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Berkeley Unified School District Superintendent Michele Lawrence told the school board Wednesday that staff layoffs or a hiring freeze may be necessary by the end of 2001 to protect the district’s finances from revenue shortfalls due to state budget constraints and deficits expected to be uncovered in this year’s trouble-plagued budget. 

“Christmas is not always the best time to talk about reductions,” the superintendent told the board, “but nonetheless, I think we have to start preparing the organization for the likelihood of that.” 

Jerry Kurr, one of two financial consultants to the district during a transition period between associate supervisors for business services, addressed the board and said the district would need to contemplate an overall budget reduction “as early as December” – and that the shortfalls driving this would be “in addition to the economic impacts” that threaten reduced education spending at the state and federal levels. 

The real state of the district’s finances have been obscured by an antiquated data-processing system that the board voted to replace Wednesday night with a $79,000 Hewlett Packard package.  

“What Michele Lawrence is preparing the board and the public for is that the budget we passed, which we thought was balanced may in fact not be,” said Doran. “The extent of the inaccuracy, we don’t know. But if it’s inaccurate, what it would mean is we would be dipping into our 3 percent reserve to pay ongoing bills. And the cuts would be made in order to keep our reserve, which the state says you have to do.”  

In a wide-ranging report on the district’s efforts to clear up the months-old turmoil in its accounting, Lawrence and Kurr also distributed a letter from the Alameda County Education Office, dated Sept. 28, that officially “disapproved” Berkeley’s 2000-2001 budget and called for intervention from a state-mandated oversight committee, the Fiscal Crisis and Management Assistance Team or FCMAT. 

“As of this date, (the county) continues to have concerns regarding the fiscal solvency of the District for the current and two subsequent years,” the letter said. 

The rejection notice was not a surprise. The district was first notified that its budget did not meet state standards on Aug. 15 and was given until Sept. 8 to rectify the problems. School administrators acknowledged at that time they could not meet that deadline and had negotiated with the county to bring in FCMAT rather than a group from Alameda County. FCMAT, a non-profit financial consultancy currently working in 16 California school districts, was set up under state legislation and is based at the Kern County Office of Education. 

“We thought they would have more expertise than the county,” said Dr. David Gomez, associate superintendent of administrative services.  

When asked what its services could cost the district, Tom Henry, the agency’s chief executive, said this would depend on the length and degree of its consultancy. 

“I’d just be guessing at this point,” Henry said, adding that the state appropriates $2 million to FCMAT and districts only pay their on-site costs.  

Gomez confirmed that the district anticipated lower revenues – due to higher energy costs and the probable absence of the state’s normal cost-of-living adjustment (COLA) – but that it was too soon to say where the budget cuts would fall because the district had just begun setting out next year’s priorities. 

He listed this year’s priorities as setting up the new business and accounting system, safety, communications, and accountability and evaluation of personnel. Next year’s priorities, he said, had not yet begun to take shape. 

“We probably have to make some hard choices for next year,” Gomez said.  

“I would think that not one board member would vote for a layoff, but it may mean a hiring freeze so that if people do leave, we don’t replace them,” said board president Terry Doran. 

“(Lawrence) is suggesting, based on the preliminary look at our budget, that we may in fact be in a better position if we start that process sooner.” 

On a more upbeat note, Kurr told the board that he expected to close the books on the 2000-2001 fiscal year by the end of this month, which would provide a clean slate upon which to build an approveable budget for the fiscal year currently in progress. He said the financial office would also have firm data on staffing placements by that time. 

“If you’ve got a good handle on that, you have a good handle on 85 to 90 percent of the costs in the district,” he said. 

“We’ll sort through and balance our budget,” said Shirley Issel, the board vice president. “We’re not going to have a takeover by the state, which is the really serious situation that you want to avoid.”