DENAIR — The Denair Unified School District will run out of money before year's end, its fiscal adviser predicts, but the district might avoid a devastating state takeover if it nails down its financial course and lines up new leadership.
Terri Ryland, the school finance expert hired by Denair, calculates that actions taken so far could bring the district back into the black, barely, by July 2014. This school year will close, she predicts, with Denair out of cash and its reserves $700,000 below the minimum required by state regulators.
Denair will need a loan to bridge the gap. If the Stanislaus County Office of Education determines this spring that the district will be on solid fiscal footing by June 2014, the county has said it could help. If not, the only option would be a state loan and takeover, giving up local control for the next 20 years.
"No district wants a state loan or a state takeover. Not only is the loss of local control tragic, the costs for not only repaying the loan, but for all of the studies and audits that come along with a state loan, are staggering," Ryland said.
In such cases, a state administrator takes over the district and the local school board becomes advisory. The 20-year loan must cover two or more years of deficit spending, cash flow and cost of the takeover, which Ryland said includes:
A state administrator, paid more than a superintendent
Any staff the state administrator feels is necessary
An annual fiscal review by state experts until the loan is repaid
Annual audits by the state, costing more than district oversight performed by the county office.
"So a problem that starts at $500,000 to $1 million could end up adding a million dollars to the annual problem. It really becomes a downward spiral," Ryland said.
Denair's board has moved to cut costs by laying off teachers and support staff and cutting some administrative positions. It mandated a 3.5 percent pay cut for nonunion staff, but has not reached a settlement with its bargaining units on teacher and support staff pay.
Until the state budget is signed, possibly in May, district revenue for next year is uncertain. Other unknowns that could slice into its sliver of safety projected for 2013-2014 include double-paying for district leadership, losing more enrollment than expected next year, or having its layoffs overruled at state administrative hearings.
Meanwhile, district leadership is in flux.
Chief Business Official Judy Sylvester told the board she will retire in September, but with vacation and other time due will hand in her calculator in early May.
The board dismissed Superintendent Ed Parraz earlier this month, saying a settlement of his contract would be negotiated. The terms of his contract say the district will have to pay his $120,000 salary for the next 15 months. And, of course, the district will need to pay the salary of the next superintendent.
Denair parent Jeff Dirkse told the board Thursday that it should look outside the district administration. "Though they may not have caused the problem, I don't believe that they have acted to solve it, either," he said.
"I do not believe there is anybody in the district who has the necessary skills," he said after the meeting.
The board members last week confirmed Carol Hammond as a short-term interim superintendent, saying they plan to soon name a long-term interim superintendent to serve while searching for Parraz's replacement.
Hammond already had taken on day-to-day responsibilities, but now she has the authority to represent the district before state administrative hearings called to iron out disputes over teacher layoffs.
Denair Unified Teachers Association President Barry Cole said several teachers have asked for the hearings, believing seniority rankings were not followed and other mistakes were made in handing out a raft of partial or full layoff notices.
Layoff deadline missed
If the judge overrules any of the layoffs, the district has missed the March 15 deadline to notify a different teacher of a cut in hours or position.
"I think this whole thing is just going to be a whole mess," Cole said.
He said he expects stalled negotiations to resume, but teachers want staffing cuts instead of lower salaries.
"As the student (numbers) went down, the number of teachers went up. We kept saying, 'Why are we doing this? We're going to go broke,' " he said, adding that the district also increased its administrators.
"We've seen zero inclination from administration that they're willing to fix the problem. All we hear is 'We want your money. We want your money,' " Cole said.
The California School Employees Association, representing support staff such as bus drivers and secretaries, had negotiated a 3.5 percent salary cut for this year, contingent upon the teachers following suit and the board undoing member layoffs.
The board on Thursday voted unanimously to not accept the contract, however, after hearing the long-term price of the deal.
Ryland's analysis showed that although the contract would save $22,460 this year, undoing layoffs approved in February would cost the district 10 times that much.
Set Straight: Gratton School is in the Gratton School District and is not affiliated with the Denair Unified School District. An incorrect photograph appeared with this story.
DENAIR UNIFIED FINANCIAL OUTLOOK
Here is the fiscal breakdown given to Denair Unified School District Board members, showing anticipated general fund savings from layoffs and salary cuts:
RESERVES AT YEAR'S END:
ABOVE MINIMUM REQUIRED:
Source: Denair Unified fiscal adviser Terri Ryland, CPA