Financial Task Force Releases Report

By Jorge Casuso

Eight months after it first convened, the Superintendent's Financial Task Force made public on Friday a detailed report outlining the root of the school district's financial woes and proposing possible solutions.

Noting that the report "was not evaluating educational services," the four-member task force proposed improvements in the financial management of the district, which has come under heavy fire after a $4 million to $5 million budget shortfall was announced last year.

The report - which focuses on the district's expenditures, revenues and administrative process -- analyzes how the district might spend its resources more wisely and how it might acquire additional revenue.

"The most recent budget roller coaster ride has damaged the credibility of the District with much of the public and District employees," the report said. Despite a $2.1 million bailout from the City of Santa Monica, "there continue to be deficiencies in District financial management and business practices that need to be corrected," according to the report.

"Once better systems are in place, SMMUSD must repair damage done in the public arena and improve credibility among all constituencies," the report concluded. "There needs to be dramatic improvement in the communication style of the District. The culture needs to change, so that information is shared in an open, clear manner."

The 18-page report makes four key recommendations to improve financial systems in the district, which "is the equivalent of a $100 million per year business with financial and management problems."

Following are the report's key recommendations:

• Structure and manage the district in a more business-like manner.

The report identified numerous problems in this area including inadequate staffing, a limited capacity for research and development and a school board that "has an aversion to making difficult choices during the budget process."

It also found that administration "does not have clearly articulated established priorities for the educational services that guide the budget process.

"The District's budget reserves are too small for the current, fiscally volatile times," according to the report. "Staff costs are not under control because there is no long-term strategy to deal with the problem of salaries rising faster than revenues, and the Board directly negotiates with collective bargaining units."

To remedy these problems, the task force suggests hiring a third party "to thoroughly review and make recommendations for improvement on fiscal and managerial practices." The consultant would be paid with a grant from the city. The report also suggests establishing a board-appointed Financial Oversight Committee and developing a new budget planning process.

"The District's current statement of a vision allows for neither the measurement of progress nor the recognition of arrival at a destination," the report said. "It is neither map nor compass and certainly not both.... The District needs to set clear, distinct goals that everyone knows are the driving force of the district.

"Once the goals are articulated, specific measurable objectives should be tied to these goals," the report said. "Without a structure like this, the District is at risk of floundering round and about rather aimlessly, with occasional quarrels when seas become unusually rough."

The report also recommends that "a professional negotiator, not the Board be involved in direct negotiations with bargaining units," following the lead of most school districts of similar size in the state.

In addition, the district should increase its current reserves from 3 percent to 5 percent for the year 2001-2002. The district should "make a one-time request of the City of Santa Monica for the money," according to the report.

"The District should then create a strategy.... to replenish and increase the reserves to provide the appropriate cushion (6%-7%) for variations in resources and expenditures," the report said. "This will reduce the fiscal crisis atmosphere that frequently exists in the School District."

• Improve the credibility among all constituencies.

The district faces a credibility problem when it comes to the budget, the report concluded. Budgets are not clearly understood and recent "budget changes and the responses from the district damaged credibility" as did the overestimated enrollment and resulting budget shortfall.

There also is a perception that the modernization and construction program bankrolled by public bonds is poorly managed, the report found. In addition, there is a general frustration over special education costs and difficulty in finding high quality services.

To help solve these "credibility" problems, the report calls on the district to improve its enrollment projection process, "possibly with the assistance of a consultant," as well as its "communication style."

"The staff culture should become open and non-defensive with the public, even when staff feel they are victims of misinformation," the report said. "The staff needs to address misperceptions promptly and effectively."

These goals can be achieved in part by developing "a user-friendly format" for presenting the budget and expanding the use of the Internet.

When it comes to special education, the task force recommended that the district restructure the delivery of special education services.

"The plan should address fiscal management, approach to relations with students and families, assessments of needs, assessments of alternative sources of services, ability of the district to render services where it is cost effective and compliance with legal requirements," according to the report.

In addition, the task force recommended that the district evaluate its current approach to the management of modernization and construction problems by determining whether "spending more money up front on a renovation will save future dollars for maintenance or additional renovation."

• Strengthen mutually supportive relationships between the cities of Santa Monica and Malibu.

The report found that "in Santa Monica and Malibu the cities and the SMMUSD do not have as symbiotic a relationship to each other as they should." The cities' officials and staff "perceive that SMMUSD only informs them of budget issues when there is a crisis and they need money from the city," according to the report.

The report recommends that the district "build and maintain a partnership relationship with the cities."

"SMMUSD management should initiate regular, productive meetings between District and key City staff, which focus on budget issues," according to the report. "The hope is that staff will identify areas in which they may be able to share certain services and facilities."

The report also recommends that the cities and district prepare an annual "State of the Schools" report and that district officials hold an annual meeting with the two City Councils.

• Develop additional sources of revenue.

According to the report, the district needs at least an additional $30 million in revenue annually to catch up with states such as New Jersey, New York, Connecticut and Alaska.

Staff, however, does not have the time to pursue new and innovative sources of funding and the district has not "sufficiently tapped into the new commercial businesses (i.e. Internet companies, entertainment companies) locating in Santa Monica and Malibu," according to the report.

To increase revenue, the district should increase the parcel tax from $73 per parcel to $98, as proposed by the school board. The increase would add $700,000 a year, bringing the parcel tax to $3.1 million annually.

In addition, the district should hire a full-time fundraiser who can build corporate partnerships and capitalize on funds available for the district's poor students, who account for 50 percent of the district's enrollment.

The district also should step up its lobbying efforts in Sacramento and pursue "an on-going, long-term revenue source."

"The Task Force believes that the District should begin discussions with the cities of Santa Monica and Mailbu, and community leaders about creating an on-going source of funds which would add $10 million annually to the SMMUSD budget for specific, high priority education programs," the report said.

Potential revenue sources would include general revenue bonds and an increase in local taxes.

The report - which will be presented to the School Board during its meeting Wednesday night -- was written by the four members of the task force. They are Neil Carrey, Wendy Cary, Jean Gebman and Anita Landecker.

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