Can California forgive OUSD’s debt?

For nearly 20 years, the Oakland Unified School District has paid the consequences of relying on the state to bail it out of financial trouble. 

During that time, it has slashed the budget, cut salaries, laid off staff and closed schools, as it tries to repay a $100 million emergency loan it borrowed in 2003, when the district fell under state receivership. And the cuts keep coming  — with 11 schools set to close, merge or downsize in the next two years. 

It doesn’t have to be that way, say some on the school board, on Oakland City Council and in the Legislature. In February, City Council unanimously passed a resolution introduced by Sheng Thao, president pro tempore, Vice Mayor Rebecca Kaplan, President Nikki Fortunato Bas and Councilmember Carroll Fife, echoing the outrage that students, families and teachers felt about the planned closures. The resolution called on the state to keep the closures from happening by forgiving the district’s debt.

“It’s totally doable,” Thao said in an interview with Oakland North. “It can be done if there is a political will.” 

OUSD has had success with small schools, so why are they on the chopping block?

That is what District 18 Assemblymember Mia Bonta is trying to determine. She introduced a bill, co-authored by District 15 Assemblymember Buffy Wicks, that would give OUSD $10 million with no strings attached, and one extra year to decide if the board wants to consolidate more schools. Bonta saw it as a self-correction of the state policy, because she believes part of the loan, about $35 million, was given to OUSD against the votes of the local school board at the time, when the district was under state receivership.

However, the bill was amended in April. Instead of giving OUSD financial aid and extra payback time, it now would require the district to conduct an equity impact analysis on schools before any could be consolidated or closed. The district, with the public’s help, would establish metrics to assess such things as pupil demographics, facility conditions, operating costs and savings from any consolidation or closure, as well as the capacity of a school to accommodate more pupils.

Bonta said the changes were made after OUSD trimmed the closure list and Alameda County released $10 million for OUSD to put toward its debt. She said the bill brings transparency and engages the community in the process.

The Assembly Education Committee unanimously approved the bill, moving it to the Appropriations Committee, which held a May 11 hearing on it. Bonta said other assembly members have been very supportive of the bill because they are aware of how devastating school closures have been for the OUSD community. 

“So far there hasn’t been any opposition, and I’m hoping that that will be the case throughout the remainder of the process,” Bonta said. “But it’s got a long way to go.”

Fairness issue

Eight districts in the past 30 years have been in the state’s debt, but none borrowed as much as OUSD. Oakland borrowed $40 million more than the second-highest on the list, Vallejo City Unified School District.

Each year, OUSD pays $6 million toward the debt. And in December, it dedicated $21.5 million from the general fund to that debt. To date, about $21 million remains unpaid, with $11 million of it to be paid by August 2023, and the remaining $10 million by June 2026. 

Paul Bruno, assistant professor of education policy at the University of Illinois at Urbana-Champaign, said California has the budget to absorb the debt. He doesn’t see forgiveness as unfair to other districts. On the contrary, Bruno, who studies school financing, said it’s unfair to students and teachers to suffer the consequences. 

“A lot of these debts are the result of financial choices that were made years ago by people who might not even work in the school districts anymore,” Bruno said. “So there’s a question of who should be paying those prices now.”

California projects a surplus of $45.7 billion for the 2022-2023 fiscal year. Oakland’s remaining debt would amount to less than one-fifteenth of 1% of that surplus.

Oakland North reached out to Gov. Gavin Newsom’s office for comment but received no reply.

Oakland North also reached out to all OUSD board members, but only Vice President Sam Davis offered a comment. He, too, believes forgiving what’s owed would be fair, because during the receivership, the state pursued a strategy that authorized a large number of charter schools, which cut into OUSD’s enrollment and affected its financial sustainability.

Enrollment is a major factor in how California school districts are funded because the state bases its formula on average daily attendance. 

In its resolution, the City Council noted that nearly all school districts experienced attendance drops during the pandemic year of 2020-21 as well as chronic absenteeism. The resolution said, “Greater structural reform around how we fund schools in California must be made to support students today who now, in addition to experiencing major disruptions because of COVID-19, are also facing threats of school closure.” 

Davis and Bruno noted that loan forgiveness won’t solve the bigger problem, since debt is only one of the drags on OUSD’S finances. While the district has received $10 million to help its budget amid the pandemic, declines in enrollment and attendance and salary increases still have a heavy impact on it. 

The district estimates a potential savings of $4.1 million to $14.7 million from consolidation plans. But closures ultimately can cause the district to lose students, leading to lower enrollment and a reduction in state aid.

An example of this is Kaiser Elementary School, which closed in 2019. Only one year after the closure, 17% of its students had left for non-district schools. Since the 2015-16 school year, Oakland Unified’s enrollment has dropped by 2,500 students.

By the end of this month, which is the end of this school year, Parker Elementary and Community Day School will be permanently closed. If all goes as the school board plans, five more schools will be closed in the next academic year.