"Great News" on West County Schools Debt, Superintendent Says

The West Contra Costa school district is on the verge of breaking free of long-standing, crippling debt caused by "financial disasters" of two decades ago, said schools Superintendent Bruce Harter.

In a "Getting Debt Free" message dated November 2011 on the district web site, Harter said the district expects very soon to be rid of three long-term debts — two to the state and one to IBM. (A copy of his message is attached to this article.)

Although the district still faces serious funding cuts from the continuing erosion of state support, the end of the long-term debts means an increase of about $3.8 in the district budget for school programs and services, Harter said.

"Paying off these three debts from the early 1990's means that the 2012-13 budget will have about $3.8 million more for programs and services for students," Harter's message says. "... While this is great news for our District and our students, it is tempered by the financial realities of the State of California with looming mid-year budget triggers and a large structural deficit that indicate that there will be even less funding for K-12 education in the coming years."

Sobering news came Thursday when state Controller John Chiang announced that California has collected $1.5 billion less in revenue than expected. A revenue shortfall of $2 billion or more at the mid-year point would trigger K-12 cuts.

The district's largest debt from two decades ago arose when the state provided approximately $28.5 million in emergency loans to the district in the early 1990s. The money was needed to prevent the threatened closure of the districts' schools before the school year was finished.

One of the conditions for the loan was that the district put income from the future sale of property into a long-term debt fund, Harter noted. That account is now large enough to pay the $8.1 million still owed to the state for the loan, he said.

In order to use the account to pay off the remaining balance, however, the district must under a special audit called a “Fiscal Systems Assessment,” expected to be completed in December or Januarly, Harter said. District officials "have every expectation" the audit result will be positive, he said. Then approval of ending the loan would be up to state schools Superintendent Tom Torlakson.

"If all goes as planned, WCCUSD will be free of the state loan sometime in the first quarter of 2012," Harter said.

A second long-term debt, from about the same time as the state loan, stems from the district being required to pay back more than $6 million after it "was found to have misspent funding from the State's Voluntary Integration Program," Harter said. In the 2011-12 budget, the district board approved the last $872,000 payment for that obligation, Harter said.

The third long-term debt was incurred in 1993 when the district and IBM agreed to a $5 million settlement requiring the district to pay IBM for comptuers bought in 1989. On Oct. 26, the board agreed to use "some one-time carry forward funds to pay off the IBM debt," Harter said.

"Despite the challenges," Harter concluded, "we now know that at the very least we won't be paying the State and IBM for the debt from the early 1990's any more."