Oakland Schools’ Cash Stash

Even as schools across the city hunger for basic program funding, the district sits atop vast surpluses with no plans to spend the money.

By spending a substantial portion of her time last year in Maryland instead in of the East Bay, outgoing Oakland schools State Administrator Kim Statham didn’t just cheat taxpayers — she cheated nearly forty thousand children. In fact, newly released public records show that the school district under Statham’s command shortchanged kids, especially those from low-income families, out of more than $40 million worth of education.

This startling fact came to light quietly last week: The district revealed that after it closed the accounting books on its 2006-07 academic year, it was left with huge surpluses in nearly all of its accounts. Public records show that the eye-popping windfall was mostly the result of the district having failed to spend the money allotted to it by the state and federal governments.

In addition, records show that Statham, who is to leave the district next week, had no plans to spend any of the excess cash this year. If the district doesn’t spend that money, Oakland students will again be cheated out of millions of dollars in government funds designed to improve their education. “It’s really unnerving,” said teachers’ union president Betty Olson-Jones, after learning of the excess funds during a presentation at last week’s school board meeting by district interim CFO Leon Glaster. “It’s a lot of money.”

Before announcing her resignation, Statham told Full Disclosure that she intended to do a better job this year of making sure school principals are aware of all the funds available to them. She also said she did not purposely hoard money to pad the district’s once-sagging bank accounts. “It really goes against my philosophy to have these funds unspent,” she said. “I plan to have a more transparent budget process this year.”

But then last Friday, Statham suddenly announced her resignation, saying she wanted to spend more time with her children and husband in Maryland. Statham, who pocketed $240,000 in salary last year, is taking a job with the Washington, D.C. public school system. According to three sources familiar with the situation, Statham spent a significant amount of her time last year flying to Maryland, often leaving early on Fridays, and not returning until late in the day on Mondays.

Some of those same sources now believe her absences, in part, may account for why the district failed to use the excess millions it had on hand. According to the district’s own balance sheets for the 2006-07 school year (view them for yourself on our news blog, 92510, along with a Power Point presentation by Glaster), the district is carrying a surplus of nearly $44 million in five major accounts, including:

—A $17.2 million surplus in the district’s general fund, which is primarily used to pay teachers’ salaries and benefits. Under state law, the district is required to keep about $8.6 million — 2 percent of its total budget — in this fund for economic uncertainties.

—A $26 million surplus in the restricted general fund, sometimes referred to as the categorical fund, which is earmarked for students who live in poverty — in other words, most children in Oakland public schools.

—A $6 million surplus in the adult education fund, which finances classes for adults who never earned their high school diplomas. In addition, there’s a $1.1 million surplus in nutrition services, which pays for the school lunch program, and a $2 million surplus in the child development fund, which covers district-operated preschools throughout the city.

That’s not all. The balance sheets also show that the district is carrying huge surpluses in at least eight other accounts for a grand total of $306.8 million. However, the majority of the money is in the district’s building fund ($173.3 million), and the district does plan to spend most of that to remodel schools this year. The total surplus also includes $31.2 million in a special reserve fund, money the district hasn’t yet spent from its $100 million state bailout loan.

The news that Statham was standing atop a mountain of cash comes at a time when principals and teachers across the city regularly plead with parents to donate to their PTAs and buy basic supplies for their kids’ classrooms. “We are as poor as church mice,” Parker Elementary School principal Deborah Davis told the school board last week prior to Glaster’s presentation. “I’m serious. You might see me on the corner with a cup in my hand.”

The excess cash also flies in the face of Glaster and Statham’s public projections in recent weeks that the district would run up a $4.7 million deficit this year in its unrestricted general fund. Glaster stuck to that prognostication after his presentation last week, even as he acknowledged that the $17.2 million surplus in that account would more than close the projected gap. Glaster argued that no matter how much money the district has in reserve, it must not spend more than it receives in revenues in any given year.

In theory, that’s a logical argument, but the district’s top officials have a long record of predicting deficits that never materialize. Two years ago, then-State Administrator Randy Ward projected a $3.7 million deficit for the 2005-06 school year that somehow became a $1.5 million surplus. In 2004, he predicted a $20 million deficit that somehow shrank to $4 million. As a result, many players in the local education community now believe that budget predictions by the state Department of Education, which has run Oakland schools since 2003, cannot be trusted.

In reality, said School Board President David Kakishiba, the district is in the best financial shape it’s been in ten years. But he said he was troubled by the $26 million-plus surplus in the restricted general fund. Because these funds cannot be transferred to any other account, the balance at the end of the year should be zero — not $26 million. “Twenty-six million dollars — that’s a lot of services that should have been spent on kids,” Kakishiba said.

Even more troubling is the lack of a plan to spend the money, even though the schools are themselves starved for cash. Glaster projects a $27.8 million surplus in the restricted account by year’s end, according to the district’s 2007-08 budget.

So are these surpluses necessary? State law only requires one in the unrestricted fund, the 2 percent noted above. Are they desirable? Not when the schools are strapped and the district is keeping the surplus funds in bank accounts that don’t even earn interest.

If the district doesn’t spend the money on students, it should at least invest the excess unrestricted funds or use them to pay down its debt. The Oakland schools still owe California $53.8 million, in addition to the $31.2 million in the abovementioned special reserve account — one of the few accounts that does earn interest. Paying down the state debt would at least help reduce the district’s year-to-year expenses.

In the meantime, the state Schools Superintendent needs to hire someone who lives in the East Bay to run Oakland’s schools. Either that, or return the district to local control so that the school board can finally recruit a new superintendent who knows how to manage money.


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