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Sitting with Oakland School Board of Education President Noel Gallo, left, State Superintendent of Public Instruction Jack O'Connell signs a document returning local control to the Oakland Unified School District during a press conference in Oakland, Calif. Monday, June 29, 2009. The district has been under state control since 2003. (Kristopher Skinner/Staff)

OAKLAND — It's official: The Oakland school board has control over the district for the first time since the state takeover six years ago. Even as the ink on the transition paperwork was drying, district leaders were pledging not to make the same mistakes that got them into the financial mess.

State Superintendent Jack O'Connell and Oakland school board President Noel Gallo signed a memorandum of understanding shortly after 1 p.m. Monday, transferring control of academic policy and financial management to the school board. The district still owes the state about $80 million, which it is repaying with 1.7 percent interest over the next 18 years.

"It's been a long journey but a journey where I feel the district is now in much better shape," said O'Connell, adding that he had three priorities when the takeover happened six years ago: improved academic achievement, restoration of fiscal stability and return of local control. All have been met, he said. The school board this month passed a $602 million budget for the 2009-10 year, though there will be cuts of 4.5 percent in funding at each school next year.

Though Oakland will have difficult times ahead, district leaders were upbeat about the return of control.

"This is truly a great day for the children and families of this great city we know as Oakland," Gallo said.

In 2003, the state took over the district after it ran up a deficit of about $82 million from 2001 to 2003 due to systemwide financial breakdowns. The state gave it a $100 million bailout and took away the school board's powers.

Gallo said the district will make its $6 million annual payments without fail.

"I think we have no choice. (Making the payments) is one of our priorities. "... We are not going back to state control. We realize we can do better locally," Gallo said.

On hand Monday in front of the United for Success Academy on the Calvin Simmons campus in East Oakland were members of the Oakland Education Association, which represents nearly 3,000 Oakland teachers.

As O'Connell, Gallo and others spoke, many teachers hissed and booed and shouted over the speeches. Teachers are upset the district declared an impasse in their 14-month-long contract negotiations while there are still 17 items that have not been discussed, said Nicole Love, executive director of the association.

Union President Betty Olson-Jones said union leaders were notified in an e-mail late Friday that the district was declaring an impasse. She said that about five minutes later, she received a news advisory that the school board was regaining local control. Olson-Jones said the move was handled poorly. What's more, the district won't be able to attract and retain quality teachers with pay cuts and other negative proposals on the table.

"It is unacceptable to tell OEA members they are the most important person in a child's school-life but then threaten them with pay cuts, caps on health benefits, increases in class sizes and caseloads for counselors and nurses, and the elimination of elementary enrichment classes. This is no way to create success." Asked if the district would reconsider the impasse, Gallo said, "That's a decision of the board."

A mediator will be brought in but no dates for continued talks have been set, she said.

The move to regain local control came two days before the new superintendent, Tony Smith, 42, starts. He will be the first permanent, locally chosen leader since the takeover. He, too, assured the school community that keeping local control and rebuilding relationships that have been fractured as a result of the takeover would be top priorities.

"I think everywhere I've been, when adults are not in good relationships, it's the children who suffer," he said during the ceremony. "I am going to take full responsibility as a person who will build bridges."

Reach Kristin Bender at kbender@bayareanewsgroup.com.