Y2K's Silver Lining 

The Millennium Bug forced Berkeley's poorly managed schools to wake up.

When one surveys the accomplishments of the Berkeley Unified School District in the late '90s, it may not be immediately apparent that this was a district headed for massive financial meltdown. To many observers, it seemed as if Berkeley school district would enter the new millennium in its best shape in a generation.

In the latter half of the decade, the Berkeley school district was flush with cash from a $158 million construction bond passed in 1992. The school board signed contract after contract to rebuild and remodel schools that suffered critical damage in the 1989 Loma Prieta earthquake. Voters approved another construction bond in November of 2000 -- this one for $116.5 million -- in a second impressive show of community support. The widely beloved Jack McLaughlin, school superintendent since 1994, rode a wave of euphoria all the way to Nevada, where he was appointed superintendent of schools for the state. He timed his last day in the district to coincide with the January 2001 ground breaking of a high school building project and the grand opening of the beautifully renovated Thousand Oaks elementary school.

But, beneath the din of earth movers and concrete mixers, the district's central office was approaching total collapse. When it became all too clear that Berkeley's budget numbers weren't adding up late last summer, Alameda County Office of Education Superintendent Sheila Jordan called in a state Fiscal Crisis and Management Assistance Team. Since the team is typically asked to provide such intervention for only one or two districts a year, it was clear that Berkeley's situation was serious. Even so, few were ready for the team's January 14 preliminary findings.

After poring over the district's books for nearly four months, the crisis team discovered that expenditures were outgrowing revenues so quickly that, unless deep cuts are made immediately, the district will face budget shortfalls of $1.7 million in the current year, $7.8 million next year, and as much as $16 million the following year. This in a budget of about $90 million.

Berkeley school administrators are frantically racing to trim the budget. If they fail to cut enough and require a state emergency loan to make up the difference, they could temporarily lose control of all financial decisions relating to their schools. Michele Lawrence, superintendent of schools since August, said there will be layoffs at all levels of the organization, including teachers, management, and non-academic employees.

How did Berkeley -- with its bond measures and parcel taxes and apparently high-performing schools -- arrive at such a crisis?

The reversal in the state economy bears some of the blame. School districts all around the state are grappling with budget shortfalls after the state legislature cut education funding by more than $800 million. Enrollment also is expected to decline in the next few years, which will reduce state subsidies to Berkeley accordingly.

But both problems could have been anticipated and planned for if years of neglect had not left the district's central office so dysfunctional that it could no longer manage its budget. Plagued by low staffing and a failure to invest in new data-processing technology, the Berkeley school district has lived with unreadable and unreliable budget information for more than ten years.

"I remember going to school board meetings and thinking, 'These people must be geniuses, because I can't make any sense of the budget,' " said Irene Hegarty, a member of the Berkeley school board from 1988 to 1996 who is now director of community relations at UC Berkeley. "Every year we would find some inconsistencies, corrections."

Nonetheless, when an economic slowdown forced deep cuts in 1994, the school board chose to slash its struggling central office staff even further, to keep cuts "away from the classroom." Morale took a dive, and bureaucratic systems that had been inefficient in the best of times began breaking down altogether.

But despite obvious managerial weaknesses, it was the district's administrative staff that bore the brunt of the cuts when a bad economy forced deep cost-cutting in 1994. Morale took a dive, and systems that had been inefficient in the best of times began breaking down completely.

A 1995 management review by the Alameda County Office of Education found, among other glaring failings, that the bureaucratic documents used to track day-to-day business within the district were not filed on a timely basis, if at all. Employees were not informed of changes in procedures or policies. Payroll checks often were erroneous, expenditures were routinely allocated to the wrong accounts, and internal phone calls were not answered or returned. "Employees have developed an attitude that 'it is not my problem, or nothing will happen even if I suggest a solution,'" the report concluded. The district was faulted for its "perceived lack of leadership."

New hires were being made without ever having been budgeted or even approved by the central office. Such lax practices meant the district was increasingly unable to account for how large sums of money were being spent, since payroll accounts for more than 80 percent of its general fund expenditures. The report said the district's very survival depended upon urgent administrative reforms.

Nobody was particularly surprised by these findings. It was understood, Hegarty recalls, that people in the district's business and personnel offices were working "without the right conditions and the right support to do their job properly."

In response to the report, the school board hired a new personnel manager and a new budget officer in 1996. But when things failed to improve, few took notice. And with state funding on the rise again, the school board focused on new academic programs, not new administrative controls. A new Early Literacy Program was put into place. Bilingual education was transformed into the popular "dual immersion" program, where English-speaking students are taught Spanish alongside native Spanish-speakers learning English.

In short, neither McLaughlin nor the board dealt with almost any of the problems identified by the 1995 report. The superintendent and his elected superiors were apparently content to pay little attention to the district's widespread system failures. "Jack at least knew about construction, but I don't think he knew about education," said Pedro Noguera, a Berkeley school board member from 1990 to 1994 who said McLaughlin was hired for his construction expertise.

Instead, things got worse. It took months for the district's central office to respond to requests for the most basic educational materials. Principals had difficulty making management decisions because they couldn't get timely, reliable budget information from the district's business office. The personnel office was so slow making offers to new teachers that the district was losing its best prospects to neighboring districts. School bathrooms weren't being cleaned because of understaffing and low morale in the maintenance department. Complaints mounted from internal staff and citizen advisory committees alike.

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