March 11, 2005 SF CHRONICLE

Oakland Schools to Borrow another $11 Million from State: Cash for reserve fund will add thousands to interest payments

By Alex Katz

OAKLAND — Oakland's deeply in-debt public schools are set to borrow an additional $11 million from the state, bringing the district's total debt to Sacramento to $76 million, State Administrator Randolph Ward announced this week.

City schools have been millions of dollars in debt since 2003, when the state bailed out the near-bankrupt school district following years of unchecked overspending.

Officials say the district needs $11 million more to create a reserve fund, the kind all California districts are required to keep in case of financial emergencies.

"This was nothing more than moving money from one reserve over to another reserve, which is something the state and the county have recommended we do," district Chief of Staff Woodrow Carter said Thursday.

The latest loan means the district will pay tens of thousands of dollars more in interest every year.

"It continues to be frustrating that the school district and school board were taken over for running up a deficit, and the state administrator can do it intentionally with impunity," said school board member Dan Siegel, a frequent critic of Ward.

In June 2003, the state gave the district a $100 million line of credit, fired former Superintendent Dennis Chaconas and appointed Ward to run the school system. The school board was stripped of its authority.

Ward previously borrowed $65 million from the line of credit to keep the district afloat.

Officials have estimated it will cost Oakland schools between $4 million and $5 million a year for the next 20 years to pay off the loan.

The district pays about 1.4 percent interest on the debt, officials have said.

The state's criteria for returning control of the Oakland schools to the local school board have little to do with the amount of the district's debt, so increasing the size of the loan is not expected to prolong the state takeover.

Ward was en route to Southern California on Thursday and could not be reached for comment.