City, District Officials Agree on School Funding Compromise

By Jorge Casuso and Olin Ericksen

May 5 – City and School District officials have hammered out an agreement that could give the cash-strapped district between $6 million and $8 million a year by 2009, but it is unclear whether it will stave off a controversial ballot measure that would generate significantly more money.

The last ditch agreement, which comes after weeks of negotiations, must still be approved by the School Board and City Council.

More importantly, the Community for Excellent Public Schools must find the deal enticing enough to pull back on plans to qualify a charter amendment on the November ballot.

City Manager Susan McCarthy and School Superintendent John Deasy -- who were at an impasse over what formula to use to boost the base $6 million a year -- finally came to an agreement days before CEPS was scheduled to hand in the 8,200 valid signatures needed to qualify the measure.

"I believe that the proposed terms represent a fair exchange of value and preserve the ability of the City Council to respond to broader community needs," McCarthy said in a statement.

“I think this is a very good agreement,” Deasy said. “It preserves our long history of working together and strengthens our ability to work together for the youth and the citizens of Santa Monica.”

Under the five year agreement, the City – which has given the district between $3 million and $5.25 million in each of the past few years -- would boost its funding to at least $6 million annually starting in July.

The amount would then increase with a cost of living adjustment of between 2 and 4 percent a year, or between $120,000 and $240,000 a year. District officials estimate the cost of living increase would likely reach about $500,000 in the fifth year.

Additional increases would depend on the fiscal health at the City’s “Big Eight” revenue streams, comprised of taxes and fines that currently total about $125 million.

Under the best case scenario, the base payments could be increased by an additional ¾ of 1 percent with a cap of $1 million in 2007/08, if “the average of the actual ‘Big Eight’ revenues” for the previous two fiscal years grows by an average of 4 percent each year, according to calculations based on the contract.

Over the past five years, those revenue streams have grown by an average of 4.4 percent, Deasy said.

If the revenue streams falter, City payments could be held constant or reduced by no more than $1 million.

On the other hand, if in each of two consecutive fiscal years the “Big Eight” revenue streams exceed 7.5 percent, the parties would “discuss adjusting payments above the applicable cap” The City can also convene a conference to discuss “temporarily suspending the contract.”

After five years, the agreement could be renegotiated for two 2½ year terms that could further boost the amount the district receives to between $10 to $12 million a year after ten years, Deasy said.

The terms of the agreement seem to fall far short of the CEPS initiative, which also calls for a base of $6 million, but would likely result in double the amount of additional funds.

“I think that’s modest growth certainly compared to the CEPS initiative,” Deasy said of the proposed agreement. “CEPS would be at least double this.

“If this agreement is approved,” Deasy added, “I would not support filing an initiative.”

If the elected officials approve the proposed agreement, City and district staff will work with their legal counsels to develop a formal agreement for execution, City officials said.

“I think it’s a fantastic step forward for the City and the children of Santa Monica,” said Mayor Richard Bloom. “It’s very exciting to find a responsible way to respond to the needs of the community.”

CEPS, whose officials will meet Wednesday night to discuss the agreement, declined to comment on the record. The group has said it must submit the qualifying petitions by early May.

The School Board is scheduled to take up the agreement Thursday night. The council will follow suit Tuesday night.

CEPS is scheduled to meet Friday, when it could decide whether to back the proposed agreement.

In a memo to the School Board Wednesday, Deasy threw his wholehearted support behind the proposed agreement.

“It goes without saying that this was not an easy task,” Deasy wrote. “However, I am very proud of this work and support the points found herein wholeheartedly.

“I make this recommendation with the absolute belief that this should be the only solution to our joint work. Given the terms of this proposed agreement… I personally, do not see the need for any charter amendment.”