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Grand Jury Blames Richmond Bankruptcy on Board

By Peter Schmidt — June 19, 1991 5 min read

A grand jury charged with investi0 gating the financial collapse of the Richmond (Calif.) Unified School Dis0 trict has laid most of the blame for the district’s plight on its school board. In its report, the grand jury also criticized former Superintendent of Schools Walter L. Marks for utilizing “unsound management practices and unjustified budgeting techniques” to advance reform programs that the ju0 rors said the district could not afford.

But, the jury concluded, the ulti0 mate responsibility for the district’s need to seek bankruptcy protection earlier this spring belonged to a school board that failed to control the district budget. The board, it said, overspent after succumbing to “a large dose of wishful thinking” and pressure from school employees’ unions and community groups.

“In the final analysis,” the Contra Costa County grand jury said in the report late last month, “the local school board has final authority over its budget."$

The grand jury exonerated Mr. Marks, who is now superintendent of the Kansas City, Mo., schools, and the school board of any criminal wrongdoing in connection with the district’s financial troubles. It noted that no legal penalties are provided for the failings of either the superin0 tendent or the board. $&

“The price is paid largely by the students of the district,” the jurors’ (report said.)

the 19-member jury, which was empowered to act as a public watchH0 dog and to issue criminal indictments if warranted, began its investigation of the 31,000-student Richmond dis0 trict last fall after it became clear that the system might require a financial bailout from the state. 62

After Gov. Pete Wilson of Califor0 nia refused to agree to a $29-million loan package, the district filed for pro0 tection under Chapter 9 of the U.S. Bankruptcy Code in April and an0 nounced that it would close its schools. District parents sued over the closings, and a superior-court judge last month issued a landmark deci0 sion ordering the state to keep the Richmond schools open. (See Educa0 tion Week, May 8, 1991.)$ >

The decision, which the Governor has appealed to the state supreme (court, resulted in the state’s lending the district $19 million and averted a shutdown of the schools.

The grand-jury report said RichL mond Unified’s bankruptcy filing “was the culmination of several years of failure by the district’s board of ed ucation to exercise effective and pru dent control of financial affairs."$

“While members of the r.u.s.d. L board over the past several years have been well-educated individ uals with community-service rec ords,” the report said, “the board, as a whole, lacked adequate expertise in the management oversight of a multimillion-dollar enterprise."$

“The primary motive of members in seeking election,” it added, “was to influence educational, not finan cial, policies and practices.’'$

More specifically, the grand jurors said, the board failed to adequately question Mr. Marks when he pro posed to enrich the curriculum and establish magnet schools, and made the “erroneous” claim that the changes could be funded by federal and state grants.

The superintendent’s plans were L implemented without careful cost cal culation, the jury’s report said, and “in the process the superintendent L greatly enlarged headquarters staff, changed responsibilities of staff mem bers, and overrode control proce% dures."&

“There are no legal penalties for this type of mismanagement, no matter how damaging the conse quences,” the report noted.

Although the district’s revenues increased by about 49 percent be tween 1986 and 1990, its expendi tures rose 76 percent during the L same period, with the annual deficit increasing from $1.4 million in 1987 to $18.1 million in 1990. 1

Driving the deficit, which totaled $29.5 million for the period from 1986 to 1990, were a 25 percent increase in certified staff members, the granting of salary increases that could not be funded by the state, excessive equip ment purchases, and the use of long- term borrowing to finance operating deficits, the grand jury said.:

The Contra Costa County superin tendent of schools, as well as annual audits, warned the district of increas ing deficits, the jury added, but the board consistently accepted Mr. Marks’s revenue projections and pending proposals without making an independent effort to verify them.

The report laid some blame for L Richmond’s financial woes on the ate, asserting that California’s fi nancial requirements for school dis tricts, combined with its “irresponsi ble” delays in providing them with estimates of their state aid, “make sound financial planning and overLsight at the district level extremely ifficult.”

The state’s system of funding all school operating expenses also fails to provide adequate or equitable fund ing and thwarts local control of chools by denying districts control of their revenues, the grand jury said.3 The jurors recommended that chool-board members be required to undergo training in financial man agement provided by county offices of education, and that the county educa tion offices conduct public meetings in advance of school-board elections to tell potential candidates of mem bers’ financial responsibilities.

The grand jury also recommended that county superintendents work L more closely with district school oards to keep their budgets in line, and that district boards take pains to hire administrators who are killed in financial management. Betty Allums, president of the ichmond Unified school board, said last week that she thought the report “was fairly stated in the sense that it didn’t put all of the blame on Marks.” She also suggested that the board, county, and state shared responsibil ity for the district’s financial woes. Ms. Allums said she had looked to the state and county for guidance in resolving the district’s financial roblems and “it just didn’t happen.”

A spokesman for Mr. Marks said the former Richmond superintendent believes most of the blame for the dis trict’s financial collapse belongs to the state legislature because of its failure to provide adequate funding.

A version of this article appeared in the June 19, 1991 edition of Education Week as Grand Jury Blames Richmond Bankruptcy on Board