Oakland weighing school closures to close budget gap

The Oakland Unified School District is slated to vote Tuesday on whether to close or merge 16 schools in the next two years to reduce a $12.3 million budget deficit driven by the California district's declining enrollment.

The proposal would save an estimated $4.1 million to $14.7 million by cutting staff and overhead costs from its $700 million budget, according to an analysis by Eric Hall & Associates, an MGT Consulting subsidiary. The district also says it needs to make $3.4 billion in repairs to its facilities.

The district on the east side of the San Francisco Bay had projected enrollment for fiscal 2021-22 of 35,043 students in grades K-12, not including students attending its 43 charter schools, according to its financial documents. That represents a decline of more than 15,000 students over the past 20 years, because of declining birth rates, the pandemic and the growth in charter schools, according to district data.

Oakland City Council

The Oakland City Council asked California Gov. Gavin Newsom and the state Legislature Thursday to use the budget surplus to forgive the district’s state debts and revise state law to base funding on enrollment rather than average daily attendance.

“With a $20 billion-plus budget surplus in California, this issue could be remedied today,” Oakland Councilwoman Carroll Fife said in a statement. The Oakland City Council plays no role in governing the school district.

“As an OUSD parent, educator and advocate round issues impact students, I find it heartbreaking and unconscionable, but not surprising that the district is again considering shuttering community schools that serve majority Black and Brown students,” Fife said. “What is being said with these potential closures is that these kids, their education, their neighborhoods, and their futures don’t matter.”

The district issued $150 million in tax-exempt general obligation bonds, $34.7 million in tax exempt GOs, and $120 million in refunding GOs in November that tapped an authorization it received from voters in November 2020 allowing it to issue $735 million for construction and repair projects. The district has roughly $1 billion in outstanding GO debt, according to its financial documents.

Fitch Ratings lowered the school district’s long-term rating in May 2020 to AA from AAA and assigned a stable outlook on $513 million in GO debt it rates citing a criteria change that allows a maximum five-notch rating distinction between the issuer default rating and the pledged special revenue bonds. The district has a BBB-plus issuer default rating.

Moody’s Investors Service affirmed an A1 rating in September for the district’s GOs and an A2 issuer rating with a stable outlook. S&P lowered the school district’s rating to A-minus from A in April 2019. It assigned its AA insured rating to the recently issued bonds based on a Build America Mutual wrap.

The board already voted in January to cut $40 million from the district’s budget through a combination of measures including slashing 200 full-time positions, resulting in layoffs and the reduction of vacant positions.

The Alameda County Office of Education in November formally declared the district to be at risk of not being able to continue as a going concern, an action that allows more intervention by the county office, up to the suspension of salary and stipends for the superintendent and school board.

The district has faced a dire financial situation before. The state placed it under the control of a state administrator in 2003 when it became insolvent. The district emerged from receivership in 2009, but its financial decisions are still reviewed by a county trustee. And it’s still paying off a $100 million loan with interest from the state, according to the Oakland City Council.