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After Heated Debate, Capo OKs Loan

Trustees give staff permission to seek out a short-term loan as high as $30 million.

Trustees of the lobbed criticism and questioned each others’ motives Monday night as part of a fiery discussion on whether the district should borrow millions to make it through the end of the year.

School district staff had asked the trustees for permission to take out a short-term loan up to $30 million –  but that number was adjusted higher by tonight’s meeting – so the district could make payroll and meet other financial obligations in June, when funds are expected to run dry.

Trustees Ellen Addonizio and Sue Palazzo urged the board to hold off on the decision until it could take a more in-depth look at district finances. But the majority said a rejection or even a delay was basically a vote to, as Trustee John Alpay put it, “shut down the school district.”

The loan did pass, 4-2, with Trustee Jack Brick absent.

The loan would be the first of its kind to cross fiscal years, but is necessary because , said Ron Lebs, in his last board meeting.

The district now expects that $26 million due for the 2011-12 school year won’t be showing up in district bank accounts until August or September, well into the next school year, Lebs said.

In addition, the Orange County Board of Supervisors has with the expectation that the state will eventually make the schools whole.

Since 2006, Superintendent Joseph Farley said, the school district has relied on a financial vehicle called Tax and Revenue Anticipation Notes (or TRANs), which pools together many school districts to seek out more favorable terms.

The district already took out a $75-million TRAN loan this year, which will be paid back in full by May, Lebs said, leaving the district in a financial lurch by June.

Palazzo said her “conscience, as well as my common sense,” prevented her from voting in favor of the loan.

“Continuing to borrow is not the answer to our financial crisis. Keeping in mind that we already have borrowed $75 million, I think it's time we come up with a plan for operating within our means,” Palazzo said.

Palazzo said it was time to go back to the negotiating table with the various unions and talk about salaries, class size and furlough days.

But Farley said it would be “virtually impossible” for the district to find $26 million to cut by the year’s end.

The district is already tasked with the state made last month.

The conversation Monday became more heated when Addonizio suggested that the board got itself into more financial hot water when .

“Immediately upon election without analysis or an understanding of the district or its finances, the board reinstated approximately $10 million in ongoing annual salary compensation,” Addonizio said. “The decisions you have made in the past year have, in part, led us to the crisis we are facing today.”

Fellow trustees took great umbrage with those comments.

“I’m offended that it continually brought up as if there’s something nefarious going on,” said Trustee Anna Bryson. The contract’s own language dictated those restorations be made, and the trustees were obligated to follow it to the letter.

“I too find it very tiresome and offensive,” said Trustee Lynn Hatton.

“It certainly sounds like an election is coming soon,” Alpay added. “People are getting on their soapbox.”

Getting back to the topic of the loan, Farley said he had full confidence the state would come through with the deferred money.

“It’s virtually impossible for the money not to be received form the state. The state can’t say, ‘We can’t give you the money.’ They must,” he said.

Pam Sunderman January 11, 2012 at 05:47 AM
You are correct GreeninOC, Mello Roos was necessary so that new communities, such as Ladera Ranch and others like it in CA would have the public works necessary...fire stations, school buildings (not salaries), etc. The law, like most, is intricate and full of loopholes and could probably use a revisit as well. Our society would work better if we all took a bigger picture view and looked beyond our own front door. The best laws have been written with that viewpoint...such as Medicare and Social Security which work well so many decades after they were written. Medicare is something any senior will tell you is a godsend. And many of our seniors would be homeless and hungry without the safety net of social security. They still struggle to get by if that is their only income. But they will not be forced to sacrifice their homes and savings for medical treatment...except of course,for prescription drug costs. The recently passed revisions will end that possibility by closing the donut hole for those whose prescription costs exceed the limits.
Capo Parent January 11, 2012 at 05:50 AM
Education in CA get's between 40% to 50% of the state budget. Given the extremely tough economic times we have suffered for the last several years, cutting waste, uneeded agencies and positions and improving efficient in education and all other aspects of gov't should be undertaken before burdening the public with more taxes. Given that CA has roughly 12% of the US population, but over 30% of welfare cases, who do you expect to pay more taxes for the well compensated teachers, well funded school districts, a robust public health system, etc... that you, GreeninOC and others long for? With CA having to compete with other states and countries for businesses to either relocate or stay, how do you propose paying for the utopian society you and others want, while staying economically competitive? Ask Greece, Spain, Portugal and Ireland how funding a utopian society and staying economically viable/competitive is working out.
GreenInOC January 11, 2012 at 06:00 AM
@Capo Parent, we don't have to go outside of the US for an example or all that far back actually. Just go back prior to Prop 13 and you'll a pretty good example of a society working pretty well. Perhaps if housing prices weren't artificially inflated due to ridiculously low property taxes would contribute to a more stable economy thereby reducing the number of people needing welfare assistance. With realistic property values it would certainly make California more attractive to business.
Penny Arévalo January 11, 2012 at 06:00 AM
From the story: Since 2006, Superintendent Joseph Farley said, the school district has relied on a financial vehicle called Tax and Revenue Anticipation Notes (or TRANs), which pools together MANY SCHOOL DISTRICTS to seek out more favorable terms. I have written about deferrals fairly in-depth here at Patch. The state defers billions of dollars each year from school districts. Surely legislators are not deferring money only from CUSD. Especially with recent coverage of Gov. Brown's proposed budget, I believe the readers know the bigger picture. I am in the middle of surveying other school districts. While other districts do issue TRANs, they find themselves in much better financial shape. More to come.
Pam Sunderman January 11, 2012 at 06:00 AM
So how much of a payout would you advocate for teachers so they wouldn't be so "over compensated?". Why is this such a difficult question to answer?
Pam Sunderman January 11, 2012 at 06:08 AM
I am sure you will be supplying information about the differentiation in funding from the state as well Penny. The ADA funding for neighboring districts is very different. CUSD has historically been one of the lowest ADA districts.
Penny Arévalo January 11, 2012 at 06:10 AM
Yep.
shelly January 11, 2012 at 03:38 PM
Sharon y. The old board has majority.
Capo mom January 11, 2012 at 03:39 PM
I'll just point out that Prop 13 wasn't the only thing that happened in the state of California in the 1970's. There are other things that had a more direct and powerful impact on education, in terms of (declining) quality and finances, that occurred at the same time. The Rodda Act became law in 1975.
Capo mom January 11, 2012 at 03:42 PM
You keep asking this question of people who have no ability to influence the outcome. It is nothing more than a smoke screen. The only entities who control teachers' compensation in CUSD is the union, CUEA, and the board CUEA put in place. No one else has a seat at the table.
Capo Parent January 11, 2012 at 03:42 PM
GreeninOC The utopian society you describe was, like the housing market, unsustainable, that's why Prop 13 passed. If the majority of the public were happy with the status quo at the time Prop 13 came up for a vote it would not have passed, but it did, and by a healthy margin. You overlook the fact that gov't has figured out ways to get around Prop 13, e.g. Mello Roos, bonds, etc. Go back and look at how large and how much gov't at the local, county and state levels have grown, and how much larger their budgets are. Gov't in this country, for the most part, are always on a quest for more money. We have enough revenue, we just need to decide what is the best way to spend it.
Capo Parent January 11, 2012 at 03:48 PM
GreeninOC If property taxes were increased at the levels they were prior to Prop 13, how does havine very large property bills contribute to a more stable economy if people can't afford to pay property taxes to stay in their home? People always lament that times were better "back then." In reality, that is almost never true.
Pam Sunderman January 11, 2012 at 03:51 PM
So Capo Parent, you are fine with neighbors paying different amounts of property taxes (which may differentiate between thousands of dollars a year)? Many bad laws have passed by a healthy margin. That means that people were misled, not paying attention, not voting...or perhaps it may mean that the law needs revision for different times. Mello Ross pays for infrastructure and buildings only. It doesn't pay for operating expenses. Capo Mom, there are 4 out of 7 board members who are left from the former board and they were not supported by the union. They have a seat at the table.
shelly January 11, 2012 at 03:55 PM
Capo mom, What else occurred?
shelly January 11, 2012 at 04:14 PM
Capo Parent, Calfornia has the 8th biggest economy in the world. Yes, waste should be cut. Education is not a waste and has been continually cut for the last several years. There are other countries that are very successful and they take care of their people. Ask Finland. "Finland, Finland, Finland is the country for me" (Spamalot) California has something that other states can not compete with. A beautiful coast and breathtaking landscapes, great weather for leisure and for growing. How much do you believe a teacher should be paid?
Capo Parent January 11, 2012 at 04:54 PM
JG Your comments are ironic.Are you referring to the last election in CUSD? :) Life's not fair and neither is taxation. Ask the starving people in Somalia, Bangladesh, etc. if they feel your pain. As for your observations about Mello Roos, you are correct, but overlook the fact that Mello Roos fees free up general funds that can be used for salaries and operating expenses. Brick is a union yes guy, he votes as he is told by Alpay, Pritchard & Hutton, who are undisputed union backed trustees. The poor guy appears to have dementia, that's why he never ran one meeting as the board president. If I recall, he has a daughter who is a teacher in CUSD. Anna Bryson is all about Anna, and that hasn't changed since she was first elected. Bryson goes, like Farley, where ever the wind blows. If the reform trustees are in control, they are reformers, if the union trustees are in control, they are union supporters.
just a parent January 11, 2012 at 07:20 PM
As far as the TRAN goes, I believe that the trustees made the correct choice for the students of CUSD considering all the alternatives were less than ideal.
shelly January 11, 2012 at 08:15 PM
Capo parent, The reform committee supported and endorsed Trustee Addonizio (A in the ABC campaign), Bryson (B in the ABC campaign), Brick and Palazzo. After the last election they wrote, "November 5, 2010 ELECTION ANALYSIS: Voters Continue to Entrust CUSD Control to Reform Trustees -- Union Fails to Gain Board Majority" http://www.cusdreform.com/ All of these candidates ran against union endorsed candidates. What do you suggest the board do? What would you have done? Please be specific. Would you have shut down the school year early? What exactly did the previous board reform? Please be specific.
Nancy January 12, 2012 at 04:20 AM
Sharon Y--I cannot and would not say (MY mother taught me manners) anything about your psychological fitness nor your success as a parent, but I can and will say that you are rude beyond measure in your comments here. What you call "obtuse behavior" is nothing more than Shelly calling out the BS. Everyone who knows Shelly personally thinks she is one of the best people they know, whether they are parents, kids, or teachers. Her family, my family, and countless others know they are blessed by the relationship. So, Sharon Y, you are welcome to argue points until your fingernails break, but leave your ad hominem attacks where they belong--in your own mind and out of your posts.
Nancy January 12, 2012 at 04:30 AM
As for psychological health? Sharon asserts that somebody's family needs sympathy because they have to "deal with" that person daily and then tries to have the last word by saying "no need to reply." Now THAT is passive-aggressive if I ever saw it!
shelly January 12, 2012 at 08:07 AM
Sharon Y. Since you believe there was no need to borrow the money how would you run the district on no money since the money coming from the state is deferred? How would you cut 105 million since you say "no need to borrow 105 million" (that is not near the amount restored)? What would you cut?
ChangeforCUSD January 12, 2012 at 03:25 PM
very interesting comments by all. As usual, Shelly and Jollly Girl "get it" and Reardon, Sharon and their friends can't let go and keep repeating false information. For the record the "union" did not spend $800,000 in the last election. Election filing reports show that CUEA spend about $250,000, the "reform" group about $15,000, and Children First about $155,000. Children First is completely independent of CUEA regardless of the lies of Reardon and others to try to link the two groups together. Alpay didn't take the union's help or money and therefore there are only TWO out of the current SEVEN trustees that were "union supported". I just reviewed the old and "reformcusd" website and it hasn't been updated since the 2010 election. Their last comments was that their side won since they retained four "reform" trustee votes. Votes in board meetings now are 5-2 mostly and Jack and Anna are doing the job they were elected to do which is to put schools and kids first. The old reform group's highest priority was approving lawsuit settlements to people like Beall and Reardon - $655,000 to be exact. The $800,000 figure was the amount the district spent on that completely unnecessary 2008 recall election that put Palazzo in office in the first place. Sue and Ellen then sued the school district with Reardon and Alexander's help and tried to get the District to pay almost $15,000 to Alexander. Thank you to the new trustees for putting kids first
ChangeforCUSD January 12, 2012 at 03:34 PM
The argument that the new board members, now with Brick and Bryson's help, are not doing what is best for CUSD is bogus. They are all doing an incredible job under difficult circumstances made worse by the "reform board" and their decisions. What the current board isn't doing is approving attorney fees for Alexander that takes money out of the classroom. What they aren't doing is settling bogus law suits with Reardon and others that would take money out of the classroom. Interesting that Reardon has a kid in private school now and Alexander doesn't have kids. The board members are fighting to keep CUSD moving forward and Jim, Craig, Sharon, Tony, Jennifer and a handful of others can't grasp the fact that THEY LOST. They couldn't even get 38% of the voters to agree with them! CUSD is stabilized now and doing what it should have been doing all along which is putting education first and not feeding the trough of attorneys, a RSM city councilman or a SJC wannabe city councilmam. The voters saw through all of that nonsense and they voted decisively. No more money for Alexander, Beall, or Reardon. Jim, pay for your private school without using taxpayer funds taken from CUSD. Shelly, I know your life is busy with your kids and your work at their schools. I admire your willingness to fight the good fight and deal with some of these posters. You are mature, intelligent and an inspiration. Remove Sue Palazzo from office this November
Capo mom January 12, 2012 at 03:55 PM
"Tax hikes won't stop school cuts, California budget advisor says" http://www.latimes.com/news/local/la-me-state-budget-20120112,0,549535.story TRANs (tax and revenue anticipation notes) are mandated to be used for cash flow deficits only. What happens when you can't reasonably anticipate taxes and/or revenue? If revenue from the state fails to materialize, the deficit becomes a structural problem, not a cash flow problem. This makes the use of TRANS, in the manner that CUSD is, irresponsible and possibly not legal.
Penny Arévalo January 12, 2012 at 04:01 PM
This story also just popped up at the Sacramento Bee http://www.sacbee.com/2012/01/12/4181845/budget.html
RSM Dad January 12, 2012 at 04:29 PM
Any government agency that would budget based on an assumption that a tax increase in this economy is going to pass is smoking the funny stuff coming out of the medical marijuana collectives. CUSD is headed down a road of self destruction that will be confirmed in November when the tax hike fails. And then it will be too late. The teachers and children will suffer from all of this because the unions fail to recognize they are the problem and not the solution. The district will have to lay off teachers and raise class sizes. Do the math. There is nothing else in the General Fund to cut.
Pam Sunderman January 12, 2012 at 05:28 PM
RSM Dad...class sizes can only be raised so far. They are near capacity now. We are at the point where the school year will be shortened and this will be statewide. This is a catastrophic event which has nothing to do with petty politics in CUSD. And it saddens me that paying a half percent more at the cash register or asking wealthy people to pony up a pittance more is something that some folks are unwilling to do to avoid it. Prop 13 did a lot more than lower property taxes...it gave credence to the current philosophy of how we govern...give me mine and if you don't I will use any tactic to get my way. I will scare you, threaten you, lie about you, and make you play the game my way. Ethics, honesty and doing the right thing are for suckers. The end justifies the means. It's all in the perception and I have a sound byte to prove it. If I make you look bad enough my own transgressions will be forgotten. And when all else fails...remember that God is on my side.
Capo mom January 12, 2012 at 10:50 PM
The problem with school financing isn't Prop 13. It is the Rodda Act. The Rodda Act is the basis of "give me mine and if you don't, I will use any tactic to get my way". Ethics, honesty and doing the right thing are for suckers. The end justifies the means. It's all in the perception and I have a sound byte to prove it. If I make you look bad enough my own transgressions will be forgotten. And when all else fails...remember as we stick it to you, we are the 99%.
shelly January 13, 2012 at 01:42 AM
We are all in this together. We are all responsible for the cause and we are all responsible for the solution. The union or the government did not bring down the economy or cause the lack money to cover the budget. We, the public, did this collectively along with banks and corporation. What do you value? The education budget has been continually cut. Teachers pay cut, teachers jobs axed, program cut, class size increased. And yes there has been waste but there is not much more to cut so what do you suggest? Before someone starts blaming the union and teachers. Please tell me how much a teacher should make? What kind of benefits? A number please since many imply teachers make too much. And no I am not saying they make too little. And if you do not trust Sacramento and the money is not here or there to cover the budget how about a local tax? No? Why? Because you already pay enough? Or you don't believe public education for all? You hate unions and blame them for everything? What? Schools have been continually cut. CUSD does have good schools. We do. No, they are not perfect but no school is and everything can be improved. Some of the monikers imply that you are parents who have children in CUSD schools yet you rant against the schools and the teachers. Your children are precious. Why would you put them in a place and with people you blame and find not very good.
shelly January 13, 2012 at 02:04 AM
I have been called a union hack and troll but really I am just a parent. I have no association with the union other than I respect and value my children's teachers. I have 4 children. I live in a modest neighborhood that is not gated. We have lived here for almost 17 years. I have a car that is 10 years old with 150,000 miles on it. We do not live extravagantly. I graduated from UCSD back when I could afford to pay my modest tution by working as a waitress, an ice cream truck driver and a phlebotomist at the VA. I was the first from my family to go to and graduate from college. I value education and understand that you can come from nothing and make something of yourself. I go back and forth with other parents here about who should be responsible for our lack of money. Conspiracy theories are bantered back and forth on both sides. Our taxes are not covering what we the public have had. More cuts? yes or no?

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