After 20 Years, Schools Could Be Freed From State Loan Payments, Trustee

In addition to the issues that have beleaguered schools throughout the country, and in California and urban districts in particular, the West Contra Costa Unified School District has had an extra burden to bear. For the past 20 years it has been paying off a loan from the state. But now the district could soon be free of that financial burden as well as a state-appointed trustee who keeps an eye on spending at a cost of $75,000 a year in district funds.

The district has determined that it can pay off the remaining $9 million it owes on the loan by using the $9 million Debt Service Account it was obliged by the trustee to keep, thus not only eliminating the debt but also keeping the $1.5 million in interest it would owe for the current fiscal year, according to Richmond City Councilman Tom Butt, who reported the news in his email forum Sunday.

Butt told Patch that his email item was based on information from school board President Charles Ramsey and school district staff. See below for his full message, which he labeled, "Explosive Financial News from the WCCUSD - State Debt Can Be Retired Now!‏"

If approved, the plan would remove a heavy financial burden imposed on the district two decades ago. Since Walter Marks played fast and free with district funds during his stint as superintendent, the district has had to devote precious money each year toward paying off a state bail-out loan and interest. Mark’s System For Choice had children as young as first grade wandering the halls of elementary schools looking for their next elective and saw spending on items like video cameras and darkroom equipment to support those electives.

By 1991, the district was planning to end the school year early because it was out of money. A lawsuit — by Butt — kept the schools open, but at a cost. The district ended up with a loan from the state that it has been paying off ever since.

School board president Charles Ramsey called the news historic.

“The community and voters are finally getting local control back after 20 years,” he said. “I want to thank everyone for sticking with the district and working hard to put this ugly chapter behind us.”

Ramsey said the district could gain more than $1 million this school year alone.

"Since 1991, our school district has labored under a significant handicap that has resulted in fewer of our precious financial resources being spent on the education of our children,” said former school board member Glen Price, who worked for years on the issue. “Over the years, thousands of students, parents, teachers, WCCUSD staff, civic leaders and community members have worked to have this unjust burden removed. I applaud this new initiative being undertaken by our school board and superintendent."

One of those who assisted West Contra Costa over the years in getting more favorable terms on the loan was Tom Torlakson, who represented most of the district during his eight years in the state Senate and has also served in the state Assembly.  The district will now be looking to Torlakson in his new role as the state superintendent of public instruction to approve the plan.

“Getting out from under the consequences of past mistakes is a long time coming,” said school board member Madeline Kronenberg. “Our students and district have been burdened by this debt for many, many years. I am both excited and relieved to see the end of the road at last. My hope is that everyone (all our city councils and our state representatives) joins with us and we all advocate together to Tom Torlakson to expedite the process to set us free — at last.”

Todd Groves, a parent and active volunteer in El Cerrito schools, praised Ramsey and others for their tenacity in getting to this point.

“Lord knows that I’ve been scathing on many issues, but this is a major WCCUSD accomplishment, especially given the times,” Groves wrote on a local education email forum. “Hats off to leadership and the many individuals that have contributed to this day.”

Butt spread the news through his long-running email forum, which includes a mix of his own point of view with a steady supply of West County news, often forwarded from other sources. Here is the text of his message Sunday:

Twenty years after the State of California unfairly saddled future generations of children in the WCCUSD with penalties for the sins of a former superintendent, the current school board, along with Superintendent Harter, has found a way to finally jettison what has been a staggering debt and the burden of a state trustee.

When what was then the Richmond Unified School District went broke in 1991 and closed the schools early, several parents successfully sued to keep the schools open. The California Supreme Court decision in the resulting litigation, Butt v. State of California, was wildly successful in opening schools back up and setting future constitutional issues regarding educational policy in California, but it also resulted in a vindictive and punitive financial burden imposed by the losers, in this case former Governor Pete Wilson.

Butt v. State of California, 842 P.2d 1240 (Cal. 1992).

The California Supreme Court ruled that the state was responsible for the fundamental educational rights of students and that the state must take action to address a local district's inability to provide an education basically equivalent to that provided by other districts in the state. In so ruling, the Court stated that the California State Constitution makes public education “a fundamental concern of the State and prohibits maintenance and operation of the common public school system in a way which denies basic educational equality to the students of particular districts. The State itself bears the ultimate authority and responsibility to ensure that its district-based system of common schools provides basic equality of educational opportunity.”842 P.2d at 1251.

Millions of dollars have been siphoned off the WCCUSD budget every year to repay the $35 million loan, and the children of West County have suffered mightily. Now the WCCUSD board, led by Charles Ramsey, has found a way to not only throw off that oppressive debt but to use the savings to increase this year’s instructional budget.

The remaining balance on the state loan is $9 million, and the District had budgeted $1.5 million for debt service this fiscal year (The interest rate charged by the state is also usurious and vindictive). It turns out that the District had been required by the state trustee to maintain a $9 million Debt Service Account. Adding that $9 million to the $1.5 million already budgeted for interest, the District has $10.5 million available to pay off a $9 million debt! The $1.5 savings can go back into the classroom.

The only condition is that State Superintendent of Public Instruction, Tom Torlakson, must approve. The District will soon be making this request, and it is hard to imagine reason why Torlakson would not consent.

In a related matter, the District also pays the $75,000 annual salary of the state-appointed trustee. Once the debt is paid off, the trustee should also go away, along with his $75,000 compensation, but this also requires Torlakson’s approval.

Ramsey will soon be looking for widespread support from District residents and City Councils within the District to petition Torlakson to let WCCUSD finally end this travesty.

Ramsey is also looking at restructuring the District's debt on some old Certificates of Participation (COPs), which could save another $100,000 annually.

Despite the burden of the loan debt and devastating state funding shortfalls, the WCCUSD remains in remarkably good fiscal health, particularly in its capital program. The District’s bonds are currently rated at higher levels on an aggregate basis than at any other time in the past twenty years. This is a reflection of the relative strength of the District’s tax base, the relative wealth levels of District residents, the relative strength of the District’s financial performance, and the relatively high debt burden. 

In another financial coup for the District, on August 10, the District took a bond refunding bond deal to market, a culmination of a great deal of planning and work by our Bond Finance Team. The market conditions were very favorable for Municipal Bonds , and this refunding has saved the local taxpayers over $7 million. Part of what drove increased investor interest was the improvement in ratings. The upgrade from Standard & Poor’s leaves the District’s bonds with ratings of “Aa3” from Moody’s and “A+” from Standard & Poor’s and Fitch. 

The refunding bond transaction was a tremendous success from a variety of perspectives. Taxpayer savings achieved were nearly twice the levels targeted and discussed just two weeks previous to the sale.  Tax rates on the 2002 Measure D bonds will remain at least close to targeted levels for the next two years. The possibility that tax rates on the 2000 Measure M bonds will increase greatly within the next five years has been significantly reduced (though not eliminated).   Perhaps most importantly, the District’s bond program continues to move in the right direction with regard to bond ratings and appeal to investors.

(Butt's web site includes a link for those wishing to subscribe to his E-Forum.)