Dire Financial Status Pushes CJUSD To Brink Of State Takeover

The financial condition of the Colton Joint Unified School District has deteriorated to the point that the California Department of Education, the San Bernardino County Superintendent of Schools or both will intervene by June 2014 if the district’s current spending patterns are not reduced.
In a highly sobering assessment May 17, Colton Joint Unified’s superintendent for business services Jaime Ayala informed the school board the district faces pending insolvency, such that it will likely have cumulative budget deficits approaching $26 million from the current and next two yearly budget cycles.
If the board, which has been hamstrung in the economies it has attempted to institute by an intransigent teachers union, does not substantially rein in spending, Ayala said the district will lose its spending authority altogether and the San Bernardino County Superintendent of Schools will take on oversight of the district’s coffers.
“If we do not start taking action quickly,” Ayala told the board, “I can almost guarantee you at this point that we will be insolvent sometime in 2013-14. The numbers draw no other conclusion. We are running out of time.”
Ayala’s warning galvanized the board into action. Three weeks ago the board, which is wrestling with a $7.8 million budget shortfall in the fiscal year ending June 30, had considered and then rejected cuts outlined by Ayala and district superintendent Jerry Almendarez which included reducing school bus transportation, delaying maintenance and making temporary swimming pool closures that would have saved the district $1.8 million in the current budget. At the suggestion of board members Patt Haro and Roger Kowalski, the board moved to reconsider making those cuts.

Jerry Almendarez

While many school districts utilize bonds and other forms of borrowing to finance the construction of schools, the Colton Joint Unified School District, which is responsible for the education of 23,000 public school students in all of Colton, Grand Terrace, Bloomington and parts of Fontana and Loma Linda, is a rarity in that in recent years it has taken to using borrowed funds to carry out operations and meet payroll. In the 2010-11 school year, 15.3 percent of the district’s revenues came from borrowed money, making Colton Joint Unified the largest deficit spender of all school districts in San Bernardino County. In addition to $10 million borrowed from private investors, the district to cover its operational costs has tapped into $19 million in bond financing and other funds set aside for such projects as building construction.
Beset with dwindling resources similar to those plaguing districts up and down the state, Colton Joint Unified does not appear to be in a position to sustain operations or keep up with the debt service on the existing loans. Indeed, were an audit of the district’s books to be carried out by the county superintendent at this point, Colton’s budget would be declared to be in so-called “negative status,” i.e.,  a circumstance in which the district is incapable of meeting its financial obligations, triggering the need for the state or the county superintendent to assume operational control.
There is a degree of irony in the district’s condition, since some of the district’s financial difficulty is a result of the state delaying payments as it struggles with its own fiscal challenges. At present, the district is considering borrowing another $32 million in the form of tax revenue anticipation notes, short-term instruments that will tide the district over until the state provides the remainder of the money due the district for the current fiscal year. That money should have arrived at the start of the final 2011-12 quarter April 1 but will not become available at least until July.
According to Ayala, Colton Joint Unified is heading toward a $7.8 million budget deficit in 2011-12, will be $20.2 million behind the eight ball in 2012-13 and will be $25.7 million in the red in 2013-14. “Deficit spending is destroying this district,” Ayala said.
The district’s deteriorating fiscal position has been accelerated by the Association of Colton Educators’ continuing efforts to challenge Almendarez. In May 2011, the district signaled that it would lay off 72 employees, including 57 teachers in a cost-cutting effort, but two months later indicated it had found funding to rehire 43 of the teachers. Teachers union agitators, however, engaged in ever more strident protests over salary and benefit cuts the district said it needed to impose to keep the district solvent.
Teachers insisted they had made more than adequate concessions and that the district was flush with money, including a surplus of $26 million. Almendarez insisted the teachers were mistaken and the $26 million referred to by protestors was a ledger anomaly. He said the money was actually due to be transferred into an account to be used for paying outstanding principal and interest on one of the loans to the district that was coming due.
More recently, the Association of Colton Educators have come to accept the dire financial circumstance of the district as a reality, and agreed to accept nine furlough days and some cuts in benefits during the upcoming fiscal year. District administrators have also accepted taking 14 furlough days in 2012-13. None of the district’s employee bargaining units have yet agreed to make salary concessions.

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