The School District’s Chief Financial Officer (CFO), Winston Braham, resigned from his post on November 22, just a little more than a month after deciding he could not certify the AB1200 Public Disclosure form for the tentative contract between the teacher’s union and the District due to concerns about funding the five percent raise included in the agreement.
Braham’s resignation was announced in a District press release on November 28. In that release, Superintendent Dianne Talarico announced she is “currently recruiting an individual to serve as an interim [CFO] until a formal search can be conducted.” The release also mentioned an agreement has been formalized with the financial consulting firm FCMAT, Fiscal Crisis & Management Assistance Team, even though there is not an emergency at this time. “The independent review of our finances will include the preparation of a multi-year financial projection of the District’s general fund.”
Concerns about funding the raise also caused the School Board to decide to delay ratifying the agreement until January. It also prompted the Board and members of the Financial Oversight Committee (FOC) to have a workshop with Los Angeles County Office of Education (LACOE) officials on Monday because LACOE oversees the AB1200 certification process. LACOE Assistant Superintendent Ken Shelton explained that in order for the District to comply with AB1200 they must file budget projections for three-year periods “to ensure the multi-year solvency” of the District in order “to prevent Districts from coming to the State for bailouts.” He also mentioned that the decision to call in FCMAT was a good idea.
The District’s FOC Chair Paul Silvern stated that the District’s CFO has the obligation as part of his position in the District to notify LACOE “any time he sees a change in the fiscal circumstances that threatens the fiscal integrity of the District. It was under that authority that the form [AB1200] was sent to the County in October even though the Board was not going to take action until November or December.” It raised so many red flags about the “district’s finances it’s hard to know where to begin.”
The Superintendent and the CFO came to different conclusions about the District’s ability to fund the agreement. The raise will, in effect, wipe out any surplus funds left in the unrestricted general fund, and by the third year there won’t be any money left to support the salary increase.
Silvern also mentioned “another collective bargaining agreement will be negotiated with the classified staff next year” which also may involve a raise. The District has entered a period of declining enrollment, and the Legislative Analyst has predicted the annual COLA (Cost of Living Adjustment) will be reduced after this year from the State. Finally, one of the District’s Parcel Taxes, Measure S, will expire in June 2009 and its renewal is not a certainty. Therefore, it cannot be used to calculate expected revenues for the third year. He then concluded, “It’s against this background of looming challenges as well as the information contained in the current AB1200 analysis that has caused the FOC to urge extreme caution in the consideration of the tentative agreement that has been initiated.”
In a letter to School Board President Julia Brownley on November 1, LACOE called for the District to develop a Recovery Plan “to restore at least minimum [three percent] reserve levels in 2008-2009” which, due to the raise, is projected to be only 0.06 percent. “Our concern is heightened by the fact that (1) the Measure S parcel tax…will expire in June 2009 and (2) funding received by the District from the City of Santa Monica under the Master Facilities Use Agreement…is subject to adjustment beginning July 2007 and its extension is subject to review in January 2009.”
Talarico stressed at the workshop there is “no opening for us to reconsider” the agreement. We “would lose credibility with the people who work in our School District.”
