Shortly before Thanksgiving, The Lookout paid a visit to the offices of business attorney Neil Carrey, who had been recently named by Santa Monica-Malibu School District Supt. Neil Schmidt to the four-member superintendent's Financial Task Force. The group, which meets weekly behind closed doors, is charged with examining the causes behind the district's $5 million shortfall and proposing solution's to the district's financial woes.
We thought an interview with Carrey on the eve of the task force's first public meetings Tuesday and Wednesday would give our readers a closer look of the issues facing the School Board, as well as an inside glimpse of the man who will make recommendations that could shape the future of the city's public schools.
We conducted a preliminary interview on the phone, then, with tape recorder in hand, we drove to Carrey's 15th floor Wilshire Boulevard office in West L.A., which commands a sweeping view of the Los Angeles basin from the mountains to the sea.
One wall of Carrey's office in the law firm of Jenkens & Gilchrist is covered with plaques commemorating his 25 total years of community service on all the local boards and commissions the Santa Monica resident has been a member of for the past 15 years. Carrey's favorite plaque is for his work in bringing a girl's softball field to SAMOHI. He takes particular pride in the fact that the diamond isn't tucked away behind some building, but sits on a prominent piece of land.
Another wall features the abstract art works - they resemble the landscapes of another planet - Carrey has concocted using a special method of painting. Using his penchant for numbers and schedules - a keystone of his legal expertise - Carrey calculates that it takes him 24 hours per painting: approximately 20 minutes to purchase the materials, about 40 minutes to create the work and about 23 hours to let it dry.
A colorful east coast native with a grey beard and full head of hair that stands on end -- seemingly the result of nature, not the trendy spiked look -- Carrey seems out of place in a world of sharp suits and trimmed manes.
He has made his money not only in the law, but also by speculating in "red neck" stocks. As a New Jersey teenager, Carrey fell in love with country music when he paused his radio dial on a broadcast of the Grand Ole Opry. His penchant for the country sound was soon accompanied by a love for stock car racing. He invested in both and the rest, as they say, is history.
Carrey and his wife Karen, also a frequent volunteer and co-president of the SAMOHI PTA, have had four of their kids in Santa Monica schools, one of them in special education. As a result, Carrey provides both a parent's view of schools, as well as an attorney's keen eye for details and numbers.
Lookout: How do you account for the district's projections being so far off? In June, they came to the City Council with a $2 million shortfall because they had fewer students than they projected. Now, the first month's enrollment figures are in, and there is an additional shortfall of up to $5 million? Why did the enrollment drop?
Neil Carrey: People are looking at the wrong issues. The enrollment didn't drop. These are only projections. There are 12,500 students. It's a pure guessing game. They were within one and a half percent (of their projections). You try to estimate how many students you will get. For four years in a row, it worked. They estimated less students than they actually have. Now all of a sudden, you miss. In the past four years, they were estimating low. When people moved in and couldn't get their kids in the neighborhood schools, they did some preliminary projections, saw an increase and cut it back. This year, the enrollment went up by 100, but they had projected 400.
L: Many people say that cutting back on the permits for the children of people who work in Santa Monica is the reason the school board has fewer students than anticipated. There has also been a crackdown on kids who don't live in the district but give phony addresses to enter the schools.
N.C.: There was no doubt that there was abuse. There is still abuse. The problem is the timing. When they underestimated the projections, then they brought in permit kids. When the projections were up, people weren't able to get into their schools, and it became a major issue. I still think it's an issue. But it's sort of a two-edged sword. You shouldn't have people getting away with coming in here that shouldn't be here. But from an economic stand point, when you're down 300 students and you have a shortfall because of it, that's not when you start spending money to find more people to throw out. I'm a business person. I'm a realist, and this isn't the time to throw people out. If you're lucky you catch them.
L: Do you think there will be a big push to increase the number of permits issued for this upcoming school year?
N.C: They've already started letting the word out. Because the word came out after they cut that they were taking very few permits, people started to look elsewhere. Now, obviously, the best time to get permits is before school starts because once people go to their own districts or make other arrangements, they bond and they don't want to leave. But the word is out that this district is taking permits and they will be beginning to come in.
L: Do you think they will have the same problem they had this year, where kids who live in the district weren't able to get into their classes?
N.C.: When they do the permits, which they will, you look to where the shortfall is. First of all, you don't want to bring in 100 students to an elementary school and say, 'Gee, our numbers just went up by 100,' and then you have to hire three teachers. So you only bring them in when you don't need to hire teachers. But everything runs in cycles. The state (enrollment) finally leveled off this year, which was a surprise to people. Historically things go up, things go down. And it's sort of the projections. It's like, what happened? For four years you underestimate, and people scream, 'How could you bring in the permits now?' You overestimate, and people scream, 'How could you not bring in enough money? You gotta get the money.'"
It's a tough business, but I have to say -- and I've been very critical of Art Cohen (the district's financial officer) and critical of (Supt.) Neil (Schmidt) --, I wouldn't take their jobs if they stuck a gun to my head. I'd say, 'Pull the trigger.' I don't know why people take it. It is very tough. It is very complex. There are so many rules, so many mandates. You're dealing with such a small amount of discretionary funds. But it's also why millions are needed, thousands are very helpful. If everybody could find $50,000 a year, $100,000 a year, that's a tremendous amount of money . A higher reserve would protect you.
L:The school district has the state mandated three percent reserve. Are you saying that's not enough?
N.C.: To me that would be one of the recommendations - to raise the reserve. It doesn't change dollars, it changes when you disappoint people or excite people, that's all it is. And that's what I think people don't understand. And even the reserve, you could spend the reserve now. It just means come next June, in addition to everything else you want, you have to replenish the reserve. But the reserve does not change real dollars, it just means when you can budget them. Three percent I think you need to hold except for dire emergencies. The others I think you hold until you see these (student) projections, then we can decide do you use the reserve and where do you use the reserve.
The three things I'd be very surprised of: One, I'd be very surprised if I'm going to be convinced that central purchasing is working correctly. Two, having seven school board members negotiate with the union. I feel that is costing something. And three, I'd be very surprised if the committee as a whole does not come out that the reserve is increased. I'd probably come out with six percent (in the reserve).
L: You mentioned the board negotiating with the union. What do you think of that?
N.C.: One thing I've been saying for years, I think win-win negotiations is nuts. We have the only school board in the state that does their own negotiations. Fourteen years ago, someone came up with a win-win concept - let's close our eyes and pretend we're not negotiating. There are some school board members who haven't run a business. There's a feeling that they know more than they do. It's a polyana view.
The concept is you don't go into traditional negotiating, hard-nosed, and people come out and don't like each other. So it's not really the full negotiating. And the way it works is for two days the sides come together and they ask questions of each other to get a feel, to get the positions. Then there's five weeks of subcommittees, a lot of talking, meeting, discussing. Then at the end of that time, by agreement, you only spend two days negotiating. At the end of two days you can declare an impasse, which is what they did this year, then they go to mediation.
In labor negotiations what you usually hope for is win-lose, usually it's lose-lose. I understand we're the only district in the state where all seven school members negotiate. Any one in labor recommends against having any school board members there. The president obviously takes the lead, then you have the superintendent, Art Cohen and a few other people. You have thirteen for our side, while the union has their professionals for their side.
First of all, being a business attorney, you never have the people making the ultimate decisions sitting across the table. You have to have your ultimate backstop, you have to have someone be able to take the ultimate hard-nosed position. Plus, if you have a staff member sitting there, if they feel what the school board is doing is wrong, how is the staff member going to be able say to the school board, 'Be quiet. You don't know what you're talking about?'
So theoretically what you have is the school board, none of whom is a labor negotiator. It's an art. Most people bring in an attorney, even a labor attorney. I would never feel qualified to be a labor negotiator. The last two negotiations I thought there was a lot of animosity. To say it works to me it depends what you're giving. If you're giving away the store, it works. I think that this last negotiation demonstrates that they're out of their loop.
L: Some have questioned the timing of the board's ratification of the teacher's contract ( which raises salaries by 6 ½ percent.) It came just one week before Schmidt announced there would be a $3 to $4 million shortfall (later increased to $5 million). Shouldn't they have postponed the vote until they knew if they could afford the raise?
N.C.: You reached an agreement with the union (in June) and these (the enrollment figures) are projections. You would have more problems with the labor issue if all of a sudden you say, 'The contract we've agreed to, we're not going to ratify it.' I couldn't do that. You can't make radical changes. You could have the teachers striking.
L: What do you think of a second parcel tax?
N.C.: Well, it's not a second parcel tax. One of the things that a school district can do, a school district is allowed to have a parcel tax where all the money can stay within the district. You can put it in for any length you want. It used to be it was renewed every four years. Our last committee decided to do this one for six years. The last time when we set the amount, we also built in a cost of living increase. It's not like there's a state mandate. You can't use it for capital items. There are certain things you can use it for. So the six years are up next year. So first, you're looking at a renewal.
The issue is the increasing of the amount of the parcel tax -- not whether you want a second parcel tax. Some people are talking about doubling the amount of the parcel tax. Clearly for me, if you double the parcel tax, then you look at the cost per property owner. It becomes small amounts of money. It's the same thing with bond issues. This is why sometimes when you hear about legislatures sometimes giving tax refunds, I feel that's ridiculous. Everyone winds up with $50 and it costs the state $300 million.
So I sort of view some of the things with parcel taxes and real estate taxes. First of all, the school district is a major factor of property values in our city. There's no doubt about that. A strong school system is what holds it up, so that the people who are most benefiting from a strong school system are the property owners. When you also look at what the small increases cost them, it's such a small amount of money you know. I tell people, you skip one yuppie dinner a year, and you've covered the doubling of the parcel tax. So I think it's a great way of doing it, but it's not something that the board just goes and does.
One of the things these committees do, in addition to looking in and recommending, is you do hire people to get a feel with surveys to see what the feel is. Can you double? There is a limit when they won't go for it. And I believe just cause the last bond issue passed - and I did chair the committee that recommended the bond issue - I think that the fact that they refinanced at the same time there was no property tax increase was a major factor. I gave many speeches for Prop X, and the thing that got me through the door and not tarred and feathered is that there wasn't going to be a tax increase. Your luck is gonna run out sooner or later, so you gotta be real careful with the amount. But I really do think an increase makes sense.
L: There seems to be a sense that's there's going to be money always there. You can go to the council and say, 'Hey, council, we need two million bucks this year,' or you can go to a parcel tax or you can figure out ways to get it .
N.C.: I guess to me it's like a sore point only cause I look at the school district like I look at my children. They become adults, they go on their own, and when they need money who do they come to? Good ole dad's gonna come through for you. Now, getting some help is nice, and I think that the city to a certain extent has some obligation, but I do feel that there has been too much demand - let's get it from the city, let's get it from the city. Almost to the point that sometimes you don't even manage well. You say, 'We don't have to worry.'
And I think this was one of the factors. I know when I talked to some of the council people, they felt that the district is really not doing enough. They come to the City Council without really looking into other ways of finding money. One of the things we hope to come from this committee is to be able to demonstrate that yes, the district now has looked into it. They look into some things that'll help, others that can't. But I feel that you gotta be real careful on how much you rely on more and more from the city.
L: Let's talk about the task force.
I'm a very simple guy. The expense side is much more a priority for me, the revenue is important, but I see that more as a long range. But I see what I'm doing locally, I think it might have ramifications to the state but I don't see myself as someone that wants to launch on Sacramento, I don't see myself flying back to Washington to take up this cause. I think there are other committee members that see this in a much broader sense. Each person is going to have a different view of why it's important.
Some may feel its a better stepping stone to take it elsewhere. It gives more notoriety, which I think is important. I think the more people you have reading about these issues, hearing about these issues (the better). To me the advisory council is a good idea because everyone's talking about it. The more people are aware of what's happening, the more interest they'll take. But one concept was that there are four of us, and we have to make a decision.
Cause the one thing Neil did not control at all, once he brought us together, is that we decided what we wanted to look into. We decided what size. He started with the four. So we had to decide -- do we expand the committee and go with subcommittees and bring in outside people? Because there's so much nitty gritty work at these meetings, and it's not like we're discussing exciting issues, there's a lot of detail, we're putting a lot of time into this. The decision was that if you expand the committee it (takes a greater) amount of time and chaos.
L: Is that why the task force set up an advisory council of community
N.C.: On the other hand, we felt that there are some issues (that require other expertise). So we felt if we could have some people to knock some ideas around with, or have them come back and give us some ideas, that would be very beneficial. Not to do it often, but at least get a perspective of people both from a cross section of people, of expertise, some people who may have some contacts in the community that may differ from the rest of us and get input from them.
We also thought it would be very important to try to get some groups that would understand the issues and maybe can get the message the other way. Cause some people see it one direction, but I think we are doing a pretty good job being balanced, and we thought that would be another way of really having some people be able to say there is legitimacy and all of that. So it was just something we thought would be a good idea. Nothing mysterious, it's not anything clandestine, it was just a way of bringing in more community people.
L: There are some who criticize that the main task force meets in closed session. Do you think the meetings should be public.
N.C.: It's not like we're discussing deep dark issues. A lot of the meetings I have no problem. But I don't want to have meetings where every time we have a meeting people start talking. There is certain trust and confidentiality that they have that if we're bringing up stuff, and my concern is if people are sitting in -- and usually the people who are sitting in are the ones that have a gripe -- they start hearing something, it's out of context. I don't think people are going to be as open and honest with us.
There are some issues like the discussion of special ed, where you'd never be able to discuss it, to try to get it to the right framework where you're not trying to take something away, you're not trying to hurt people, but where every word on some of those issues becomes so potentially inflammatory to some people that people are going to be afraid to even discuss issues.
One of these things is to really get the information, and I would hate to think by opening up a process that it closes the process. Not everything should be opened up. My view on a lot of things has changed dramatically as I get the whole picture. So sometimes not being at all the meetings, not having all the perspective, you hear things.
I feel that those people who think this is a big mysterious type of thing I just don't agree with. It's just a lot of work, and I think the system will come out better for everyone.