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  Explosive Financial News From the WCCUSD - State Debt Can Be Retired Now!
August 21, 2011

Twenty years after the State of California unfairly saddled future generations of children in the WCCUSD with penalties for the sins of a former superintendent, the current school board, along with Superintendent Harter, has found a way to finally jettison what has been a staggering debt and the burden of a state trustee.


When what was then the Richmond Unified School District went broke in 1991 and closed the schools early, several parents successfully sued to keep the schools open. The California Supreme Court decision in the resulting litigation, Butt v. State of California, was wildly successful in opening schools back up and setting future constitutional issues regarding educational policy in California, but it also resulted in a vindictive and punitive financial burden imposed by the losers, in this case former Governor Pete Wilson.

Butt v. State of California, 842 P.2d 1240 (Cal. 1992).
The California Supreme Court ruled that the state was responsible for the fundamental educational rights of students and that the state must take action to address a local district's inability to provide an education basically equivalent to that provided by other districts in the state. In so ruling, the Court stated that the California State Constitution makes public education “a fundamental concern of the State and prohibits maintenance and operation of the common public school system in a way which denies basic educational equality to the students of particular districts. The State itself bears the ultimate authority and responsibility to ensure that its district-based system of common schools provides basic equality of educational opportunity.”842 P.2d at 1251.

Millions of dollars have been siphoned off the WCCUSD budget every year to repay the $35 million loan, and the children of West County have suffered mightily. Now the WCCUSD board, led by Charles Ramsey, has found a way to not only throw off that oppressive debt but to use the savings to increase this year’s instructional budget.


The remaining balance on the state loan is $9 million, and the District had budgeted $1.5 million for debt service this fiscal year (The interest rate charged by the state is also usurious and vindictive). It turns out that the District had been required by the state trustee to maintain a $9 million Debt Service Account. Adding that $9 million to the $1.5 million already budgeted for interest, the District has $10.5 million available to pay off a $9 million debt! The $1.5 savings can go back into the classroom.


The only condition is that State Superintendent of Public Instruction, Tom Torlakson, must approve. The District will soon be making this request, and it is hard to imagine reason why Torlakson would not consent.


In a related matter, the District also pays the $75,000 annual salary of the state-appointed trustee. Once the debt is paid off, the trustee should also go away, along with his $75,000 compensation, but this also requires Torlakson’s approval.


Ramsey will soon be looking for widespread support from District residents and City Councils within the District to petition Torlakson to let WCCUSD finally end this travesty.


Ramsey is also looking at restructuring the Districts debt on some old Certificates of Participation (COPs), which could save another $100,000 annually.


Despite the burden of the loan debt and devastating state funding shortfalls, the WCCUSD remains in remarkably good fiscal health, particularly in its capital program.  The District’s bonds are currently rated at higher levels on an aggregate basis than at any other time in the past twenty years. This is a reflection of the relative strength of the District’s tax base, the relative wealth levels of District residents, the relative strength of the District’s financial performance, and the relatively high debt burden. 


In another financial coup for the District, on August 10, the District took a bond refunding bond deal to market, a culmination of a great deal of planning and work by our Bond Finance Team.  The market conditions were very favorable for Municipal Bonds , and this refunding has saved the local taxpayers over $7 million. Part of what drove increased investor interest was the improvement in ratings.  The upgrade from Standard & Poor’s leaves the District’s bonds with ratings of “Aa3” from Moody’s and “A+” from Standard & Poor’s and Fitch. 


The refunding bond transaction was a tremendous success from a variety of perspectives.  Taxpayer savings achieved were nearly twice the levels targeted and discussed just two weeks previous to the sale.  Tax rates on the 2002 Measure D bonds will remain at least close to targeted levels for the next two years.  The possibility that tax rates on the 2000 Measure M bonds will increase greatly within the next five years has been significantly reduced (though not eliminated).   Perhaps most importantly, the District’s bond program continues to move in the right direction with regard to bond ratings and appeal to investors.