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State Oversight Likely as Oakland District Is Engulfed in Theft-and-Patronage Scandal

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By Nancy Mathis

The Oakland, Calif., police department has opened a telephone hot line to take tips on alleged wrong-doing by school officials, and a county grand jury is awaiting testimony from seven subpoenaed members of the Oakland Board of Education.

The developments are part of an unfolding theft-and-patronage scandal that has brought the system's deep financial and administrative problems into stark relief.

And the picture beginning to emerge has led increasingly to calls for state intervention.

The trouble-plagued district, California's fifth largest, has been without a superintendent since December, with four of the leading candidates for the post having turned it down in recent months.

In the past six months, Oakland police have charged six school employees with theft, and two others--the district's maintenance foreman and its director of state and federal funding--have been indicted on similar charges by the Alameda County grand jury.

The system's budget deficit, placed by conflicting estimates at as high as $20 million, led a grand jury in July to pronounce its financial condition "near insolvency" and recommend state action.

Last week, a bill in the California legislature that would force the district to accept a state-appointed trustee with veto power over expenditures was expected to clear its second Senate hurdle on the way to what some observers say is almost certain passage. It passed the lower chamber on a 69-to-3 vote.

"The situation is grave," said Bill Honig, state superintendent of public instruction. "They just need to make a thorough overhaul in that district."

Patronage Groups Alleged

In fact, there are indications that the depth and breadth of the Oakland scandal may not yet be fully determined. In addition to the current grand-jury probe and the work of a 12-member police investigating team, the Oakland Tribune last week began unearthing allegations by school employees of widespread patronage and misuse of power by top officials.

In a two-part series on the school system's problems, the newspaper reported the alleged existence of half a dozen powerful patronage groups, one--"the family"--said to consist of some board members and other school leaders.

The newspaper account quoted teachers and other employees as saying ''the family" procured and protected jobs for friends and punished dissenters with transfers or firings.

"Working in this place is like Argentina," one unidentified teacher was quoted as saying. "You say the wrong thing, and you disappear."

Even before the newspaper series appeared, the situation had prompted Mayor Lionel Wilson to suggest publicly that voters recall some board members. He declined to name which ones.

And the local teachers' union, the Oakland Education Association, recommended last month that the state suspend the board's authority and appoint a four-member governing panel to see the district through its financial crisis.

Mr. Honig, however, is among those supporting the measure pending in the state Senate. The bill, sponsored by Assemblyman Elihu Harris of Oakland, would allow Honig to appoint a trustee to oversee the district's financial operations, and it would provide a $10 million state loan to the district.

Legality of Bonds Use Disputed

A majority of the seven-member Oakland board opposes the Harris bill. Just hours after it cleared the Senate education panel in the last week of August, the board, in a 4-to-3 vote, passed a $10-million financing plan of its own.

But both Mr. Honig and the superintendent of Alameda County, who is charged under state law with approving the Oakland budget, contend that the board's bond plan is illegal.

It involves the issuance of special tax-exempt bonds called certificates of participation, which require that school buildings be used as collateral. Normally, such bonds are used to finance school-construction projects.

William Berck, the Alameda County superintendent, and Mr. Honig contend that the bonds can be used only to finance construction, not to balance the general operating budget.

The issue moves toward a showdown this week. State law requires school districts' budgets to be approved by county superintendents by Sept. 15.

The Oakland board, which estimates its deficit at only $2 million, the smallest of three official estimates, plans to meet on Sept. 13 to give final approval to its proposed $238 million budget for the coming year.

'Too Many Agendas'

But without Mr. Berck's approval--and that of Mr. Honig--the district will not have a legal operating budget, officials point out. And without either a state loan or the disputed bonds, they say, it will run out of money by April.

Sylvester Hodges, an Oakland board member and chairman of its budget committee, said the county official and the state superintendent are interferring in Oakland's attempt to resolve its own problems.

"I propose first of all for the other entities to keep their noses out of the business of the district," Mr. Hodges said in an interview.

He noted that the nearby Richmond Unified School District used the same method in April 1988 to balance its budget. But Mr. Honig countered that Richmond's actions did not fall under the new law adopted later that year requiring county superintendents to approve local budgets.

But Mr. Hodges insisted that the Oakland board should be given the chance to try to resolve its budget problems and, failing that, should be allowed to seek a state loan on its own.

Alfreda Abbott, the board president, agreed. "We don't say we don't have serious problems," she said, "but we feel we can work our way out of this."

Both board members said they viewed the district's treatment as part of a personal and political vendetta launched by Assemblyman Harris and associates of Mr. Honig.

The assemblyman and the state superintendent have the same political adviser, Mr. Hodges noted. Mr. Harris, he said, recently announced his candidacy for mayor of Oakland and plans to make the schools a campaign issue in the 1990 race.

"There are too many agendas going on that have nothing to do with the education of the children," Ms. Abbott said. Spokesmen for both Mr. Harris and Mr. Honig denied the charges of political motivation.

Playing a 'Racial Card'?

The prospect of state trusteeship has deeply divided the community, and some in the predominantly black district have charged that much of the tension surrounding the issue is related to race.

Mr. Hodges, who is black, said that while the state action may not be racially motivated, it has "racial implications."

Mr. Honig, however, complained that some board members merely "play the racial card" to hide their involvement in patronage.

In July, a coalition of black community leaders announced its opposition to state intervention, citing both the "negative effect" it would have on black administrators and the people's right to select their elected officials.

To Kathleen Crawford, a white board member supporting Mr. Harris's bill, the impetus for changing her initial opposition to it was the announcement by police in July of their investigation into the district's financial affairs.

The appointment of a trustee is now all but a foregone conclusion, according to Mr. Harris's aides who report the Assemblyman has the votes to pass the bill through the Senate.

"People oppose it because of the local-control issue," Ms. Crawford said of the possibility of a trustee. "I say this is a local out-of-control issue."

'Worse Every Month'

Most observers trace Oakland's myriad of problems to California voters' approval a decade ago of Proposition 13, the property-tax-reduction and -limitation measure.

Despite Proposition 13's impact on revenues, they say, the school board failed to cut costs, protected staff members from layoffs, and borrowed from funds intended for desegregation efforts and cafeteria expenses. A $4 million salary package negotiated for teachers and a new state mandate to increase budget reserves have in recent months compounded the district's financial problems.

According to Alameda County Superintendent Berck, who has been working with Oakland for the past year to improve its financial condition, the problem "simply gets worse every month."

Turnover at the top has also been devastating to the district, he said. "I would describe it as leaderless."

Stacy Walthall, the senior deputy district attorney for Alameda County, said he expects the grand jury to continue its investigation through July 1990.

The school board ignored previous grand-jury reports critical of unnamed members for interfering in day-to-day district operations and the hiring of employees, Mr. Walthall noted.

The last report, issued in July, recommended that the board seek a state loan and a trustee because it was "near insolvency" and there was "no historical evidence" it could make the necessary decisions to save the district.

Rallying Up

While the political and legal machinations continue, parents and others struggle to make the best of a bad situation.

As school opened two weeks ago, Oakland officials were forced to turn to Alameda County for administrative assistance. The district was being led by the acting deputy superintendent, the interim superintendent having been forced to leave office because of illness.

But a coalition of parents, formed earlier this year, was focusing on the educational product, rather than the crisis. Spokesmen for Save Our Schools said that, although they are concerned about the financial problems, the city's high dropout rate and lackluster student performance worry them more.

"My feeling is that people have never seen the district this bad before," said Paula Taylor, an sos member. "Most people feel hopeful that having reached the bottom, we will rally and move up."

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