Poor Little Rich District
By the time school starts next fall, the Monterey Peninsula Unified School District will have lost 72 teachers, slashed more than $6 million from its budget, and denied its students a list of educatio
Thursday, May 11, 2000
Thirty years after graduating from Monterey High School, Ron Chesshire returned for a nostalgic stroll across the school''s campus.
As he walked past the drama room where a group of students were rehearsing a play, he noticed chairs missing from the theater. Others were torn and tattered. In the classroom where he learned drafting years ago, tiles were missing from the floor.
Passing the football field, Chesshire noticed the stone steps
to the stadium were cracked and crumbling. The girls'' playing field was "virtually unplayable," he recalls--littered with ankle-breaking clumps of grass and dirt. The music room was in shambles, the gym beat up and dirty, the cafeteria grimy.
"I felt like one of those movies where I was the last person left on Earth after the Bomb," laments the father of three, who served on the district school board from 1993-96. "It''s just the overall dirty appearance of the campus. It just is not really a symbol of a nice, healthy school district. You can tell just by walking around, things are not right."
Chesshire has sent two sons through this school. His 14-year-old daughter should start here soon. But Chesshire isn''t sure he''ll send her to Monterey High. In light of the Monterey Peninsula Unified School District''s money problems--an estimated $9 million deficit that has prompted the district to slash educational programs and put off basic building maintenance--he may send his daughter to high school elsewhere.
"This district will reel from this [budget crisis] for years," Chesshire says. "It will have an effect on students one way or the other. The district is losing experienced teachers, and it''ll have trouble attracting qualified teachers because of the wage gap."
More urgent than that is the physical condition of district facilities, Chesshire''s alma mater in particular. The visibly deteriorating high school has suffered from years of neglect, but a problem of esthetics became one of safety in late February when a 200-square-foot crumbling section of an antiquated roof crashed down on the heads of students, injuring two.
Chesshire is asking himself the same question dumbfounded parents and citizens are asking: How can a community so rich fail its children so miserably?
At a school board meeting nine months ago, Irene Hufford, MPUSD''s chief business officer, delivered a shocking secret to a stunned constituency: The once-rich district, a model of enlightened education, was hemorrhaging money. Early estimates of a $6 million deficit eventually crept to $9 million, necessitating a series of painful budget cuts.
So starting next year, 12,000 children from Monterey, Seaside, Marina, Sand City and Del Rey Oaks will pay the price for a half-decade of mismanagement. Next year, school as they know it will be different. A host of enrichment programs--music instruction, special reading classes, and advanced education opportunities for gifted and talented students, to name a few--will be cut back or eliminated altogether.
Of the district''s 800 teachers, 72 will be gone. Forty-three will be laid off, and the rest, many of them experienced district longtimers, will leave by choice, retiring early or taking jobs in better paying, less tumultuous teaching environments.
On one hand, it''s a familiar story. School districts around the state have suffered for years from lack of proper funding, earning California the infamous ranking of 40th in the nation in per pupil expenditures and a reputation for providing lousy public education.
But money problems are something that happen to other districts, not to wealthy Monterey Peninsula Unified.
A Sordid Tale
When it comes to assigning blame for MPUSD''s fiscal failures, fingers naturally point to Pat Malone, the late deputy superintendent and business manager. He was too secretive, his critics say. No one knew what bad shape the books were in until it was too late.
However, dead men make convenient scapegoats. And while Malone undoubtedly played a lead role by hiding the district''s money problems, a host of other players acted out a near-decade of bizarre political drama leading to a fiscally tragic denouement. The scenario would make for a great John Grisham novel, even a Shakespearean tragedy (or farce, depending on one''s sensibilities):
The background: The district loses millions of dollars in federal funding after Fort Ord closes, but the school board fails to cut the fat.
Protagonist: Pat Malone tries single-handedly to save the day by sleight-of-hand, volleying money from fund to fund, masking an evolving financial crisis.
Supporting actor: Superintendent Billy DeBerry''s lack of oversight and hands-off approach to district finances contributes to the crisis by enabling Malone''s shell game.
The chorus: The school board refuses to make necessary cuts early on, rubber-stamps the administration''s decisions and fails to ask the tough questions.
The audience: Vocal parents demand a continued high level of enriched education, despite the loss of federal funding.
The tragic climax: Malone takes a fatal fall from a roof in May 1999.
The unraveling: Malone''s efforts, whether noble or misguided, prove vain. An audit reveals the district''s $83 million 1999-00 budget is running at an unexpected $5-6 million deficit. The Monterey County Office of Education, which oversees the district, swoops in and seizes fiscal control of the district. Meanwhile, Superintendent DeBerry falls ill and takes medical leave until his retirement this summer.
The ending: As yet to be seen.
From the time MPUSD was formed in 1966 until Fort Ord closed in 1994, the district enjoyed wealth rare among school districts. Because the district served military kids from Fort Ord, MPUSD reaped the benefits of federal funding awarded to districts serving military bases.
The federal money helped offset the crippling effects of Proposition 13. In the late ''70s and ''80s, while other districts were being forced to make severe cutbacks, MPUSD''s students continued to enjoy enrichment programs, top-notch athletic equipment, expert music instruction, and well-stocked libraries.
But when Ford Ord closed in 1994, the district lost 3,400 students and $23 million--an amount equal to a little less than one-third of the district''s current budget--in federal and state funds. (MPUSD nets about $4,000 per student per year from the state based on average daily attendance.) While the district closed the base schools and laid off 322 employees, those cutbacks didn''t make up for the lost revenue.
The district knew the closure was coming as early as 1990. The news should have been a call to action for the seven-member, elected Board of Trustees and the administration. But very little changed on MPUSD campuses following that revelation and the ensuing closure. Until now.
A One-Man Show
Mark Twain is responsible for what must be one of the most scathing assessments of school boards ever uttered beyond the safe confines of the dinner table. "In the first place God made idiots," Twain wrote in Pudd''nhead Wilson''s New Calendar. "This was for practice. Then He made school boards."
In retrospect, one has to wonder if Pat Malone didn''t have the same opinion of the school board charged with overseeing his activity and the school district''s finances.
"We were never allowed to input on the budget until the very end, and we were supposed to rubber-stamp it," says Ron Chesshire.
Other board members concur. "The way it was run was not a democracy," says freshman trustee Robert Eggers, who joined the board last December. "It was one person controlling all the information."
Malone was regarded as a hardworking professional whose conservative, no-nonsense approach to fiscal matters earned him a fluid ascension through the district''s administrative ranks, from assistant business manager to deputy superintendent. But he answered only to the superintendent and to the school board. As second-in-command behind DeBerry and controller of the purse strings, Malone had too much power, some say, and not enough accountability. Even Superintendent DeBerry has insisted he was kept in the dark about district finances.
There are clues that help explain why Malone acted as he did. District watchers say Malone warned the board on several occasions that a budget slashing was needed. Starting in 1995, the county Office of Education also gave fair warning, ordering the district to cut expenses on several occasions. When the school board failed to do so, Malone took matters into his own hands.
At that point, district insiders say, Malone became a one-man show, keeping the board at arm''s length and getting defensive when questioned about details. When trustees or members of the public did try to pursue further fiscal information, they met with hostility.
Chesshire recalls inquiring about the teachers'' Health and Welfare fund, the self-insurance fund that provides health care and retirement coverage for the district''s educators. "I asked how the fund was going, how the benefits were determined," he remembers. "And in typical Malone style, he became very defensive. He didn''t want to give out a lot of information."
Within the school district''s culture, the widely admired Malone was untouchable.
"Pat Malone was highly regarded in the state," says Rick Ringler, president of the Monterey Bay Teachers Association. "Everyone thought he was a financial guru."
Red Ink, Rubber Stamp
In a valiant, if perhaps deceptive, effort to keep the district afloat, Malone presented a picture prettier than what really was. But his ability to creatively finance MPUSD''s general fund sprang from his sole dominion over the district''s pocketbook, and for that, Malone cannot alone be blamed. Over the course of the past five years, the school district''s system of checks and balances seriously broke down.
Superintendent DeBerry, a former Monterey High principal who ascended through MPUSD''s ranks as an educator, not a businessman, failed to keep tabs on Malone''s financial maneuvers. DeBerry has insisted publicly that he was unaware of the deputy superintendent''s fund-shuffling.
His critics find that hard to swallow. One memo dated April 27, 1999 demonstrates that DeBerry was aware of transfers out of the teacher''s insurance fund that have since become the subject of a lawsuit.
The district argues that surpluses in the Health and Welfare fund were not improperly used and that it provided benefits as required--it just provided the payment of those benefits out of the teachers'' own self-insurance fund. In an April 27, 1999, memo, DeBerry wrote: "There has never been a contractual obligation for the district to contribute the entire $6,990 per employee from the General Fund. In fact, since 1993/94, this amount has come from a contribution of General Fund and Health and Welfare Fund."
The ailing DeBerry, who is on sick leave from the district until his retirement this summer, declined to speak with the Weekly.
But ultimately, the various elected officials who sat on the MPUSD school board over the past decade must accept their role in the meltdown.
"The board has to take responsibility," the newly arrived Eggers says. "If everyone is pointing the finger at Pat Malone, that''s wrong."
Perhaps the most important job the board has is to keep the district in financial order. And although the board may have been clueless to the extent of the district''s deficit spending, it nevertheless passed budgets in the red each year for the last four years. Armed with healthy budget surpluses in the early ''90s, the board committed itself to retaining enrichment programs.
"Nobody wanted to cut programs," Eggers observes of those early days, "and MPUSD still had lots of money in the bank."
Longtime board member Ken Brown says the board made efforts to cut programs, but faced a particular kind of NIMBYism that made the job difficult.
"Continually we would go to the teachers union and ask for help," he says. "And they''d say, ''No, you can''t cut this, you can''t cut that.'' That''s all we heard the entire time: ''Don''t cut us.''"
As for the deficit budgets the board kept approving, Brown blames Malone for perpetuating the fiction that things were going to get better.
"We were using the reserve funds to offset the deficit until things straightened out," he explains. "When you''re hearing that you''re getting increased revenues because attendance is up and because of class size reductions, then you get the picture painted to you that things are straightening out."
In 1994 MPUSD took out a 10-year, $12 million emergency loan from the state that was offered to districts hit hard by base closures. But the district continued to live high on the hog--the loan only perpetuated business-as-usual spending. As reserves dwindled, insiders say the board members and administration hoped that the state would forgive the loan. It didn''t happen.
The trouble comes down to failure to make a lifestyle change, says Mike Ottmar, associate superintendent of the Monterey County Office of Education.
"It''s like when your mom tells you to stop using your credit cards," Ottmar says, "because some day you''ll have to pay them back, and you say, ''I''ll think about that when the time comes.''"
It''s not like the board wasn''t warned. Ottmar says the county office sent the district its first warning to cut expenses in 1995. And the county outright rejected the district''s 1998-99 budget, sending it back for revision. "We communicated with them for many years there was a deficit spending situation going on," Ottmar says.
Last month, the county office assumed control of the district''s hemorrhaging finances. "It turns out the [1999-00] budget the board adopted wasn''t really reflective of the actual operating budget of the district," Ottmar says. "As we started to take a closer look at the budget over several years, it became clear that the fiscal situation was immediately threatened."
School Board President Dan Villa contends the board did its duty, pointing to $2.4 million in cuts in 1994. "When the board was asked to make cuts [by the administration], we made cuts," he says.
But Chesshire thinks the trustees let themselves be manipulated by Malone and DeBerry.
"The board was unwilling to do their duty as elected officials," Chesshire says. "They allowed politics to enter...allowed themselves to become a rubber stamp. There should have been more oversight by the board elected by the people. When it becomes a rubber stamp, all hell can break loose. And it did."
While the board was privy to yearly audits, the trustees relied heavily on Malone''s reports rather than slog through the numbers themselves.
"The board was almost criminally not proactive enough," says concerned parent and district-watcher David Jones. "All in all, these people are in those jobs because they care; they certainly are not trained to do this job."
But board member Brown contends that the trustees were doing their job, which is to set policy, not scrutinize the arithmetic of certified accountants.
"Yes, we should have known," he admits a little wearily, "but we''ve got seven lay people doing this job. If you''ve ever looked at a school board budget, the complications of it, it''s very convoluted, very difficult to understand. As policy makers, our role is to listen to the staff recommendations being made to us."
Brown says that the board members did ask questions. They just didn''t ask the right ones.
"Lots of questions were asked," he says, "but unless you knew what to ask and when to ask it, you wouldn''t get a complete answer. [Malone] was very good, I thought, at crafting his responses."
Robbing Peter, Paying Paul
According to a report conducted for the district by consultant Thomas Brewer and released last October, the district was all along bleeding more red ink than originally believed. Meanwhile, general fund reserves--a kind of required savings account for the district--slipped from $6.6 million in 1996 to a low of $491,948. According to the state''s formula, that''s just one fifth of the $2.5 million the district should have as a financial buffer.
Apparently the money flew fast between accounts to mask the seriousness of the problem. According to Brewer''s report, over the course of several years, Malone transferred more than $2 million from the building and worker''s comp accounts into the general fund.
Brewer also revealed that the employee Health and Welfare fund was raided to the tune of $5 million to pay back a state loan. Moreover, millions more were transferred out of the employee''s Health and Welfare fund to the general fund, then put back into the same fund to pay for employee benefits. Teachers'' attorney Michelle Welsh compares it to the district''s "taking salaries out of the teachers'' own bank accounts and then putting it back in."
The Health and Welfare fund balance has spiraled from $18 million in 1995 to $6 million now. While no benefits have been denied employees as a result of the transfer, teachers say the withdrawals violate state education code as well as their contract, which requires the district to put nearly $7,000 per employee per year into the fund.
The teachers did agree in 1994 to allow the district to use some of the Health and Welfare fund''s accumulated interest to pay for part of that year''s benefits. But that was a one-time-only authorization, Ringler says. The district kept doing it. The teachers'' union filed a lawsuit against the district over the Health and Welfare transfers; the suit is currently in court-ordered arbitration.
The Damage Done
Six months ago, reality hit the MPUSD Board of Trustees. In an emotional round of marathon meetings, the board was forced to finally hack $6.5 million out of the $83 million budget.
Moreover, a report by the Monterey County Office of Education estimates those cuts aren''t enough: Another $2.5 million must be slashed in order to balance the budget and replenish reserves up to the state-required 3 percent mark.
The effect of the cuts has yet to be felt. But that will change soon enough. By next school year, 22 percent of the music instruction budget will be lopped off and elementary school children will be short one vocal and one instrumental music teacher districtwide. The Magnet schools, which provide specialized career training, will be a memory. So will the school-age parent program. Gifted and Talented Education (GATE), which offers enriched education for elementary students, will be scaled back 30 percent. The Early Enrichment Kindergarten program and counseling services will be cut as well. The much-touted Miller-Unruh reading program for problem readers will be slashed in half.
And it''s the kids that lose out. For instance, programs like GATE provide the kind of education students can normally only get at private schools.
"Now, there will be very little out there to stimulate bright children," says Jones, whose 12- and 13-year-old kids were in GATE in elementary school. "Bright children get bored with school."
Nevertheless, district officials insist that, when all is said and done, things aren''t so bad. They are optimistic that if the county allows the district to take a few years to rebuild the budget, the $2.5 million in additional cuts above the $6.5 million already identified won''t all have to be made this year, as long as significant progress is made toward replenishing general fund reserves.
"The picture is changing," says Villa. "The budget looks very positive."
Former Carmel USD superintendent Bob Infelise is acting as interim superintendent and working with state legislators to try to restructure payments of the $12 million state loan. The district''s old dream of outright forgiveness of the loan is as likely as "the second coming," he says.
The effects the cutbacks will have on the typical student are mixed. Even with teacher reductions, class size is only expected to increase in grades 4-12, and only by one student per classroom. Many special programs will remain, such as music instruction on the elementary level, a rare luxury eluding other districts. The school facilities, on the other hand, remain in shambles, and teachers continue to endure some of the lowest salaries in the area.
Moreover, should the district lose the lawsuit over the Health and Welfare fund, it''s unknown at this point how that will affect the budget.
Only one thing is certain: The party is definitely over. From now on, Villa says, any program that parents desire beyond basic education paid for by the state (for example, music teachers, counselors, certified librarians are not state-funded) has to be accompanied by a plan to pay for it.
One can argue that that''s the reality of public education in California and that the program cuts made by the district were inevitable, but that doesn''t make it any easier to accept.
"When you''re cutting programs," Villa says, "parents aren''t ready to hear it''s a statewide problem."
Needless to say, the MPUSD officials have their work cut out for them. First, they have to adopt a balanced budget for next year. The county recruited fiscal advisor Ed Miyasaki to guide the district on balancing its 2000-01 budget, which must be finalized by June 30. Meanwhile, Infelise is providing leadership in DeBerry''s absence.
A budget committee made up of citizens is reconvening this month to hammer out the 2000-01 school-year budget. This time, two trustees--Marjorie Troutman and Robert Eggers--will sit on that committee. "The bottom line is the development of the budget will be much more visible," Infelise says, "not only internally to the board, but externally to the public."
The board is also involved in the arduous process of choosing a new superintendent to replace the retiring DeBerry. Trustees say the ideal candidate should be a committed educator, but with a strong financial background and top-notch communication skills.
And district administration has set about the task of implementing a number of changes to ensure fiscal crisis never plagues the district again. A March 30 county Office of Education report outlines a number of steps the district should take. Those changes include updating the district''s accounting system and going online with the county office, where officials would have the ability to check district finances on a daily basis.
But perhaps the greatest need for healing exists on a less tangible level. For those directly involved, emotions are running high. Teachers say students have picked up on the negative energy swirling around the district. And morale among teachers is "lower than a snake''s belly," says teachers'' union president Rick Ringler.
As for the public, the parents'' and taxpayers'' trust in the district''s administrators and elected trustees is in shreds. "This board is not going to regain the public''s support," says parent Jones. "This board has been very ignorant."
The past nine months have also taken their toll on the trustees themselves on a personal level.
"All of us feel personally responsible," Villa says. "You lose sleep. Waking up at four in the morning is not fun. The stress level is high, for all of us."
Although he only joined the board six months ago, Eggers says he can''t go to the grocery store without being confronted by a citizen. Even his teenage daughter has been harassed at school.
As the dust settles, trustees are nevertheless hopeful they can regain the public''s trust. But that will take some effort, and some communication. "The board must study everything they receive conscientiously, thoroughly, and in depth," trustee Troutman says. "They need to ask questions, make sure they understand what''s being presented, stay alert, and know the consequences of what might happen."