The Santa Monica-Malibu Unified School District (SMMUSD) school board convened for a special informational workshop presented by the Los Angeles County Department of Education (LACOE) Monday, December 4th.

The workshop concerned compliance with Assembly Bill (AB) 1200, which requires that a plan must be submitted to the county by a school district once a tentative agreement has been reached with a teachers union.

This came on the heels of postponement by the school board of approval of a tentative agreement between the district and the teachers union for a five percent pay increase for teachers, concerns over how the raise would be funded, and the letter of resignation of the school district’s chief financial officer, Winston Braham.

Many, including members of the district’s Financial Oversight Committee, are concerned about how the district will fund the tentative agreement reached with the teachers union.

The five-percent salary increase for teachers is estimated to cost $7 million over the next three years.

In mid-October, the Santa Monica-Malibu Unified School District submitted an initial AB1200 plan to the county, but district superintendent Dianne Talarico and Braham had come to different conclusions on being able to fund the agreement with the teachers union.

Braham — who submitted a letter of resignation late last month — did not sign the document sent to the county certifying the district’s ability to pay for the tentative agreement.

He instead put a check mark next to a box that said, “I am unable to certify.” Talarico signed the document.

At the workshop, Ken Shelton, assistant superintendent for LACOE, provided a presentation on AB1200 and its components.

In his presentation, Shelton explained that AB1200 provides a mechanism “to prevent [a] district from going to the state for bail-out [of financial crises],” and that it came about in response to the state’s recognition of school districts’ financial issues, for example, fiscal failure or the bankruptcy of school districts.

AB1200 requires that school districts make full public disclosure on labor agreements and their potential impacts on the school district’s finances. Fiscal implications must be detailed in the document.

The plan spells out the procedures by which a county office monitors, assists, warns or intervenes in the fiscal operation of a school district.

Following Shelton’s presentation, several public comments — including those from the chair of the Santa Monica-Malibu Unified School District Financial Oversight Committee, Paul Silvern — were made, and a discussion among school board members took place.

Silvern urged “extreme caution” in ratifying the tentative agreement with the Santa Monica Malibu Classroom Teachers Association (SMMCTA), noting that the district’s Financial Oversight Committee provides a “purely financial” perspective to the board.

The tentative agreement, covering the period from July 1st of this year to June 30th, 2009, would exhaust the district’s reserves and potentially put the district into a deficit starting in three years.

The agreement cannot be supported by available revenues without substantial changes and budget cuts, some believe.

When SMMUSD submitted its initial AB1200 form to the Los Angeles County Department of Education in mid-October, the county department responded with concern that “the projected 2008-09 reserve level would not meet minimum state requirements.”

The state requires that the district maintain reserves of at least three percent in the special reserve fund. For SMMUSD, that’s $3.6 million.

Based on the county’s analysis, the bulk of the funds to support the tentative agreement would come from “existing reserves, which are one-time funds.”

District reserves would decrease to 6.06 percent in 2006-07, 3.85 percent in 2007-08, and would be depleted to 0.06 percent in 2008-09.

In a letter addressed to Julia Brownley, former school board president, the County Department of Education requested that the district adopt a recovery plan to “demonstrate the district’s ability to afford the SMMCTA [union] settlement,” if they stick to the tentative agreement, which is expected to happen.

Silvern said that the AB1200 form submitted by the district to the county “raises so many red flags about the district finances that it’s hard to even know where to begin.”

“It had some troubling implications,” he said.

Silvern pointed out that the tentative agreement “essentially wipes out the ending balance in the unrestricted general fund.”

He also said another “red flag” about the district’s finances was when superintendent Talarico and assistant superintendent and chief financial officer Braham came to different conclusions on being able to fund the agreement.

Currently, Talarico is working with the financial consulting firm FCMAT (Financial Crisis Management & Assistance Team), although district officials say “a [budget] crisis is not seen to exist.”

The district is also delaying ratifying the tentative agreement with the teachers union until January to come up with this recovery plan.

A first interim report will be due to the county by Friday, December 15th.

The FCMAT team will perform an independent review of the district’s finances, which will include the preparation of a multi-year financial projection of the district’s general fund, district officials say.

FCMAT may also help the district figure out ways to make funds available to finance the teacher salary increase.

Shelton said he thought working with FCMAT was a “good idea” for the district.

Silvern said he felt that the workshop was a “helpful opportunity” for the board and that the Los Angeles County of Education “did a good job” with providing information about AB1200.

Silvern also said that he didn’t think the board fully understood the requirements and disclosure procedures of AB1200 before attending the workshop.

“I think we’ve all learned a lot,” said Kathy Wisnicki, vice president of the board.

Shelton’s colleagues, Debbie Simons, director of Business Advisory Services, and Jon London, business services consultant for the Division of Business Advisory Services, were also present at the workshop.

“We’re happy you could join us,” said Talarico, who thanked Shelton, Simons and London for “coming on short notice.”