Predictions and Prognostications for the New Year

ISSUE 67 | JANUARY 6, 2005

[This free e-mail newsletter about school information, accountability and the public is provided by School Wise Press. To add a colleague's name to the distribution, please send us their names and e-mail addresses to: stever@schoolwisepress.com. If you'd rather not receive this, simply notify us by phone at (415) 337-7971, or by e-mail, including the word "unsubscribe" in the subject line of your message.]

The future, while unknowable, evolves from clues that are suggested in the present. It is this owl's pleasure to scan those clues and offer a talon-full of predictions for the new year.

INSOLVENCIES GALORE

This owl has been watching the rising number of districts summoning Tom Henry's Fiscal Crisis Management and Assistance Team (FCMAT) unit for help. While intended to be preemptive, some of the hollering is likely to be too little, too late. As of the 2003-04 second interim report on the financial health of districts, FCMAT reported 9 negative findings and 36 qualified findings. These numbers, in Tom Henry's opinion, were "significantly underrepresented due to the flexibility given them by the Legislature." For reference, "qualified" means they are not certain of their ability to meet their obligations over the next three years. The 2004-05 interim results will be announced in February. Joel Montero, second-in-command of FCMAT, shared a hunch at CSBA in December that if they were to review all districts' financials, they'd expect that one-fourth would fall into qualified status. His prediction is well worth heeding. His teams are on the ground, and their evidence is gathered with care.

As districts run out of money and turn to the state treasury for help, the county offices will be asked to be more diligent in their role as fiduciaries for their districts. Yet, their capacity to execute is strained. If some county offices can't step up, this owl predicts that FCMAT may be asked to provide financial oversight in their place.

IMPROVED FINANCIAL DISCLOSURES

This owl has a hunch that districts' J-200 financial reports of the future will be required to call out the future obligations of districts much more explicitly than they do now. Those who currently manage and govern school districts' financial health are like doctors who have diagnostic tools that are only half functional. Two examples stick in this owl's craw. First, financial reports for the current 2002-03 fiscal year do not include a declaration of the value of future commitments to retired employees. This is the type of problem that has contributed to West Contra Costa USD's difficulties. A new reporting standard, the Government Approved Standard Boards Instruction 45 (GASB-45), calls for a clear declaration of this future liability. But districts will not be required to adhere to it until the 2006-07 fiscal year. With FCMAT predicting that as many as one-fourth of districts will be unable to ensure their ability to meet the next two years of their financial obligations, something's got to change.

Second, the GASB-34 standards for reporting fixed assets, like the value of land and buildings, should have resulted in an improvement two years ago. The standards themselves were intended to give the public an idea of how land-rich any public entity might be. In an era like the current one, where school districts are increasingly cash-poor, business officials and boards are looking all too suddenly toward the value of land and buildings. Some districts are resorting to shuttering underutilized schools as a short-term remedy to their financial problems. With standards in place for reporting the value of these assets, districts should not be surprised to discover their worth and should be able to plan better. They should have a balance sheet with the value of land and buildings available for all to see, as well as evidence of how efficiently the land and buildings are being utilized.

THE RISE OF THE INSPECTOR GENERAL

The Williams legislation calls for the county offices of education to assume the role of inspectors general. Whether they are able to meet the task that's been handed to them remains to be seen. This owl's prediction: either the county supes will assume the inspectors role, or the judge overseeing the Williams settlement will pass the baton to another agency. While county offices of education have had financial oversight responsibilities for over a decade, their staff and leaders have been happier in the role of service provider than in the role of enforcer. The system needs an enforcer, and this owl hopes that at least some county supes prove ready to rise to this historic occasion.

THE CREATION OF A TIERED HIGH SCHOOL DIPLOMA

The high school exit exam is about to change the lives of tens of thousands of high school students who graduate in the summer of 2006. In order to graduate, they will have to pass the high school exit exam. If they do not, they will not be issued a diploma. Districts in years past set their own standards for graduation, usually allowing students to take and pass a minimal number of units. This reward for "seat time" qualified most high school students to join the graduation ceremonies in cap and gown, and entitled them to receive a diploma. Next year, districts will lose this freedom to set their own standards for issuing a diploma. The controversy that will ensue will, in this humble owl's opinion, trigger a tactical retreat by some supporters of the exit exam in the legislature, that will enable districts to award a different diploma to students who meet the "seat-time" requirements but do not meet the academic requirement of passing the exit exam. (Indiana does it this way, so California would not be the first state to do so.)

NCLB'S MEASURE OF PROGRESS WILL MEAN LESS

Next year schools will be told to climb to the higher plateau for annual measurable objectives. It is set at a level about twice as high as current levels for proficient and advanced students. The owl's team has run the numbers, and if students' scores on the English/language arts and math California Standards Tests next year resemble this year's scores, nearly half the schools in the state will not be attaining the benchmark adequate yearly progress (AYP). But as the number of schools on this No Child Left Behind (NCLB) watch list grows, the stigma will fade. Like currency inflation, if you circulate too much money, it simply can't hold its value. The more there is, the less it is worth, and eventually it becomes worthless. This owl predicts that the public stigma of being tagged a school that did not make AYP, or a school that has entered Program Improvement, will diminish. And when NCLB reauthorization rolls around, Congress will fix this problem.

RECOMMENDATIONS

This owl has been hooting the same song for awhile: be prepared. Get in front of these waves, and start paddling. If you are steering wisely, and if your team is paddling together, you can ride these waves. And like the adept Hawaiians who sail their outriggers in the surf, you can use the power of the waves to your advantage.

REFERENCES

Fiscal Crisis Management and Assistance Team website

FCMAT's predictors of school agencies needing intervention [PDF file]

FCMAT's annual report [PDF file]

California County Superintendents Educational Services Association

Government Accounting Standards Board (GASB)

OWL ARCHIVE | BACK TO NEWSLETTER REGISTRATION PAGE