Oakland High students speaking about the impact of budget cuts at a Town Hall I hosted in November, along with Director Eng & Director London
As OUSD moves closer to what all agree will be devastating mid-year budget cuts – the board will vote on December 13, 2017 – all segments of our community are rightfully outraged at the situation in which we find ourselves. And much of that outrage is directed at the school board. To be sure, the board as a whole bears final responsibility for the district’s financial health.
I’d like to share some of the ways in which I’ve endeavored to tackle a couple of the primary challenges we face: the need for greater fiscal discipline and transparency in spending decisions, and the need to reverse our declining enrollment. It’s my hope that as we move past this time of drastic cuts, the board as a whole will provide stronger oversight when it comes to asking difficult questions and committing long-term to changing the harmful culture and practices that have led to this situation.
When I was sworn in as an Oakland School Board member in January of 2015, Antwan Wilson had been the superintendent for about six months, having been hired by the previous board. From the time I took office I was concerned about what seemed to be a culture of complacency about wasteful spending and have spent countless hours reviewing financial documents, seeking to understand where the money is going, and asking (often only to be ignored) for the additional information I need to make the best decision. In many instances, and often alone or in a small minority, I opposed wasteful expenditures. For example:
- I have read every item on every consent agenda that comes to the board and have voted against millions of dollars in wasteful and unnecessary contracts. Those who watch or attend board meetings know that at virtually every meeting I pull wasteful contracts from the consent agenda so that I can vote no. I call on the whole board to scrutinize these contracts more carefully and be willing to reject them.
I have served on the Budget and Finance Committee since its inception and have been the board liaison to the Audit Committee since I joined the board, one of the ways I try to be a knowledgeable and committed steward of our students’ resources. Since I don’t have a background in finance I took extra steps to educate myself, by attending training offered by the Government Finance Officers Association, and have sought (and received) mentoring from many members of our community with experience in school district finance. All of us should take these responsibilities seriously and educate ourselves further.
- During my first year on the board, the board did support my advocacy for adding Fiscal Transparency Tools to the work plan for the year, and now as a result the public has easier access to OUSD budget documents and information.
- I have not supported recent questionable expenditures such as the decision to hold board meetings in City Hall last year, which cost over $2 million and was not budgeted for; I voted against that proposal but was overruled. I similarly voted against many unbudgeted six-figure contracts for positions in central administration, and against land giveaways to charter schools.
- On many occasions I have suggested bringing work in-house to save money on consultants; my suggestions have not prevailed.
- I have pushed to award large contracts only on the basis of competitive bidding; as a rule this advocacy has met with defeat as well.
As a result of my ongoing concerns about our financial practices, I have voted "no" on the last two budgets. Finance staff refused to provide simple information about staffing (positions) year-to-year. Without that information I could not trust the budget numbers from staff; consequently I voted against the budgets for both 2016-17 and 2017-18. I hope that the entire board will demand the information we need to fulfill our fiduciary responsibility.
OUSD’s student population has been declining over the last decade (although currently we see hopeful signs of it stabilizing). We will not be able to exist as a healthy school district if this trend continues. The main reason for the decline is the proliferation of charter schools in Oakland. We have California’s largest share of charter school students and they are draining resources from our public schools. We need to resist the growth of charter schools and stop the bleeding.
- Since I have been on the board I have not voted to approve any new charters and have worked to help the community understand the financial harm they do to our public schools.
- When Superintendent Wilson attempted to create a “common enrollment” policy to include charter schools in our enrollment system, thus further undermining public schools, I joined with parent leaders to organize house parties to educate the community and mobilize opposition. As a result the common enrollment idea was dropped. (The board never voted on the Superintendent's subsequent decision to include charters on our district's enrollment website this year).
- I authored the Enrollment Impact Analysis policy that the board passed earlier this year; it requires staff to analyze and report on the impact on revenue that would result from any change in district programs, use of facilities, grade reconfiguration, opening or closing of new charter schools, etc. Until this policy was in place, these decisions were made with little or no consideration of their effect on enrollment, even though enrollment is the primary source of OUSD’s funding.
Being a member of the Oakland School Board is a labor of love; for me the role requires spending at least 20 hours per week on OUSD business and often more. Each board member receives $9,000 per year for our service, so financial gain is clearly not a motivation.
I am not proud of the situation we are in – we should not be facing the devastating cuts that are in store. But I am proud of my record of struggling to steward the district’s finances well and provide the oversight our students and the public deserve. On the other side of this crisis, the board as an institution has to ensure that we make decisions on the basis of complete and reliable information and refuse to accept anything less.
Why are Mid-Year Cuts Necessary?
The question I am hearing a lot from the public is why it is necessary to make such large mid-year cuts. On paper it looks as though we only need to come up with $1.2M to ensure that we stay out of state receivership at the end of the 17-18 school year (the state requires every district to have a reserve for economic uncertainty of at least 2%).
However, the $1.2M figure is very misleading because in three of the last four school years, expenses have outpaced revenue by millions of dollars, which is referred to as a structural deficit.
The reasons for the structural deficit are complex, and some of them were detailed above (growth in executive salaries and positions, large no-bid contracts, declining enrollment, board approval of large expenses like the City Hall move that were not budgeted for) and others that are not as unique to Oakland, like the growing portion of retirement contributions school districts are required to make, without additional resources from the state, the growth in OUSD's share of special education students, without additional resources from the state or federal government, and the cost of living in Oakland outpacing the meager additional state funding we receive.
Last year, these and other factors led to us going over budget by about $14M. The only reason we did not end up in state receivership at the end of last year is that we received $5M in one-time funds unexpectedly from the state, and we had a larger balance in our self-insurance fund and reserve fund at the time. In order to close the books without going into the red, staff essentially depleted the self-insurance fund and our reserves. Now we don't have those resources to fall back on. There is no margin for error.
The Superintendent is working with staff to improve internal controls and avoid going over budget this year, but we have had a deeply problematic culture around fiscal practices for decades (as evidenced by Superintendent Wilson being able to hire dozens of people with no budget allocated for the positions, and vendors routinely being paid without a required purchase order).
The reality is that these issues that emerged over years are not likely to be addressed in a matter of a few months. We have years of data to demonstrate that we are likely to go over budget by millions of dollars. If we do not plan for that, and make mid-year cuts to address it, we will end up in state receivership again.
I agree with the critique that it is ridiculous to have to plan for going over budget by millions of dollars, but if the alternative is to lose local control of our schools, I choose budget cuts. It would be foolish to ignore years of data that tell us that we need to plan for going over budget again this year.
So what are the categories where we go over every year?
1. Administrative and other salaries. Mid-year and for 18-19, we will be making layoffs, mainly in the central office, which will help to alleviate this issue. Going forward, the board needs to be much more vigilant about preventing unauthorized hiring, ensuring the central administration doesn't become bloated and ensuring that we fully account for the fiscal impact of wage increases.
2. The Oakland minimum wage increase has impacted Nutrition Services and Early Childhood Education in OUSD, because these were our lowest-paid employees who received raises as a result of the minimum wage increase. The board was not fully apprised of the cost to the district of the minimum wage increase when we were asked to approve the last contract. When workers receive wage increases, their supervisors also get adjustments, which led to inaccurate accounting for the fiscal impact of the last contract. This is the main reason that these two programs have been going over budget consistently.
3. A growing special education population means growing demand for special education staffing and services, and transportation for SPED students has been part of driving the growth in special education spending. The growth in the student population and need is far outpacing the funding from state and federal sources, leaving OUSD shouldering a heavier and heavier share of the cost. The long-term fix for this is a change in the funding formula for special education, but that depends in large part on the state and federal government. In Oakland, charter schools need to stop discriminating against special education students; this practice is part of why our special education population is growing in OUSD even as overall enrollment has declined.
4. Every year there are unanticipated expenses. This year, we have discovered lead in some of our schools' water fountains, sinks and showers, and so we are unexpectedly spending an unknown but large amount of money for testing and replacement of fixtures. In a district with a larger reserve fund, these kinds of things don't become crises. We cannot touch the 2% reserve fund the state requires us to maintain, and the self-insurance fund is depleted. So this leaves us in the position of having to use mid-year cuts to address this kind of unanticipated expense.
We need to have more than the state-required reserve in order to address unanticipated expenses like addressing the lead issue; we would also save on the borrowing that we currently do to smooth out cash flow over the course of the year. Not having adequate reserves creates the kind of mid-year chaos we are experiencing this year, and hurts our ability to attract and retain teachers and families. So in addition to salaries, Nutrition Services and Special Education, we also need to make mid-year cuts in order to put aside funds to build a reserve to deal with the lead issue and other future unanticipated expenses.
I agree with the community folks saying that it's unfair to punish students and staff for mistakes made by central staff and the board, and the way I see it, it also is what it is unless we want to end up in state receivership.
I will only vote for mid-year cuts that meet these criteria:
- are not visited disproportionately on our lowest-paid employees,
- are mapped to our priorities for student learning, and
- that are concentrated predominately in the central office. I would like to avoid cuts to schools entirely, but I am not sure that is going to be possible.
When the board passed the resolution requesting staff to bring us a plan for making the mid-year cuts, we asked that they focus on our #1 value, "students first." If I don't feel that "students first" has been at the core of the plan for the mid-year cuts, I will not vote for them.
I hope this is helpful in understanding why we need to make mid-year cuts that are more than the $1.2M. Based on the trend over the last several years, that is not going to be nearly enough to avoid state receivership.
I know this is disappointing, and I am disappointed too, because I have worked so hard to avoid being in this position, but it's not enough. The entire board needs to be focused on changing the culture of complacency around fiscal matters, and that is our work for the next several years.