Last month I wrote about the need for the Pleasanton school district leadership to rebuild trust with members of the local community who fund the public schools. Since then, significant information has come to light about how the district refinanced measure B bonds that local taxpayers are repaying.
Dan Borenstein’s column in the Contra Costa Times on June 25 was headlined “Pleasanton residents must pay for illegal bond deal” and opens and closes with assertions about why the refinancing was conducted improperly:
- because past school officials lost their moral compasses in pursuit of more construction money […and because….]
- many in the financial industry prey upon local governments and look for any opening [to earn refinancing fees for bonds].
Glenn Wohltmann’s article in the Pleasanton Weekly, which appeared two days later and was headlined “Cash-out refinancing practices get first PUSD review: Popular among school districts at the time, debate continues about legality“, treads more gingerly in its framing of the reasons why past district officials engaged in refinancing.
Nevertheless, both pieces lay out important facts that had not previously appeared in the press. The refinancing actions were taken without appropriate voter approval. The amount of the additional construction funds was significant, and the cost of paying interest on those funds means that taxpayers will see significant amounts on their property tax bills through 2016. If the refinancing had been carried out without the unconstitutional “cash-out” option, taxpayers would already be seeing declines in the portion of their property tax bills which go toward paying off the bonds.
In the university context, I have seen this before — when leaders focus on the appeal of bright and shining new facilities, they disregard the consequences for people who work in and financially support the organization. The consequences are bloated budgets, preventable layoffs, and corroded community relationships for years afterwards. I’m sad, frustrated, and angry to see it here in Pleasanton.
Past district officials are responsible for the decisions made at that time, and should be shamed for their hubris and disregard for the public’s right to oversee district financial decisions. That’s not the only benefit of pulling the scab off this injury to the school district’s reputation, though I’m glad to see the injury exposed to sunshine. Current district leadership, including both school board members and the district superintendent and senior management, knows that the decisions made were not in the interest of the district as a whole. By owning up to the facts, giving the issue a full airing out in public, and developing policies to prevent this kind of irresponsible action in the future, the district is not just uncovering wrongdoing in the past. It is also opening up possibilities for rebuilding trust with the community in the future.
I hope that the district will be fully transparent about how the additional construction funds that were the result of the “cash-out” refinancing have been used. There is another meeting of the measure B committee in the works (not sure when). The next regular meeting of the PUSD Board of Trustees is scheduled for 7 p.m. on Tuesday, August 16, in the district’s board room at 4665 Bernal Avenue in Pleasanton. Regular meetings are normally webcast live, and recorded for televised rebroadcast on Tri-Valley Community Television. The agenda for the meeting is posted on the district website on the Friday before a Tuesday meeting. The district should continue to address these issues forthrightly.
Digging up history can sometimes seem a distraction from planning for the future. But if the consequences of that history are significant constraints on the district’s ability to execute future plans, then the thorough investigation of past decisions is essential.
I was surprised to see the school district reinstate programs at its June 3 board meeting. After all, through the winter and spring, budget projections from the state’s Legislative Analyst down to the school district’s assistant superintendent for budget services were grim. The budget projections in past years (2009-2010 and 2010-2011) have been almost as negative (though 2011-2012 was supposed to be worse). Many community members, including myself, worked hard to pass measure E — which was described as a partial solution, but not a big enough parcel tax to solve all our budget problems — and yet we were unsuccessful. So the idea that the district could reverse budget cuts before the state budget is finalized was surprising.
Why could the district reverse February’s budget cuts in June?
- the state economy is improving, with an additional $3 billion in state revenue expected between July and December, as compared with the projections that Governor Brown’s January budget proposal was based on.
- the school district had budgeted conservatively in February, assuming that state tax extensions would not get on the ballot and that the measure E parcel tax would fail.
Could anyone have predicted in February that the economy would be doing so much better by May? Perhaps, and if they were smart, they invested in the stock market based on that prediction. However, I do not believe it would have been fiscally responsible for the school district to assume that they might see additional revenues from the state that no one else was predicting would occur.
Could the school district have managed its budget challenges even more conservatively? The school district could have attempted to impose a hard salary cap and cuts to the salary schedule, while preserving existing programs. However, I believe the teachers’ union and the classified employees’ union would have put up a big fight, and I do not believe that a mediator would rule in favor of the school district.
However, some might not be surprised that the budget predictions now are rosier than they were in January. There is a vocal minority in Pleasanton who think the school district was just crying wolf and the budget problems could be easily surmounted without a parcel tax (or tax extensions at the state level). In a new post, The Armageddon That Wasn’t, a representative of the PEVC writes
“The PUSD Armageddon-that-wasn’t along with the CA state budget theatrics was messaged/timed to condition voters to extend the temporary state tax increases and to heighten Pleasanton voter angst to impose a new parcel tax.Why should voters trust either PUSD or its union leaders to give an honest accounting (or prediction) of the district’s fiscal health? And should we trust those who claim that failed parcel taxes will destroy housing prices?”
- the school district is in the pocket of the Association of Pleasanton Teachers (a union local of the California Teachers Association which represents Pleasanton teachers at the bargaining table);
- the school district leaders don’t give an honest account of the district’s future budget challenges, with the intent of misleading voters to pass higher taxes;
- pro-parcel tax campaigners try to frighten voters with the potential of lower property values if a parcel tax does not pass.
Why do people believe that parcel taxes and property tax values are unrelated?
Because so many other factors affect property tax values that in many cases the impact of parcel taxes is undetectable. I never thought this was a strong argument in favor of a parcel tax, and I wish that supporters of the school district would stop using it. It distracts from much more significant benefits of investing in our local schools.
Why do people believe that district leaders misled the public about the district’s financial challenges?
“The District has engaged Government Financial Strategies (GFS), an independent company, to conduct a review of these financing transactions and report to the Board on Tuesday, June 21, regarding the results of these financings.As part of this process, PUSD has invited a committee of local citizens to participate in this review of the District’s activities related to the refunding of bonds. The committee will meet twice–on Monday, June 13, and Monday June 20, from 5 to 7 p.m. at the PUSD District Offices (meetings are open to the public). Committee members are: Beth Limesand (chair); Kay Ayala; Jan Batcheller; Jack Dove; Anne Fox; Kathleen Ruegsegger; and Julie Testa. The committee is charged with assisting GFS in completing its scope of work by providing thoughtful input to the work in progress and reviewing preliminary findings. It is hoped that, by these efforts, the report to the Board will be helpful in terms of transparency, fiscal accountability, and implementing best practices in the areas of debt management and debt issuance.Follow the links for the June 14 overview from GFF and an updated scope of work.”
That’s the past, but what about the future? Why do people believe that district leaders are misleading the public about the district’s future financial challenges?
Why do people believe that the school district and the APT are too closely allied?
Readers will have to decide for themselves whether to trust the school district about financial issues. I believe that Superintendent Ahmadi and Assistant Superintendent Cazares are of high integrity and tell the truth about the district’s finances. The roller coaster of dire budget predictions followed by reprieves is a function of the state legislature’s actions and not of the school district’s leadership. Until that roller coaster in Sacramento is replaced by a more sane budgeting process, our school district has to make the best of a bad system.
In a surprising move last Friday, board members restored $150,000 more to the budget for 2011-2012 than had been recommended by Superintendent Ahmadi and the PUSD cabinet. The unexpected motion and debate occurred between 6 pm and 6:35 when the meeting adjourned.
For more background on this meeting, see my earlier post Cuts rescinded, programs saved in Pleasanton schools or the articles summarizing the meeting on the Pleasanton Patch and in the Pleasanton Weekly. There you will find more detail about the first part of the meeting, when cuts were rescinded so that class size reduction for grades K-3, PE specialists, reading specialists, and counselors can all be retained for next fall. In this post, though, I’m going to focus on the surprising events at the end of the meeting.
What happened in the last half hour of the meeting?
The board had heard public comment from several speakers, including parent Marilyn Palowich and high school studen Zane Manna, on their frustration that the seven-period day at high schools was not on the list of programs to be restored.
I also made a public comment expressing concern about the elimination of remedial summer school in grades 1-5. I acknowledged that it is logistically impossible to restore summer school so late in the school year, and urged board members and cabinet to work together over the next year to consider whether the program could be reinstated for 2012-2013, and how students who are not proficient at grade level could be supported.
In response to the public comment, board president Valerie Arkin made a motion to restore sections of high school courses. After some discussion, Chris Grant made a substitute motion, which was eventually approved by a vote of 3-2, with Arkin, Grant, and Hintzke in favor, and Bowser and Laursen opposed.
Why is this surprising?
Three weeks ago, I wrote in What Pleasanton students can expect next fall that
“Because enrollment was so negatively affected [in music and band classes] this past year [with the suspension of the seven-period day in high schools], and because the music teachers have agreed to teach outside the regular schedule, a limited number of those courses will be taught either before or after the regular school day.”
My prediction was wrong, though — the board acknowledged on June 3 that many other students who do not take music or band were affected by the suspension of the seven-period day. As student Zane Manna explained “I really do want to have seven periods because… I want to continue to take sciences [specifically biology]… I want to actively challenge myself because it’s getting tougher and tougher to get into the top colleges.”
In response to comments by Zane, Marilyn, and others, the board allocated $50,000 per comprehensive high school to fund additional sections at the beginning or end of the school day. That’s right — the board took action on the spot in response to public comment at the meeting. This is rare. A favorable response to public comment is much more likely to come in board reports, when a board member might request an agenda item for a future meeting to discuss concerns raised by members of the public. Furthermore, it is unusual for recommendations made by the superintendent to be amended by the board.
Just as surprising to me was Chris Grant’s substitute motion, which allocated an additional $50,000 (total) to elementary schools for additional intervention during the school year. I did not expect any action in response to my comments about summer school at the June 3 meeting. I expected to examine issues of support for students who are not performing at grade level during the fall, and then to wait for a recommendation from cabinet about how to address those issues.
Was it worth doing? Maybe not (yet)
The board members who voted in favor of these additional allocations of funds were responsive to public comment. However
- the funding amounts are token amounts. $50,000 for Amador and $50,000 for Foothill translates into 2.9 more sections at each school. $50,000 divided up across 9 elementary schools is about $5500 per school.
- Fundraising for the CORE program is still underway, and if the fundraising target is exceeded, some of those dollars could be used to restore sections at the high schools.
- The legislature and governor have not yet finalized a budget for 2011-2012.
The board members in the minority on this vote explained their decision differently.
Joan Laursen indicated her reluctance to restore programs beyond what cabinet recommended, while also noting that she is optimistic that the board might be able to restore other programs as the state budget is finalized this summer.
Jeff Bowser said “seventh period is a luxury, a luxury we can’t afford” and noted the impact of the $150,000 on the projected bottom line for 2012-2013 was negative. He voted against the motion based on his desire to be fiscally prudent.
Would you have voted for the motion, or against?
I would have voted in favor. I support the original cabinet recommendation to restore $2.1 million in cuts. Reading specialists, counselors, and PE specialists provide valuable services to Pleasanton’s students, and a majority of parents believe that class size reduction in grades K-3 improves the quality of education for students just entering elementary school.
If given the option, I would have voted against allocating the additional $150,000. I think it was premature. However, there was no separate vote on the $150,000 along with the other $2.1 million in recommendations from cabinet. This was unfortunate, and a bit of parliamentary procedure hardball that took me by surprise (and I am a PTA parliamentarian!)
Given that there was no option to vote separately on the two issues, I would not vote against a motion based on my objection to $150,000 out of the $2.4 million that it concerned.
That’s my Tuesday-evening quarterbacking of the meeting, for what it’s worth.
Did you watch the meeting? What did you think of the board’s actions?
The special board meeting yesterday (June 3) was well attended by parents, teachers and staff. Several spoke in favor of restoring class sizes in grades K-3, PE specialists in the elementary schools, reading specialists and the Barton specialist, and counselors.
Parents and students also advocated for expanded course offerings in the high schools, and obtained a partial victory when the board amended cabinet’s recommendation and added $50,000 for each comprehensive high school to use to open additional sections so that more high school students will be able to include seven subjects in their high school schedule for next fall.
The archived webcast of the meeting is available online. I attended the portion of the meeting from 4:30 till 6 pm, but the vote was not finalized until about 7 pm. After I’ve had a chance to review the rest of the webcast, I will post an expanded summary of the meeting, with my commentary.
There is also a summary article up at the Pleasanton Patch.
Headlines can be so confusing. Here are some headlines from the past 24 hours, talking about Governor Brown’s most recent budget proposal for 2011-2012 (the “May Revise”):
- Brown proposes revised budget with lower deficit
- Jump in revenue helps halve California deficit (New York Times)
- California revenue up, but Brown still pushes tax hikes
- Brown says tax extensions still needed to fix California’s deficit
- Jerry Brown recasts tax push, targeting California’s wall of debt (Sacramento Bee)
- Brown trims proposed tax increase for Californians (Wall Street Journal)
(Contra Costa Times)
(San Jose Mercury News)
Notice how the first two headlines emphasize a lower deficit, and the other four emphasize increased taxes? (And, actually, the Contra Costa Times and the San Jose Mercury News ran same article by the same reporter, but published with two different headlines — one emphasizing a lower deficit, the other emphasizing increased taxes.)
It just goes to show that skimming is not enough. To really make sense of the Governor’s budget plan, we have to read several different articles, commentary from different points of view, and ask our own questions.
What happens when we just skim? We draw erroneous conclusions. For example, here in a post on the Pleasanton Weekly Town Square forums, is some evidence of how those headlines can be misinterpreted:
The parent who wrote the post implies that the Pleasanton school board might ignore the extra money the state might send to the district, still eliminate programs and fire teachers. Also, the parent misses a key fact: the May Revise is not the final budget.
Here’s what the Mercury News says the implications are for schools (in an article entitled “here’s what you need to know…“):
Q What happens to schools?
A Brown’s new plan would increase by $3 billion the amount of money going to schools from his January budget, funneling much of the unanticipated tax revenue to education. However, his budget message says that K-12 public schools could be closed a month early if the tax extensions aren’t approved and if an “all cuts” budget is needed. Neither Democrats nor Republicans in Sacramento support that.
There’s also another important detail that only a few news outlets (like the San Leandro Patch and the Orange County Register) have honed in on. The “increase” in education funding is not really an increase.
The OC Register quotes Ron Bennett, president of School Services of California, who explains:
“It would be a mistake to say education has a $3 billion windfall,” Bennett said.
“This deal is like saying to your brother-in-law, ‘I’ll loan you 50 bucks for your car payment,’ but then he comes up with the 50 bucks, so you say, ‘I’m not going to loan you the money anymore.’ “
School districts still have to continue making payments. They have just been given a brief reprieve.
The San Leandro Patch explains further:
Brown projected that the state will take in $6.6 billion more in tax revenue this year and next year than was originally expected, with $1.6 billion of that going to K-12 education and community colleges.
But that money is cash already owed to the schools. The Sacramento Bee reports that the extra cash would go towards reducing short-term IOUs to schools, which the governor’s previous budget proposal relied on, in part, as a form of “backdoor borrowing.”
Essentially, the state has been deferring payments to school districts. In this current fiscal year, the state told districts that they were budgeted to receive X million dollars, but they could only expect about 80% of that money to be paid in cash before the end of the fiscal year — 20% of the payments would be deferred, to be paid next year. Now, the governor is proposing that increased state revenue should be used to pay schools the remaining 20% on schedule, rather than deferring the payments.
So the fuss over education spending will continue. The budget is still being negotiated, and the best possible scenario is flat funding for next year. The worst possible scenario for next year looks less bad than it did last week — but it could still be pretty bad. After that, tax extension votes make everything uncertain again.
My prediction for Pleasanton
Based on what I have read so far, I would be surprised if the Pleasanton school board votes to rescind any layoffs at their next meeting. Rather, it is more likely that the budget will be approved in June based on conservative assumptions, and if the final state budget gives the district more leeway, then we may see some layoffs rescinded in July or August.
Back in January, Governor Jerry Brown issued his proposed budget for the state of California. Today, May 16, the governor released his revised budget proposal. (Here is the table of contents, and a link to the PDF.)
Here’s an excerpt from the introduction:
The May Revision proposes that the Legislature implement and the voters ratify a plan that preserves core services, including a reduced safety net. Current sales tax and vehicle license fee rates and the dependent credit exemption level would be extended for five years. Given the current revenue situation, the May Revision does not seek a 2011 personal income surcharge, but would reinstate it for the 2012 through 2015 tax years in order to fund core serves. Even with these extensions, State revenues, per $100 of personal income, would remain billions below the average level of the past three decades.
These revenues would be used for two purposes:
- funding a major realignment of public safety programs. […]
- protecting education funding. Schools have borne a disproportionate share of past spending cuts. These revenues will allow a reinvestment in education. Even under the May Revision’s increased funding for education, support for schools and community colleges will remain more than $4 billion below the 2007-2008 funding level.
I am reading those PDFs now, and will post again when I have had some opportunity to digest them.
Where to from here?
Now the negotiations begin again between the governor and the members of the state legislature. Two other proposed budget frameworks were announced recently, and will undoubtedly have an influence on negotiations. On May 12, Assemblywoman Conway (R-Tulare) issued a proposal for a no-tax increase state budget, that aims to protect education. That same day, twelve top business groups issued what they call a workout plan to encourage Democrats and Republicans to end the compromise and propose a particular set of principles for the budget and for legislative reform.
To influence Pleasanton’s state legislators, contact them!
Our state representatives are Mary Hayashi and Joan Buchanan.
Our state senator is Ellen Corbett. (Senator Corbett is also a member of the “big 5” since she serves as the Democratic majority leader in the State Senate.)
Let’s open up the dialogue here!
What will you tell legislators about the governor’s May revise? Are there elements of his proposal that you would support or oppose? Why?