SMUHSD - Fiscal Analysis

High school district finances to be scrutinized (Daily Journal)

Financial experts will analyze if the San Mateo Union High School District's finances and the steps taken toward financial recovery and the state-required 3 percent reserve are sufficient safeguards. The County Office of Education will contract with the Fiscal Crisis and Management Assistance Team, which specializes in fiscal analysis for school districts, to begin analyzing the books right away. Cost for the project or a timeline, however, will not be known until the scope of the work is outlined next week, said County Superintendent Jean Holbrook. Holbrook asked that the analysis be expedited.

The district's rocky financial year kicked off with $3.5 million in budget cuts including the layoff of 12.4 teachers and 36.1 school staff. Recently, the district began work on an $80 million consolidation loan to pay off three separate loans taken out since 2001 to finish infrastructure renovation at the six high schools.

Additional articles in Burlingame Daily News and San Mateo Times.

- Written by Fiona

Comments

[KRN]

From the SM Times Article:

"The district had to make steep budget cuts over the summer when it learned of an unexpected $3.5 million shortfall. This month, the district learned it would have to shell out an estimated $475,000 a year to repay certificates of participation on a number of school projects, including the rebuilding of San Mateo High School"

This is not true! The district was warned of the shortfall in 2005 and decided to spend down the reserve to .25%. The district took out $50 million in COP loans (and will need an additional $25 to $30 million) and KNEW it would have to make very large payments on these debts. Stating that the $475,000 was something new is outragous. The $80 million in debt was suppressed from the taxpayers during the last bond initiative and will be paid for out of classroom funds.

During the entire budget reduction process, the district has known that it was an additional $73 million in debt but did not disclose this to the public.

How can the current administration inherit a reserve of $12 million and move the district to a state of bankrupcy in just a few short years?

[Joanne]

Answer: a) ineptitude, b) crummy financial reporting systems, c) circumstances beyond their control (i.e. "bad luck"), d) all of the above.
KRN, you are new to the elementary school district, BSD, but when it was in serious financial trouble 7-8 years ago, most parents were shocked to learn how crummy the financial reporting systems was. Unlike one's home accounts or those of most private businesses, there was no current, accurate snap-shot of the district's finances. Huge bills just seemed to trickle in -- even in some cases after the year end statements were made -- and one never got the impression that the numbers could be relied upon. I believe the BSD has now invested in better reporting systems but this could easily be part of the problem in the SMUHSD.

[KRN]

If the SMUHSD has a crummy financial reporting system then how was Tom Mohr able to collect $12 million in reserves upon his leaving the district?

I'm new to the system? " KRN, you are new to the elementary school district, BSD"

I've been involved in Burlingame education for over 17 years! I don't believe that I'm the new one on the block.

Furthermore, how do you explain that the district put themselves an additional $80 million in construction debt? These bills are going to have to be paid out of general fund money which is inteded for classroom use. I believe that answer "A" above is the solution.

[Joanne]

I do think that paying routine bills with a routine income stream (such as Tom Mohr did) is different than paying construction bills with never-before-seen litigation-related hits to income like the SMUHSD has recently experienced. Answer "A" above could be part of the answer, but I don't think it's the only part. Wasn't the same finance guy in place for both Tom Mohr and Sam Johnson? The new finance person, Liz McManus, strikes me as both smart and honest. I think she inherited a mess.

[KRN]

Why do you assert that Tom Mohr had "routine bills with a routine income stream." Do you know this as a fact or are you making an assumption? It is a fact that Mohr left the district with a hefty financial reserve and is now the President of Canada College.

Once again, the district administration was given strong warning to build the reserve in preparation for tax reductions and litigation related to 9/11. We have this on video. The district administration did not follow the advice and continued to spend.

Have you read the treads on the NEW $73 -$80 million in debt? If not you should read SMUHSD Financial Scandal! and The SMUHSD must pay down its debt.

[Joanne]

My "routine bills with routine income stream" was not meant to be a putdown of Tom Mohr. Simply a statement that he left before anyone the SMUHSD had to manage a $144M construction project, and handle multiple, consecutive years of unexpected income hits which occurred at the same time as multiple, consecutive years of rising health care costs.

[KRN]

Tom Mohr set up the construction projects and was able to get San Mateo High School rebuilt.

The rising healthcare costs are already built into the contract as these costs are off-set by reduced increases in teachers salaries, so rising healthcare also cannot be used as a reason for mismanagment.

The administration was warned of the income hits and had multiple years of deficit spending. When warned of the impending reduction in tax revenues, the district ignored the advice.

The answer is simple. The district failed to plan for its own financial well-being and refused to adjust when adverse events changed the environment of the plan. How else do you explain the fact that they kept spending when tax revenues were falling?

Also, how do you explain the NEW $80 million in debt that will be paid off out of the General Fund over the next 40 years? Why was this debt supressed during the last bond election? Is this ethical leadership? By paying this construction related debt out of the general fund we are taking funds out of the classroom in order to build buildings.

If you missed these last points you should read, The SMUHSD must pay down its debt and SMUHSD Financial Scandal!. The Grand Jury may be looking at the district leadership for fiscal wrongdoing as a result of these actions.

I don't think Tom Mohr handled the process around the SM rebuild well at all, (the disregard for the CEQA process, the 'miswording' regarding the bond, etc...the gym had to be fixed at least twice before it opened. What kind of contractors are these folks using.

Or maybe that is unfair......
Forgive me, maybe it was this same wonderful Board, the majority of whom are still seated, or Mr. Arnold, who gets blamed for everything after the fact. I hope he's on an island somewhere so he doesn't have to hear the people who praised him so much when he retired, turn on him.

More and more, it seems to me that this has been an ongoing downward spiral, not just with Sam Johnson, but that it started beforehand. There are no Saints here. The good Board members, like John Gregory left long ago, in disgust. Maybe he was the smartest one, seeing what has transpired in the five years since.

[Joanne]

I don't know if anyone can confirm this, but I heard that the school district is obligated to accept the lowest bid contractor. Anyone who has ever done home remodeling would know the folly of that policy. Then, when our low-bid, low-margin contractor goes belly up half-way through the project, the school district has to scramble and find someone else to finish the job -- at premium prices I'm sure! Can anyone reading this confirm whether the lowest bid must be accepted? Is there any requirement that bidders demonstrate prior fiscal responsibility?

My guess is that you are correct.....but the trick is that they must have a bunch of "change-orders" that eventually bring the bid way back up again. It's kind of a silly, expensive game with taxpayers' money.

[Haddam Huhain]

We URGE SMUHSD district to consider what Ms.
McManus has to offer , we suggest that the
District cut teachers salaries and reduce all
support staff by the end of 2007. Close 3 schools
and contract out bussing to close the budget
gap.

Love Haddam Huhain.