The teachers union – the Oakland Education Association – wants a 12 percent increase phased in over three years. The district has offered a 5 percent raise over three years. The union and district have been unable to agree on a contract since the last one expired in 2017.

That’s at least partly because Oakland Unified is in a financial bind that is worse than many other districts. It has the same problem as other districts in dealing with the increasingly heavy annual cost of the Legislature’s 2014 bailout of the California State Teachers’ Retirement System. The bailout – phased in from 2014 to 2021 – requires school districts to increase by more than 130 percent their annual contributions to CalSTRS.

But Oakland Unified also has seen among the sharpest enrollment drops of any state school district, falling from 54,000 to 37,000 since 2003. Because state funds depend on average daily attendance, this has wiped out many non-mandatory programs.

Schools kept open despite huge drop in enrollment

Yet Superintendent Kyla Johnson-Trammell and other district officials have been leery of closing schools because of parents’ concerns, leaving nearly 11,000 empty seats in often half-full schools. They’ve also failed to significantly reduce administration and support staff even as enrollment has dropped by more than 30 percent.

That may change soon. According to a Bay Area News Group report, to free up money for raises for the district’s 3,000 teachers, the Oakland school board is prepared to lay off 90 administrators and nearly 60 school support workers to generate annual savings of $21.75 million. Oakland Unified officials say that this will not only pave the way for labor peace, it will help reduce the district’s structural deficit, which is otherwise on track to top $56 million by the 2020-21 school year. They have also vowed to follow through on staff recommendations that 24 schools be closed.

But a 2017 analysis by a state agency that helps school districts in financial distress raises a question that most local coverage of Oakland Unified doesn’t address: Can district staff be trusted to competently manage its $500 million-plus budget?

After looking at district budget information dating back to 2010, the Fiscal Crisis & Management Assistance Team (FCMAT) depicted the district as on track to a “fiscal emergency” because of its slowness to acknowledge, much less respond to, obvious problems. It noted that the school board had approved pay raises – including boosts of about 15 percent for teachers from June 2014 to January 2017 – without first identifying how they would be funded. FCMAT also cited “constant turnover” in key positions; a lack of district supervision of how schools deal with spending decisions; and an “abundance of budget exceptions granted to sites and departments that overspend.”

District hoping for emergency state loan

In the short term, the district has taken steps to secure an emergency state loan of $34.7 million. But as the EdSource website reported in September, the district still hasn’t fully paid off the $100 million emergency state loan it got in 2003.

State officials may feel that for political reasons, they have no choice but to help Oakland Unified again. But as FCMAT and others have noted, the district’s enrollment is expected to keep plunging – even as pension obligations keep growing. A 12 percent raise for teachers would only make achieving fiscal stability even more daunting for district leaders.

L.A. Unified school board members heard similar warnings last month, but chose to provide a 6 percent raise to teachers – just shy of the 6.5 percent the teachers union had wanted.

It’s been a tumultuous era in Oakland. The Police Department has been enmeshed in an ugly

But now Oakland is also wrestling with a painfully familiar story: financial turmoil in local schools. The state took some of Oakland Unified’s autonomy in 2003 after the Legislature approved an emergency $100 million loan to the then-reeling district. With $40 million of the loan still unpaid, the state continues to oversee district spending, though with a smaller role. Now there are new indications that even Oakland Unified’s limited autonomy could disappear for another long stretch as school officials struggle to make ends meet yet again.

In recent months, district officials had to approve what were described as “emergency” $9 million cuts in the district’s $521 million general fund 2017-18 budget and to authorize potentially greater reductions in 2018-19 as well. The cuts were widely denounced in public meetings as unnecessary and indicative of poor management.

This criticism has been buttressed by the Fiscal Crisis Management Action Team (FCMAT), the state agency that works with struggling school districts. In an August report, FCMAT warned that a “fiscal emergency” loomed if Oakland Unified officials didn’t quit spending reserve funds to cover budget shortfalls. FCMAT depicted the Oakland school board as irresponsible for approving cumulative raises for teachers of 14.5 percent in the 2014-15, 2015-16 and 2016-17 school years in a three-year span in which the cost of living went up by less than 2 percent. These pay hikes were the biggest drain on district reserves.

Oakland board members brought more criticism on themselves in January when they approved 5 percent pay raises for themselves. While the total amounts were small – $39 per board member per month – San Francisco Chronicle columnist Otis Taylor Jr. wrote that district students and parents were appropriately “livid” about the salary boost at a time when schools often lacked funds for basics like toilet paper.

A recent East Bay Times analysis suggested there was plenty of blame to go around for Oakland Unified’s fiscal headaches. It largely absolved district Superintendent Kyla Johnson-Trammel, who took over in January 2017, noting her predecessor had failed to follow through on plans to lay off 42 employees because declining enrollment had left the district with less than 37,000 students. Since enrollment directly determines how much state aid comes to districts, well-run districts usually reduce employees when enrollment drops. With enrollment down 33 percent from its 1999 peak of 55,000, Oakland Unified has thus faced constant pressure to downsize.

Pension costs grow 132% per teacher by 2020

But information distributed by the district before Oakland Unified trustees approved the recent $9 million in cuts pointed to another budget culprit – one that is hammering districts statewide. That is the bailout of the California State Teachers’ Retirement System approved by the Legislature and Gov. Jerry Brown in 2014. It phases in an 80 percent increase in annual contributions to CalSTRS from fiscal 2014-15 to fiscal 2020-21 – going from $5.9 billion a year to $10.9 billion.

More than two-thirds of this additional cost must be borne by local school districts. In 2014-15, they were required to pay 8.25 percent of teacher payroll to CalSTRS. Beginning in fall 2020, that amount will be 19.1 percent – a 132 percent increase in per-teacher pension funding obligations. Even in districts with high numbers of English-language learners – which receive additional funding under the Local Control Funding Formula, a 2013 state law – pension obligations have created major headaches.

School Services of California – a consultant which advises a large majority of the state’s 1,000 school districts – estimated last July that at least 280 districts would struggle to pay bills in the 2017-18 school year. A San Jose Mercury-News analysis at the time suggested that the just-ended 2016-17 school year might be looked back on in 10 years “as the last good year in recent times for public education.”

The August 2017 FCMAT report on Oakland Unified raised additional concerns about why the district would struggle with its finances in coming years beyond inadequate funding. FCMAT faulted the district for inadequate internal budget controls, for allowing significant expenditures without board approval and for inadequate training of officials with budget responsibilities.