The Vanguard has a new home, please update your bookmarks to

Thursday, October 23, 2008

State to Ask Davis Schools to Return $4.5 Million?

The Davis Enterprise reported yesterday that the Davis school district could be asked to return the $4.5 million it received just last year from the state in matching funds for the construction of Montgomery Elementary.
"That's apparently the gist of a new legal opinion from the state Attorney General's Office, directed to members of the State Allocation Board. The school district's appeal will be heard at a SAB meeting next Wednesday in Sacramento.

If the Davis district is asked to return the money, it will effectively reverse the SAB's decision in August 2007 to award the $4.5 million to the Davis district, following a lengthy appeal of an earlier decision by the Office of Public School Construction to deny the funds."
Last year, the school district received the $4.5 million plus matching funds from the state after a lengthy appeals process that we have highlighted. This stems from the district back in 2001 and 2002, missing critical state deadlines and therefore becoming ineligible.

However, after a long process, the district finally received the money last year.

Bruce Colby, the current Chief Budget Officer for the District expressed his surprise to the district, noting that the state formally approved the funds and the district received the money. After that, the district considered the matter close.

Colby told the Enterprise:
"It's unprecedented for the SAB to ask for money back after they've approved the money and sent the money."
Assemblywoman Lois Wolk who was also involved in the process of recouping the matching funds was similarly baffled.
"I was very surprised by the action of the Office of Public School Construction staff to try to reverse the decision of the State Allocation Board. In 2007, the SAB decided on a 7-3 vote to support the Davis school district's appeal for funding. Since then, the district has received the funds owed to them.

I see no reason to reopen this issue again. I will be working with the members of the State Allocation Board to ensure that the district's funding is secure."

This is a baffling decision by the state. The district has long since acknowledged the errors that led to the original loss of eligibility for the matching fund. They have implemented new fiscal policies, hired a new CBO (Mr. Colby), even hired a new Superintendent in James Hammond. They have done the due diligence to correct whatever fiscal problems existed under the previous CBO and the previous Superintendent.

What is gained now by revisiting this issue? The State Allocation Board already met and made their determination. The school district has already received the money from the state, and undoubtedly has already spent it to pay off the bonds that were used to finance the building project in lieu of matching funds.

At this point, any attempt by the state to take back that money would have to be considered punitive. What possible purpose would it serve at this point in time?

The State Allocation Board will meet next Wednesday.

Before people jump to conclusions, understand that this money is for facilities only. It cannot be used for the general fund. Therefore, this has absolutely no impact on the parcel tax. If there is a deficit as a result of this, the parcel tax money cannot be used for it. The parcel tax is explicitly allocated already. However, general fund money cannot be used for facilities and vice-versa.
"Under state law, the matching funds can only be used to fund facilities projects - such as modernization of existing school buildings, or construction of new school buildings. (The money can't be used to pay teacher salaries.)

The Davis school district ran short on facilities funds in 2007, and borrowed money to complete construction of the new building for Martin Luther King High School, which was dedicated in November 2007. 'Part of (the state matching funds) is to pay back the King loan,' Colby said Tuesday."
Also, the school district cannot pass another parcel tax in order to pay off this $4.5 million.

This needs to be very clear--the general fund and the facilities fund are completely separate and money cannot flow between the two.

The immediate concern will obviously be on the district's part to retain the money at the hearing next week.

This is another very concerning development. There appears to be no rhyme or reason for such as decision by the state to re-open this case.

---David M. Greenwald reporting