OAKLAND — In the months leading up to the state takeover of Oakland's public schools, the size of the district's financial problem was a source of speculation. Estimates of the deficit ranged wildly, from $35 million to nearly $100 million.

All anyone knew for sure was this: Without an influx of cash, paychecks would start to bounce.

Six years after the largest state loan ever made to a California school district, the Oakland school district is emerging from state receivership $89 million in debt. It faces a budget hole of $18 million for the 2010-11 school year, even if the state government makes no additional cuts.

But now, at least, the Oakland school district's leadership knows — or appears to know — how much money is available.

At a news conference Monday, state Superintendent Jack O'Connell touted the progress the district had made under state receivership. Others say any gains were made despite the state administration, not because of it.

Robert Blackburn, a former Oakland schools superintendent who was badly wounded in 1973 during the assassination of his colleague, then-Superintendent Marcus Foster, by the Symbionese Liberation Army, said the state takeover has done damage to the school system and to the city.

Blackburn said O'Connell treated Oakland "like an absentee landlord with slum properties," and that the upheaval caused an exodus of families from district schools.

"The state takeover was ill-advised and badly executed," Blackburn said. "As an educator, I'm embarrassed and ashamed, and as a parent and citizen, I'm outraged."

An elusive bottom line

Although financial problems triggered the Oakland school district's takeover, the state administration appeared to be more focused on redesigning schools and overhauling central office services than on stabilizing the district's finances.

None of the three state-appointed administrators had strong financial backgrounds, and the district has had three chief financial officers since 2007.

For years, auditors with the state controller's office have issued "inconclusive" findings on the state of the school district's finances. The auditors reported last summer that the agency's bottom line was unclear because key records dating to the time of the takeover were missing or inconsistent.

It wasn't until 2008 that the district hired a private auditing firm to address the problem and "disentangle" the old financial records. The firm had grim news this spring: They had $5.6 million less than previously thought. Auditors found other problems, totaling $9 million, bringing the size of the shortfall to nearly $15 million.

The Alameda County civil grand jury, in its 2007-08 report, found that "the district was hampered by continuous staff turnover, particularly in the area of finance, numerous reorganizations and a succession of state administrators. "... After nearly five years of state management, OUSD's budget remains unbalanced and the district's future is unclear."

In 2008, Oakland Unified balanced its budget for the first time since before the state takeover. The budget is balanced again this year, but because of deep state funding cuts — including several announced in late May — the district's surplus cash reserves are all but depleted. The district also plans to spend the rest of the $100 million state loan in the coming year, leaving the schools with no cushion and a debt that could take decades to repay.

In addition to those concerns, the school board and its new superintendent, Tony Smith, will inherit a tense relationship with the teachers union, which has been asked to accept a 3 percent pay cut. In late June, in one of his last acts as state administrator, Vincent Matthews declared an impasse in contract negotiations.

"On the one hand, the district is out of a crisis, near-bankruptcy environment," school board member David Kakishiba said. "On another level, we're creeping back to a very dangerous financial situation. We are going to be right up against the edge of the cliff."

Test scores rise

Oakland's test scores have risen despite the turmoil, mostly because of jumps made by the city's elementary schools. The district's Academic Performance Index has climbed about 70 points since 2004, making it one of the most improved districts in the state.

A 2007 study by the Council of the Great City Schools, a coalition of the nation's largest urban districts, found that from 2001 to 2006, more of Oakland's public school children were excelling each year, at about every grade level, in reading and math (the math analysis didn't include high schools).

Matt Hill, a former district staff member who worked on a package of foundation-backed initiatives called Expect Success from 2005 to 2008, said he saw positive changes throughout the school system during those years.

"I definitely think the district's stronger now than when I first joined, in every area," he said.

Hill noted that many of the major changes — such as the creation of small schools and a school-based budgeting system — began before the takeover.

In the past decade, the district has opened dozens of new district schools and has authorized dozens of tuition-free, independently run charter schools. Although the district's enrollment dropped sharply from 2001 to 2008, the state administration opened more schools than it closed.

In the years to come, that trend might be reversed. Some board members and staff members say the district can't afford to maintain about 130 schools for its 47,000 students.

Then and now

When Kakishiba joined the Oakland school board in January 2003, it had 10 members, including three mayoral appointees. He described it as hostile, divided and dysfunctional.

"It was a mess," he said.

The board now has just seven directors, including several new members. The dynamic is often civil, though not always. In May, the notoriously outspoken Alice Spearman stepped down as board president after only four months in the role; she said her colleagues did not force her to do so. Despite differences of opinion and the occasional flare-up, Kakishiba said, the board is far more functional than it was when he started. Unlike the pre-takeover years, in which board members fell into two distinct camps — that of Mayor Jerry Brown and Superintendent Dennis Chaconas — the votes of these board members are less "factionalized," he said. In May, the board voted unanimously to hire Smith as superintendent.

Gallo, the Oakland school board president, presided over the district during its period of overspending and the resulting crisis. That won't happen again, he said.

"We're going to live within our means," Gallo said. "I'll apologize in advance to the parents, and to the teachers, and to the Oakland public, because I will be faced with some difficult financial choices."

Reach Katy Murphy at 510-208-6424 or kmurphy@bayareanewsgroup.com. Read her Oakland schools blog at www.ibabuzz.com/education.

Takeover timeline
  • Sept. 11, 2002: Oakland schools Superintendent Dennis Chaconas tells the school board that staff members discovered a large shortfall, potentially amounting to millions of dollars, while switching financial data to a new computer system.
  • Oct. 21, 2002: Chaconas calls a news conference to announce that the Oakland school district is $35 million in the red because of overspending and major accounting errors.
  • Jan. 8, 2003: State Sen. Don Perata announces he has introduced legislation to secure a $100 million emergency loan for Oakland schools, and warns that teachers' paychecks might bounce by June without a state bailout.
  • March 3, 2003: The school board approves $17.2 million in cuts in an attempt to avoid a state takeover.
  • May 12, 2003: The school board lays off 330 teachers and counselors; later that week, 260 support staff members lose their jobs.
  • June 2, 2003: Gov. Gray Davis signs Senate Bill 39, the takeover bill Perata wrote. Randolph Ward is appointed state administrator; Chaconas is ousted.
  • June 16, 2003: Ward starts the job.
  • Aug. 18, 2003: The Oakland teachers union, which had received a three-year, 24 percent raise in 2001, agrees to scale back its salary schedule by 4 percent.
    Schools chiefs since 2003
  • Superintendent Dennis Chaconas: Ousted in June 2003
  • State Administrator Randolph Ward: June 2003 to August 2006
  • State Administrator Kimberly Statham: August 2006 to September 2007
  • State Administrator Vincent Matthews: September 2007 to June 2009
  • Interim Superintendent Roberta Mayor: July 2008 to June 2009
  • Superintendent Tony Smith: Started July 2009