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Published in Print: March 5, 2003, as Portland Schools' Financial Crisis Threatens Future

Portland Schools' Financial Crisis Threatens Future

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Here in the bucolic Pacific Northwest, the Portland school district is in the toughest fight of its life.

Since September, the 53,000-student district's budget has shrunk by $21 million because of state revenue shortfalls, from $360 million to $339 million. Local school officials may chop up to 24 days off the current school year. Next year, the shortfall may reach $50 million, and the district may cut teaching jobs, close up to six elementary schools, and increase class sizes to as many as 42 students.

A tentative agreement between the local teachers' union and the district, which averted a threatened strike, remains fragile. School leaders also face a potential exodus of students and an angry public that has watched Oregon's largest school system fall from grace, plummeting from a source of pride to an embarrassment.

"People who have held on a long time in the schools have come to the end of their rope. Parents are in a near-hysteria state," said Kathie Humes, a parent and member of Help Out for Public Education, or HOPE, a grassroots group that is lobbying the state Capitol for more funding.

The Portland schools' fiscal crisis, Ms. Humes said, is "the perfect storm. Many events came together to create a cataclysmic situation."

'Absolutely Crushed'

Those events include a dismaying blend of steep state revenue shortfalls, an inadequate school funding formula for urban districts, longtime local fiscal mismanagement, and a dearth of strong, consistent district leadership, observers here say. The failure in January of Measure 28, a last-ditch state tax measure that would have infused schools statewide with $95 million, sparked the latest round of deep budget cuts.

As a result, Portland is one of the most cash-strapped districts in the nation, said Mike Griffith, a policy analyst for the Education Commission of the States, a Denver-based group that helps states develop and implement school policy.

When Oregon's recession hit two years ago, all districts received less state revenue, he said. But unlike colleagues in other districts, Portland school officials didn't have a rainy-day fund to fall back on and kept spending anyway.

So while other systems had to make reductions in programs and school days, they were less damaging than Portland's. Oregon's education department, responding to the state budget crisis, has waived the minimum number of instructional hours this school year.

"While everyone was hurt, Portland was absolutely crushed," Mr. Griffith said. "You have a management system that's not seeing reality and bad economic times. Those two things colliding are making it progressively worse."

Superintendent James Scherzinger, the district's fourth leader in eight years, said he's well aware of the system's financial crisis and has drawn up a list of proposed cuts. He was expected to make final recommendations on those cuts late last week.

Mr. Scherzinger also countered that critics are ignoring the positive steps the district has taken, such as updating its data-collection system, improving its mathematics and science teaching, and making its English-as-a-second-language program more efficient. Some student scores have gone up in spite of shrinking resources, he said in an interview here.

"It's amazing to me that, given the pressure on this district, we can do as well as we do," Mr. Scherzinger said.

The district now outsources the custodial services for all of its 98 schools, has reduced its central administrative staff by more than one-third since 1990, and has sold or leases buildings to the city and local private schools, he said. The superintendent also recently recommended abandoning the central headquarters and offering the property to the highest bidder.

But Mr. Scherzinger, the district's former chief financial officer and a man known for his no-nonsense style, agreed that the leadership of the Portland schools was partly to blame for the financial mess.

Free-Spending Decade

As he sat in his office overlooking the Columbia River on a bleak February morning, the superintendent spoke of the district's history of bad financial management and its poor communication with parents and community members on how it spends its money.

Combined with a debilitating lack of state funding, those weaknesses, Mr. Scherzinger said matter-of-factly, "have made us especially vulnerable."

The Portland schools' dire financial shape dates to 1990, when Oregon voters approved Measure 5. The state ballot initiative capped local property taxes, transferring the responsibility for financing schools from the local level to the state.

When Measure 5 passed, the state also instituted a new equity formula to close the revenue gap between school districts. Small, rural districts with homogeneous student populations did well, but the new formula was disastrous for Portland's schools, with their increasing number of second-language learners, special-needs students, and others who cost more to educate.

The fiscal situation of the Portland district has not been strong for a long time, said Marty Howard, a former school board chairman. But that reality was muffled in the middle to late '90s by a state economy going gangbusters in the high-tech boom.

As a result, school officials didn't nurture a $25 million reserve they had in 1990, Mr. Howard said, but spent it on needed programs and schools. The school board did make reductions, he said, but not as many as planned, because parents and others argued long and hard against each planned cut.

District leaders didn't make deep cuts, such as capping employees' health benefits as other systems did, in part because they didn't foresee the economy's downturn.

"If you've got an infection in your finger, you put a Band-Aid on it and get it treated. You don't cut off your arm because you think it may become gangrenous," Mr. Howard said. "Not only were things good, they continued to be good until about 2000 or 2001."

Leaders Faulted

Stephen Griffith, also a former school board chairman, agreed with Mr. Howard's analysis. In addition to the comfort of a booming economy, he said, district officials were assured by state legislators that schools would not be harmed by Measure 5.

"Those two factors meant that we did not foresee what now has happened," Mr. Griffith said.

That explanation, however, doesn't hold water with Ms. Humes, the Portland parent. District school boards, while made up of well-meaning people, did not display the management skills the district needs, she said.

Public trust in the school administration eroded in 2001, when two top administrators left under clouds of controversy. That trust was further whittled away when the school board approved contract buyouts for them totaling $500,000—money that could have paid for school programs and teachers, some observers have noted.

The district paid Deputy Superintendent Susan Dyer $250,000 to leave in February 2001 and paid Superintendent Benjamin O. Canada the same amount to leave just four months later.

Cynthia Guyer, the executive director of the Portland Schools Foundation, a community organization that works for school improvement, pointed to the revolving-door tenures of previous superintendents as another factor hurting the district.

A nationwide superintendent search last year, in fact, ended in embarrassment, when all four candidates who were offered the job turned it down. Mr. Scherzinger, who was the interim superintendent, took on the top position, but makes no promises about how long he'll stay. ("Top Contenders Withdraw From Portland Search," May 1, 2002.)

"We have to take a critical look at the district and see how it could spend its money to a higher and better purpose," Ms. Guyer said. "If we had consistent, strong leadership over the past 10 years, we might have managed the challenges more effectively."

Frustrated by the district's chronic budget shortfalls, city and county public officials and business leaders are trying to shore up its coffers.

Mayor Vera Katz and Multnomah County Chairwoman Diane Linn helped broker the tentative agreement between the Portland Association of Teachers, an affiliate of the National Education Association, and the district last week, one hour after the union's members authorized a strike as early as March 10.

The agreement is dependent, though, on whether the district's 3,600 teachers agree to work 10 days for free this school year and take a 5 percent pay cut. If they go along, the school year will not be cut by 24 days. In addition, voters in May must approve temporary tax increases to help pay for schools.

One proposal is a three-year hike of half a percentage point in the county's personal-income tax, from 9 percent to 9.5 percent. Another is a four-year surcharge on city business-license fees, which is expected to pass the City Council this month without going to voters.

If the local tax increases pass, it won't be the first time the city of Portland and Multnomah County have stepped in to help finance schools. In May 2000, state voters approved Measure 26-2, which allowed local districts to temporarily raise property taxes. That "local option" raised more than $78 million for Portland-area schools.

Although the day's final school bell had rung hours before, the lights were blazing in Roosevelt High School's cafeteria on a mid-February night. Here in a working-class neighborhood of northeast Portland, a long line of parents, students, and community members patiently waited to scoop large forkfuls of Asian noodles and Mexican burritos at a community dinner and information session on the proposed budget cuts.

More than 200 people filled the room, which was spotted with poster-size notepads asking two questions: "What is working in your school?" and "What is NOT working in your school?"

After dinner, small groups gathered around each notepad, talking animatedly in frustration. One group wrote in 3-inch-high letters: "Students are feeling abandoned by the school district."

Another group scrawled: "Where is the money going? This is not clear to parents!"

Lisa Amato Craig, a member of the parent group HOPE and the mother of two children, said many parents are anxious and frightened. She knows of several whose families have left the district.

Ms. Craig, who attended Portland schools and is a staunch supporter of public education, blames the legislature for not funding the schools adequately and Oregonians for voting down measures that would have provided more money for schools.

"Public education is the foundation of our community," she said. "But it's crumbling here."

Coverage of urban education is supported in part by a grant from the George Gund Foundation.

Vol. 22, Issue 25, Pages 1,16-17

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