RICHMOND, Calif. (KGO) -- The phrase "debt-free" has a wonderful ring to it.
After making loan payments to the state for 21 years, the West Contra Costa Unified School District is now paid in full. Back in 1991, it was the first district in California to be taken over by the state before nearly going bankrupt and many believe it was the first in the nation to be taken over. Back then, it was called the Richmond Unified School District and no one had ever heard of a school district having a $29 million budget deficit.
Free and clear, West Contra Costa Unified made its last payment to the state ending 21 years of receivership. This means the district will now have an extra $1.4 million a year that would otherwise have gone to repay the loan. "What it'll help us to do is to do is not make cutbacks that we otherwise would have made. So, there's a number of teachers who're going to have jobs as a result of that that would have been laid off otherwise and class sizes would have been larger," Superintendent Bruce Harter said.
The district first got into trouble more than two decades ago. "We did not budget properly. We had more obligations than we could afford and the state cut revenue," California Board of Education President Charles Ramsey explained. The financial situation was so bad, the entire district and its schools planned to close and declare bankruptcy. That's when parents led by Tom Butt sued California. "We prevailed and the state was ordered to open the schools back up and complete the school year," he said.
California had to lend the district $29 million, but the interest rate on the loan was so high, 5.7 percent, the district continued to struggle financially. That's when Wendy Gonzalez, a first-year teacher marched to Sacramento with others and went on a hunger strike demanding the loan be refinanced. The Legislature voted to lower the interest rate. "It feels great, especially with the kids out here because that's who we really did this for. It's kind of a relief," she said back in 2004.
Currently, there are three school districts in California that are under control of the state: King City near Salinas, Vallejo, and Oakland. Richmond is now scratched off the list.
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West Contra Costa school district pays off debt
Saturday, June 2, 2012
Richmond Unified, the first school district in California to go bankrupt and require a bailout loan, made its last payment to the state Friday - four years early.
District officials, in what is now called West Contra Costa Unified, squirreled away enough money during tough economic times to pay off the $29 million loan made 21 years ago.
The final payment of $8,130,607.58 was handed over to state Superintendent Tom Torlakson at Richmond's Ford Elementary Friday morning.
The settling of the debt ends two decades of state control over the district, which serves 30,000 students in 50 schools across five cities.
"We're ready to pay you off and get you out of our hair," school board President Charles Ramsey told Torlakson as he handed him the oversize check.
Over the years, the initial bankruptcy and subsequent loan payments devastated the district, costing nearly $19 million in interest payments alone, said school board member Madeline Kronenberg.
"Thousands and thousands of children were unable to get what other districts provided," she said. "Today is independence day."
The district found itself in dire financial straits in 1990 because of mismanagement and overoptimistic economic predictions, Kronenberg said. There never was any evidence of fraud or criminal conduct.
Still, the bankruptcy resulted in an immediate 9 percent pay cut for teachers at the time as well as midyear elimination of elective courses including music and art, the closure of libraries and cuts to athletic programs.
While many programs were later restored as the district's finances stabilized, the budget was still tight as the school board grappled with the nearly $2 million in annual loan payments at a 6 percent interest rate.
In the years that followed, district officials were unable to persuade the state to refinance the debt even as rates for homeowners and other borrowers dropped.
In 2004, teachers and other community members marched to Sacramento to call for modifications to the loan conditions. Denied a meeting with then-Gov. Arnold Schwarzenegger, they started a hunger strike.
First-year teacher Wendy Gonzalez was among them, losing 30 pounds in 18 days as she refused food, begging state officials to help the district.
A personal message from civil rights activist Dolores Huerta to the governor's wife, Maria Shriver, pushed the state to cut the interest rate to 2 percent, cutting annual payments and saving the district $5 million overall in interest, district officials said.
Now in her ninth year as a teacher at Ford Elementary, Gonzalez celebrated the final payment Friday.
With the debt off the books, the district will now have about $1.4 million more to spend on its schools each year.
"It means so much to me," Gonzalez said. "I'm hopeful the funds will come back into the classrooms."
Jill Tucker is a San Francisco Chronicle staff writer. E-mail: email@example.com
West County schools, free from state control after 20 years
By Katy Murphy
Posted: 06/01/2012 04:08:12 PM PDT
Updated: 06/02/2012 03:50:34 AM PDT
RICHMOND -- Friday marked the end of a two-decade struggle for the public school system in West Contra Costa County. Twenty years after a fiscal meltdown nearly forced its schools to close six weeks early, the first school district to undergo a state financial takeover has cut its last check to the state of California.
The final payment on the $29 million state loan -- which ultimately cost the district $47 million with interest -- came nearly six years ahead of schedule. The obligatory blown-up check presented to the state superintendent of public instruction contained its own huge number: $8.1 million.
School Board President Charles Ramsey, who has served on the board since 1993, said it wasn't easy to find the money in this era of unprecedented education funding cutbacks. Employees took furlough days this year, and class sizes have grown.
Still, he said, "We had to get it done. We had to get this yoke off our neck. Finally, we're done."
Now that the West Contra Costa school district is debt-free, it will no longer have a state trustee with veto power over its finances. It also means the West County schools will keep the $1.4 million that has gone to Sacramento each year.
Only eight California school districts have experienced a state financial takeover, and four of them are in the Bay Area. Last summer, the Emery school district paid off its debt after 10 years. That day could be more than a decade away for Oakland and Vallejo schools, since each still owe tens of millions of dollars to the state.
West Contra Costa's last payment wasn't scheduled until February 2018. Trustees voted last September to pay off the loan early, using a long-term debt fund established in the 1990s. An audit confirmed that the district did, in fact, have the money.
It was fitting that the ceremony was held in the playground of the newly rebuilt Ford Elementary School in Richmond. Wendy Gonzalez, a third-grade bilingual teacher at Ford who grew up in the neighborhood and went to school there as a child, joined a hunger strike in 2004 to demand the elimination of the state debt. She fasted for 18 days and lost 30 pounds, she said -- all during her first year in the classroom.
The protest didn't eliminate the debt, but the Legislature passed a bill that lowered the district's interest rate from 5.9 to 1.5 percent, a change that has saved the district about $500,000 a year, on average, since it took effect in 2006, Ramsey said.
On Friday, as she kept an eye on students swinging from the play structure, Gonzalez teared up.
"It's a beautiful thing," she said. "I'm hopeful that the funds will come into the classrooms. That's my main thing -- to have all the money to go back to these babies right here."
During the ceremony, some of the speakers -- including State Superintendent Tom Torlakson -- seized the opportunity to promote a local school tax measure on Tuesday's ballot. Measure K would renew an existing school parcel tax through 2017, but with a higher rate. It would cost property owners an additional 3 cents per square foot -- an extra $44 a year for the average homeowner.
If approved by two-thirds of the voters, the school system would receive an additional $4 million annually; the current tax, which expires in 2014, raises about $9.7 million a year for the local school system, according to Superintendent Bruce Harter.
The tax revenue wouldn't make the school district whole again; its general fund budget has taken a $40 million hit in the past three years, Harter said.
The additional tax dollars, combined with the money the district no longer must pay to the state, will help prevent even deeper cuts, he said.
Harter said he hoped the district's emergence from state control will continue to restore the public's faith in the school system. "There's always been this cloud hanging over the West County school district," he said. "What this says to people is this district really can manage its money."
Read Katy Murphy's Oakland schools blog at www.IBAbuzz.com/education. Follow her at Twitter.com/katymurphy.
School District Paid $19 Million in Interest Alone on State Loan
Newly released data show that West Contra Costa schools paid $47.4 million back for the $28.5 million they borrowed. "Wow," the school board president said on the eve of a big ceremony today, Friday, marking the debt's end.
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Everyone knows you usually have to pay interest on long-term loans, but apparently the amount paid by the West Contra Costa Unified School district comes as a surprise to some.
Data provided by district officials in response to a request from school board member Madeline Kronenberg shows that the $28.5-million state loan given to the district in 1991 has cost the district $47.4 million to pay off. The final payment was made Tuesday.
"It was a whopping 47 million dollars!" school board President Charles Ramsey said in an email exchange shared with Patch. "I (am) just glad that we are done. I mean 47 million! Wow."
The disclosure comes as the long-standing debt has been in the news. The district has been preparing for a high-profile ceremony with state schools chief Tom Torlakson coming to Richmond today, June 1, to celebrate the early retirement of the longstanding financial burden.
The debt payments had been scheduled to continue for four more years, but the board under Ramsey's leadership along with district Superintendent Bruce Harter recognized that the remaining balance had fallen to the point where the district could pay it off all at once with the funds in its Debt Service Account.
The only hitch was that the idea had to be approved by Torlakson, the state Superintendent of Public Instruction. Torlakson, having lent his aid to the district when he represented it as a state senator, agreed to the deal after an audit gave the district a thumbs-up for it financial management.
The debt, including the interest payments, has placed a significant financial burden on the struggling district. Its academic programs and services suffered from $40 million in cuts in recent years needed to overcome deficits.
The district paid off the remainder of the state loan debt on Tuesday, May 29, with a transfer of $8,130,607.58 to the state, said Marin Trujillo, community engagement coordinator for the school district.
The debt was historic in California. The district, known in 1991 as the Richmond Unified School District, had filed for bankruptcy and planned to close. A lawsuit by Tom Butt, currently a Richmond City Councilman, and other parents resulted in a landmark decision by the state Supreme Court in Butt v. State of California saying the state was obligated to provide an education to students in a district that was failing.
The district became the first to enter into state receivership and was saddled with a state trustee and the loan.
Today's 10:30 a.m. ceremony will be held at the newly rebuilt Ford Elementary School at 2711 Maricopa Ave. in Richmond. Expected attendees include present and past members of the school board, as well as state and local officials representing Richmond, San Pablo, El Cerrito, Hercules and Pinole, the district said.