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Fresno school board gives bleak fiscal view

District to tell state that it can't meet its obligations

By Erin Kennedy, Fresno Bee, December 9, 2004

Fresno Unified trustees voted Wednesday to tell the state the school district cannot meet its financial obligations for at least the next two years.

Only newly elected trustee Valerie Davis without explanation voted against turning in the required budget update with a "negative certification." That admission of an unbalanced budget gives Fresno County schools Superintendent Pete Mehas broad powers to regulate the district's spending, including overriding board votes on money issues.

Paul Disario, the district's chief financial officer, said Mehas will have little say since about 94% of Fresno Unified's budget is salaries and benefits, which are subject to contract negotiations for any changes. State law does not allow Mehas to change or suspend collective bargaining agreements with unions.

Disario recommended the dire financial assessment because of rising health benefit costs, declining enrollment, a looming liability for retirees' lifetime benefits and workers' compensation claims, and contract promises to decrease class sizes next year.

Disario pointed out that the current teachers contract promises to decrease classes by one student at a cost of $4.3million to the district. Kindergarten enrollment has dropped 1,050 students since 1995, and is projected to continue decreasing, meaning funding also will decrease. The Fresno Unified School District gets about $5,000 per student in state funding.

Health benefits, which took 11% of Fresno Unified's budget in 2002, are projected to consume 20% of the budget by 2007. This year, the district spent $23.6million on retirees' benefits and that cost is expected to rise to $80 million annually in the next 25 years, even if that benefit is cut off for new employees, Disario said.

After Disario's report, interim Superintendent Chuck McCully joked, "I suddenly rediscovered why I retired in the first place."

McCully takes over for Walt Buster, a retired Clovis Unified superintendent who had volunteered since July as Fresno Unified's leader.

McCully was first hired to lead Fresno Unified in 1992 when the district was near bankruptcy, considered laying off 300 employees and had asked Mehas for help untangling its fiscal crisis. Then, the issues were also enrollment and attendance and rising costs for employee health claims.

Teacher Radley Reep said that besides telling the state that Fresno Unified has declining enrollment and rising health benefits, trustees need to add that "poor planning strategies and inefficient use of resources" caused the crisis. Reep said he came to that conclusion after reading a state audit released last week and a community task force report.

Joel Montero, who headed the state's Fiscal Crisis and Management Assistance Team, outlined the just-completed audit for the newly seated trustees.

He warned that instead of looking at a budget just barely in the black today, trustees need to look at longer trends.

"This district is trending toward insolvency," he said.

But if the district can keep cash in the bank and continue making payroll, it can hold off a state takeover, he added. Montero suggested short-term loans to maintain cash flows while trustees try to fix bigger structural issues.

Montero said Fresno Unified needs to increase enrollment and get more students to stay in school. And the district must begin reducing health benefit costs and putting money aside for future benefit and workers' compensation costs.

"You need to close ranks and get to work," Montero said. "Don't confuse what you need to do to fix this problem with what caused the problem."

Trustee Manuel Nunez, the only incumbent returned to office in the November election, suggested that the state Legislature and funding cuts were to blame for Fresno Unified's woes.

Montero responded: "There are about 1,054 school districts in California and about 10 are in severe fiscal crisis and another 10 are on the bubble. And the others are operating within the means available to them."

McCully concurred with Montero that it was time to move forward and not lay blame. He said while the district is addressing fiscal problems, it also needs to attack academic achievement issues. He made a number of recommendations to trustees:

  • Immediately stop deficit spending
  • Restore reserves of at least 2% of the budget, if not more
  • Decrease future health benefits liability and put money aside for future costs
  • Tap into community expertise for help on budget matters
  • Establish community task forces to improve attendance and enrollment
  • Step up the pace of employee negotiations

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Last modified: December 10, 2004

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