about it. “There were a whole number of issues in my budget that needed to be cleaned up by my new business officer,” Jordan says. “I just let Dennis know, ‘Hey, heads up, we’ve had some issues.'” Chaconas denies that Jordan tipped him off, but it certainly couldn’t have escaped his attention that, while he was firing principals right and left, Yasitis stood by the same staff that had been blasted by state overseers just months earlier. The fact is that, by his own admission, Chaconas focused 90 percent of his attention on academic improvement, leaving all the fiscal work to Yasitis — not exactly the hallmark of a good manager. But someone ordered Chaconas to do exactly that, and that means …
It’s Dan Siegel’s fault. In the late ’90s, then-board president Siegel led the charge to oust Superintendent Carole Quan and replace her with Chaconas, staring down Mayor Jerry Brown in the process. The board of trustees made it clear that academic achievement was its highest priority, and no one was more vociferous than Siegel. “Dennis did what we told him to do,” Siegel says. “When he first came over, the cry from the community wasn’t ‘Balance the budget.’ It was ‘Teach our kids to read.’ Because we didn’t know we had a budget crisis.” Of course, Siegel and his colleagues were policy makers, and thus not really responsible for day-to-day fiscal oversight. That job fell to someone else, someone charged by state law with making sure that Oakland’s books were balanced. And that means …
It’s Sheila Jordan’s fault. The California education code specifically states that “if at any time during the fiscal year the county superintendent of schools determines that a school district may be unable to meet its financial obligations,” the superintendent is legally obligated to fix the problem immediately. Jordan claims she was keeping an eye on Oakland’s finances but that the district just gave her the wrong numbers. “That information indicated that their numbers were okay,” she says. But Jordan clearly knew that Oakland’s numbers were definitely not okay; in fact, she claims her office repeatedly warned Chaconas that Oakland’s enrollment numbers were decidedly lower than the district had budgeted for. So Jordan knew the district’s enrollment couldn’t support its revenue projections. And of course she also claims she knew that Yasitis was unreliable, because he left her own budget in a mess. And yet, she ultimately signed off on each annual budget.
There you have it; the rogues’ gallery of the Oakland budget mess. All of these people bear some responsibility for the disaster that has befallen the district. But now that at least some of them have paid the price, here comes the hard part: fixing the mess. Many of the outstanding questions will be resolved this week, when the state and the board deliver their final report on just how much the district owes. As Oakland Tribune reporter Robert Gammon’s excellent reporting has suggested, district officials might be able to use $33 million in state school construction bond money to pay down the debt, taking a substantial bite out of the requested bailout. But even if they pull it off, unless officials whittle the bailout down to roughly $17 million, state law stipulates that Chaconas be replaced by a state administrator, who will probably reverse all of his academic gains in the name of cost-cutting.
And this is where our last rogue makes his appearance. He’s a man who has caused nothing but trouble since the bad news broke. A man who’s overhyped the scale of the deficit, thrown bombs in the press, sown gratuitous bitterness in a district whose employees were just beginning to trust each other, and poisoned Sacramento’s once-vaunted opinion of the district’s academic accomplishments. And that means, when it comes to all the anger that’s boiled over since the scandal broke …
It’s Don Perata’s fault. Back in the fall, when news of the deficit quietly circulated through the corridors of power, Chaconas and Perata were working together to figure out the size of the problem and how much money it would take to solve it. On December 9, Perata wrote Chaconas a letter asking him to explain, by January 10, how much money the district needed, when they needed it, and what cuts he would make to balance the books. But just as the district’s staff was getting some tentative numbers together, Perata held a January 8 press conference and declared that he had requested a $100 million bailout from the governor. Since neither Perata nor anyone else will actually know how much the district needs until sometime this week, the $100 million bailout request seemed more than a bit splashy and premature.
And that announcement was nothing compared to Perata’s next bomb. After Chaconas and his supporters floated a proposal that asked for less money and retained Chaconas as head of academic affairs, a furious Perata declared that the superintendent was leading the district “straight to hell” and vowed to have him fired. Since then, on at least three occasions, he’s met with leaders of the unions with whom Chaconas or his successor will have to negotiate a host of cost-cutting measures, including a retroactive salary freeze and cuts in benefits. If Chaconas manages to keep his job, Perata’s meetings will surely undermine his authority when the time comes to balance the budget on the backs of employees, as it inevitably will. Already, Oakland teachers union president Sheila Quintana has called for Chaconas’ firing, as well as a recall campaign against every elected board member. According to district sources, one Perata staffer even tried to sneak a letter to the district’s employees in the district’s outgoing mail.
What could Perata be up to? Since he didn’t return any of roughly ten calls made to his office by this newspaper in the last two weeks, we’ll just have to rely upon the nervous speculation of district officials and their supporters. So let the fun begin!
It’s a land grab. In the last few weeks, Perata has suggested that Oakland school administrators could pay off the debt by selling the district’s Second Avenue headquarters, a suggestion echoed by some of the district’s unions. Guess which building lies on the eastern edge of the zone which Jerry Brown promised to populate with 10,000 yuppie residents? And guess which mayor has been meeting with Thomas Henry, the head of the state’s school oversight team? This one sounds a little half-baked, but some district staffers are taking it seriously.
It’s a mayor’s race. Everyone knows that Don Perata will run for Oakland mayor whenever the office is next vacant. Riding to City Hall on the backs of the schools is a long-standing Oakland tradition; Elihu Harris did it in 1990, and Jerry Brown did it in 1998. By overplaying the scale of the debt crisis, Perata can ride in on his white horse, save the district with a $100 million bailout, and rule us like a king for eight years. Of course, this could backfire if the state fires Chaconas and appoints an outside administrator, who promptly destroys all the academic gains of the last two years. But this strategy has the added benefit of hanging the millstone of the school crisis around the necks of Siegel and his school board colleague Greg Hodge, both of whom are expected to mount their own mayoral bids.
It’s what Chaconas deserves. After all, what kind of administrator loses at least $62 million of the public’s money? Perata could be legitimately outraged over Chaconas’ seemingly casual approach to the Sacramento bailout. He knows better than anyone what it takes to get millions of dollars out of a state government that’s roughly $30 billion in debt. Discovering that Chaconas was talking to the state legislature without him could have been the final straw for Perata. Consider the first draft of the school board’s official bailout request; rather than adopting a contrite tone, the first few pages read like Chaconas’ résumé. “The legislature finds and the declares the following,” reads the proposed bailout bill: “During his tenure in Oakland, the superintendent has successfully led the district in the most surprising test score and grade-level gains for all students in the district.” Chaconas also has been showing up at every church and community meeting in town, lobbying to keep his job even as parents are just beginning to comprehend the vast scale of this disaster. Sure, everyone from Oakland Community Organizations to Allen Temple minister J. Alfred Smith loves him. But even Yusuf Bey could get people to love him if he had $62 million with which to buy their affection.
Chaconas’ school board supporters still hope they can beg Sacramento to let him stay in charge of academics, but since the bailout requires a two-thirds approval by the state Legislature, that means getting the Republicans on board, and they are not in the mood to play nice. But here’s something for conservatives to chew on: The Oakland fiasco debunks once and for all the notion that you can’t solve social problems by throwing money at them. Chaconas threw at least $62 million he didn’t have at the failing public schools. And by God, it actually worked.