Recently the Rowland Unified School Board and School Management issued a Press Release, priding themselves of saving almost $3 Million in interest cost from a recent refinance of a school General Obligation Bond. On closer examination of the Press Release alone, it reveals that the School Board and the School Management have in fact wasted at least more than double, or even more, before the refinance due to the much higher interest rate when the bond was issued, and due to the prolonged delay of the much needed refinance, given the interest rate has been very low for several years.
The worst part is not over, because that Cash Reserve of $54 Million probably derived from the bond issue is still shrinking very day, because the School District, as a California public agency under the State law can only invest such cash reserve in federal or California public agency bonds. Every student of finance or every intelligent household knows that the cost of borrowing is always higher than the return being generated from investing in similar government bonds, because of the huge transactional cost involved in issuing a bond.
A private or profit seeking company can take advantage of raising funds from the capital markets when the interest rate is low to increase the company’s cash reserve, because a private company does not have a State-mandated restriction on reinvestment, thus free to pursue ventures that will bring in much higher return. In many cases, many retail operations can multiply the return several times within a fiscal year because the turnover is short and fast.
However, the School District, as a public agency of the State, can only pay higher interest on its cash reserve than it can earn on restricted investment in government bonds. Then, we must ask the School Board and the School Management why sitting on such shrinking cash reserve when the State only requires a public school to keep a 10% reserve. According to the School Board’s Press Release, the annual budget is only $138 Million, so a $14 Million cash reserve should be adequate. The excess, but daily shrinking, $40 Million cash reserve is an ongoing waste of the community taxpayers’ hard-earned money.
It was a breach of fiduciary duty by the Board and the Management to raise excess money from taxpayers only to sit paying interest on cash reserve. It was a breach of fiduciary duty to wait so long to refinance. It is unfair to the teachers that have to use their own money to buy school supplies for the students. It is dishonest and illegal for the schools to use various campaigns to trick sympathetic parents into donating funds, books, supplies and improvements quarter after quarter, and year after year, only to realize that the senior School Management personnel, such as Superintendent, Assistant Superintendents, School Principals, and Chief Security Officer, etc., are getting paid at the top 10% in the entire Los Angeles County for a performance of closing 3 schools in 2010 and for a performance of losing over 2,000 students to other school districts seeking better teaching and better learning.
Under normal circumstances, those people should have been fired, as once strongly petitioned by the Rowland Teachers Union to fire the Superintendent. Instead of getting fired for unacceptable performance, the current School Board and School Management had the guts and audacity wasting our money on lawyers going to court suing Walnut Valley Unified School District for accepting 1,940 students from Rowland Unified School District.
The current School Board and School Management even prided themselves for having won the court battle by being able to convince the court that student transfer is a “fiscal decision”, not a “parental decision”. This means that Rowland Unified School District has been treating the students as their income-producing property, rather than human beings. Every honest human being knows that it is the parents who make the decision to transfer their child to another school district for better education. In short, it is a “parental decision”, not a “fiscal decision” as the School District had hoodwinked the court into accepting such ridiculous, bizarre argument, because the parents receive no finical gains from such transfers. But the State funds follow the student. This court decision is very likely unconstitutional that I will discuss in another editorial.
Instead of seeking self-improvement to stem the tide of student outflow, the School Board and School Management chose to resort costly litigation to protect their incompetence and gross mismanagement. Because of this judgment, now the management at Rowland Unified School District is judicially-sanctioned to be incompetent. It is also the only public school district that is judicially-sanctioned to be protected for its incompetence, because under the judgment, no schools can accept more than 10% of students transferred from Rowland School District, regardless of how bad the Management at Rowland is going to be. Shame on the current Board and shame on the current Management!
By the way, since September 20, 2013, I have been requesting the current School Board and current School Management to provide me the public records on the General Obligation Bond issue and the alleged refinance that have saved $3 Million under the California Public Records Act, as of this writing, they chose to violate the law, refusing to produce any documents.
Do we really need to keep such incompetent School Board members and Management that are not only anti-students, anti-parents, anti-teachers and anti-community, but also defiant to law?