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Discovery of Budget Shortfail Prompts L.A. Board To Postpone Contract Vote

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The Los Angeles Unified School District has postponed ratification of its contract with district teachers following the discovery of a $150 million shortfall in the school system's budget.

On the advice of the district's chief financial officer, the school board postponed ratification of the contract from Feb 3 until Feb. 18 to give itself time to account for the unexpected deficit in the current year's budget.

The board's decision prompted Helen Bernstein, the president of the United Teachers of Los Angeles, to threaten a strike by teachers at the end of the current winter break. Classes are scheduled to resume Feb. 14.

The district's superintendent, William R. Anton, and the school-board president, Warren Furutani, later assured the union leadership that the contract, which both sides already have signed, was "a done deal."

"It was not even an issue that it wouldn't be ratified," said Diana Munatones, a spokesman for the district.

Ms. Bernstein issued a statement saying that "we do not expect a confrontation with the school board" over contract ratification, but noting that a strike would be an option for the union's 33,000 members if such a confrontation emerged.

"As far as we're concerned, we have an agreement with the district," Ms. Bernstein said last week.

"We negotiated the pact in good faith," the union president said, "our membership has ratified it, and five L.A.u.s.D. school-board members have assured me that they will vote to ratify it."

The contract, which was negotiated late last fall and accepted by union members just before the winter holidays, includes provisions that require the district to spend about $12 million a year to repay teachers for a 3 percent pay cut they took to balance this year's budget.

Auditors Find Shortfall

The $150-million shortfall in the current budget was discovered late last month as the district prepared its mid-year review of income and expenses. A budget evaluation conducted by the auditing firm Ernst & Young blamed the shortfall on a combination of factors, including:

  • Budgeting errors, especially in the area of health-care costs, and failures in communication between district offices.
  • Board reversals of earlier costcutting decisions, such as a new substitute-teacher policy for secondary schools that had been expected to save $6.8 million.
  • Unpredictable losses, such as a $15.6-million reduction in state-lottery revenues and a jump in healthcare expenses when employees who feared being laid off rushed to take care of medical needs covered by the district.

The auditors said several of the variances that caused the shortfall "probably could have been anticipated or reasonably estimated" before the budget was adopted.

Ernst & Young said some of the problems could also be attributed to a loss of budget flexibility as a result of severe cutbacks last year.

Recommendations Made

The auditors recommended that, in the short term, the district conduct detailed analyses of health costs, substitute-teacher usage, and payroll expenditures and develop new mechanisms for reviewing and monitoring the budget.

In the long term, they said, the district should conduct a management audit of its budget-services division, develop mechanisms for making its budget more predictable, and not continue to rely on "unspecified savings" to bring the budget into balance.

School-system officials said the district can cover about $120 million of the projected deficit by delaying payments to insurance funds and drawing from emergency reserves. A freeze in spending for school supplies may be ordered to make up the rest.

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