King City Joint Union High School District

King City Joint Union High School District Comprehensive Review and Recovery Plan Initial Report February 2010 King City Joint Union High School District Comprehensive Review and Recovery Plan Initial Report February 2010 Introduction and Executive Summary Background The King City Joint Union High School District is located in the town of King City in Monterey County. The District serves 2,185 students in grades 9-12 at two comprehensive high schools and two continuation schools. The student population is diverse; 37.6% of students are English learners and 56% are eligible for free or reduced-price meals. The district’s annual revenue limit funding per average daily attendance (ADA) was $7,066.34 for 2008-2009 and $7,366.34 for 2009-2010. The district has experienced multiple years of financial difficulties leading to cash insolvency and the need for state intervention. of the lack of organizational decisions and an unfavorable ruling from the Public Employment Relations Board (PERB) have compounded the district’s financial problems. The PERB decision resulted in a retroactive formula-based increase in employee compensation costs and contributed to the district’s continued deficit spending. In 2006, the cost of retroactively applying the compensation formula was estimated at $5.2 million; the on-going cost was $600,000 annually, an increase of 11% to total compensation. A FCMAT fiscal review commissioned by the district in May 2006 concluded that the retroactive payout and ongoing liability “…could potentially lead to insolvency, necessitating a loan from the state.” Based on the requirements of Assembly Bill (AB) 1200 that the district maintain a reserve for economic uncertainties and undergo budget certification, the district could not afford to fund the retroactive amount for employee compensation, and subsequently in 2007 the certificated bargaining unit agreed to a negotiated settlement of $1.2 million. The district requested and received a temporary loan from the Monterey County Office of Education in accordance with Education Code sections 42621 and 42622 to fund the settlement because it did not have sufficient cash to fund both the retroactive amount and the permanent ongoing increase to the salary schedule. Over the past two fiscal years, the board and administrative teams were unable to resolve the growing structural deficit. From 2002 until the appointment of the state administrator, the district was unable to maintain consistent leadership in key administrative positions. Several superintendents and chief business officials were employed in succession, and at one time these functions were combined into one position to reduce costs. The administrative and business services were shared with the King City Union School District, in effect leaving one person to fill four key administrative positions. This organizational structure unfortunately exacerbated the lack of effective decision-making to keep the district financially solvent. Ineffective governance has also contributed to the fiscal crisis and need for state intervention. The high school district’s governing board experienced many changes in membership during the last several years. The board’s lack of experience and institutional knowledge contributed to a limited understanding of the seriousness of the district’s financial condition and the types of fiscal priorities and solutions needed to eliminate the structural deficit. The permanent cost increase associated with the certificated staff compensation formula was significant and created a substantial structural deficit. By fiscal year 2006-07 the district was spending $654 more annually per pupil than it received in revenue. Since that year, this deficit has varied between $450 and $1,987 per pupil annually. Beginning in 2007, the Monterey County Office of Education assigned a variety of fiscal experts to the district to provide support to ensure that the district’s financial obligations were met and Introduction and Executive Summary 1 business was conducted appropriately while critical business office positions were vacant.A fiscal advisor was assigned to the district in 2008 to assist the district in achieving fiscal recovery. On December 4, 2007, the Monterey County Office of Education declared the district a “lack of going concern” because the district’s budget was projected to have a negative fund balance for the current and two subsequent fiscal years. In addition to the total employee compensation, other factors contributing to this condition included a developing and serious state budget crisis and the beginning of a period of declining enrollment. In May 2008, the Fiscal Crisis and Management Assistance Team (FCMAT) concluded a fiscal review of the district commissioned by the Monterey County Office of Education.That study included the effect of the PERB decision, and FCMAT’s report stated, “Based on the district’s projected budget and levels of deficit spending, FCMAT projects that the district will need to make substantial reductions in the multiyear financial projection (MYFP) or the district may require state intervention in the 2009-10 fiscal year.” On July 23, 2009, Senate Bill (SB) 130 (Denham, co-author Assembly member Caballero) was signed into law. The bill authorized the appointment of a state administrator and provided a $13 million emergency state loan or line of credit. So far, $5 million has been required from the emergency apportionment for the King City Joint Union High School District to continue to meet its financial obligations. The legislation authorizes FCMAT to complete comprehensive assessments of the King City Joint Union High School District and develop recovery plans in five operational areas. The bill also requires FCMAT to file written status reports annually with various entities, including the Legislature, regarding the school district’s progress in meeting the recommendations contained in the recovery plans. SB 130 differs from prior state emergency loans in that it also requires that the recovery plan include specific training for board members and staff who have management and personnel policy-making and advisory responsibilities to ensure that the district’s leadership team has the knowledge and skills to discharge their responsibilities effectively. In addition FCMAT is authorized to assist the state administrator in developing the first multiyear financial recovery plan required under paragraph (1) of subdivision (a) of Section 41327.1 of the California Education Code (EC). FCMAT has prepared a multiyear financial projection and cash flow analysis that will form the basis for the financial recovery plan, which will be issued in a separate report. SB 130 further authorizes FCMAT to do the following: 1. Assist the state administrator in the development of the adopted budget and interim reports. 2. Recommend to the state administrator any studies or activities that the state administrator should undertake to enhance revenue or achieve cost savings. 3. Provide any other assistance as described in EC Section 42127.8. SB 130 further intended that the state superintendent of public instruction (SPI), through the state administrator, work with the staff and board to identify the procedures and programs that the district will implement to accomplish the following: 1. Significantly raise pupil achievement. 2. Improve pupil attendance. 3. Lower the pupil dropout rate. 2 Introduction and Executive Summary 4. Increase parental involvement. 5. Attract, retain and train a quality teaching staff. 6. Manage fiscal expenditures in a manner consistent with the district’s current and projected revenues. The purpose of this report is to provide the district with the results of a systemic, comprehensive assessment and recommendations for improvement and recovery in the following five operational areas: 1. Community Relations and Governance 4. Personnel Management 5. Pupil Achievement 6. Financial Management 7. Facilities Management This report provides data to the district, the community and the Legislature to facilitate more effective collaboration and to build the district’s capacity to effectively manage personnel, reduce operating costs, increase revenue and promote student learning. The report also provides critical information regarding site and facility issues that interfere with effective teaching and learning. Comprehensive Review Process In preparation for this comprehensive review, FCMAT revised the legal and professional standards to align with industry best practices and with applicable state and federal law, including the California Education Code. The standards used are applicable to all California school districts. Independent and external professional experts from both the private and public sectors assisted in researching, identifying and categorizing the 307 standards used in this assessment. FCMAT monitored the use of the standards during the assessment process to ensure that they were applied fairly and rigorously. FCMAT also measured the district’s implementation of the standards, and this report includes recommendations for improvement and recovery related to each standard addressed. Recommendations for recovery are designed and intended to affect functions directly at the district, school site and classroom level. Implementing the designated standards and recommendations with this type of depth and focus will result in improved pupil achievement, financial practices, personnel procedures, community relations and facilities management. This comprehensive

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