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THE WALL STREET JOURNAL DROPS IN, AND GETS A COUPLE OF THINGS WRONG
June 29, 2007
An attentive and knowledgeable reader has pointed out that in my June 15 column on Oakland Mayor Ron Dellums (“Is Mr. Dellums Oakland's Major Problem?”), I incorrectly reported that at the new mayor’s direction, the city’s Community & Economic Development Agency (CEDA) has “put a moratorium on conversion of Oakland's dwindling industrial-zoned parcels to mixed-use.” Though close, that’s not what actually happened.
In the column I used “moratorium” in the popular way, meaning to put a temporary halt to a certain activity. That’s what CEDA did, pulling its “Update To The Industrial Land Use Policy” report from consideration by the Planning Commission’s Zoning Update Committee on May 16th, with plans to rethink it, possibly rewrite it, and resubmit it to the Commission sometime in September. In effect, that temporarily halts the rezoning of currently-zoned industrial land to permit mixed use developments, a rezoning that some observers—including my attentive reader—feels would lead to the loss of Oakland’s valuable industrial land, land which we will need in the future on which to attract businesses that can provide needed jobs for Oakland residents.
But “moratorium” has a specific legal meaning in the context of city planning that is different from the popular meaning, with specific actions and consequences such as temporarily halting consideration of developments altogether, and so I was in error in using the term, and I apologize. Sometimes, in our haste to get out information, we get out the wrong information, a hazard of the journalistic profession.
That seems to be the case with a recent Wall Street Journal article on the Oakland Unified School District, getting out the wrong information, and I hope the Journal is as quick to recognize its errors, and correct them.
The June 22nd “Taste” article “Another School Dropout” by WSJ deputy “Taste” editor Naomi Schaeffer Riley (first called to our attention by Alex Gronké’s blog on the NovoMetro online Oakland newspaper—thanks, Alex), reports on the decision by OUSD Budget Director Barak Ben-Gal to leave the district to take a job as Yahoo.com’s Director of Corporate Finance. The article is what you would expect from the Journal, an advocacy for corporate control of public institutions. That’s the Journal’s position, bless their hearts, and they have the right to hold it. But as the saying goes, they ought not to alter the facts in order to make their point.
“When Mr. Ben-Gal started his (Eli Broad Foundation) residency (at OUSD in 2004),” Ms. Riley writes, “the Oakland Unified School District was bankrupt. It had been placed under state control, and [Mr. Ben-Gal’s] first role was as the special assistant to the state administrator. In the subsequent two years he was the executive officer of financial services and then finally the budget director for the whole district. Today, thanks in some part to his efforts, the district is out of bankruptcy…”
OUSD is out of bankruptcy? That seems odd, because we never knew it was in.
Bankruptcy, in lay terms, is a situation in which an entity—person, company, and so forth—has gone so far into debt that it has become impossible to pay off their debtors with their available income and assets, and must file a petition with a “bankruptcy court” to declare himself, herself, or itself “bankrupt.” The result of this situation is that sometimes the bankruptcy court allows the entity to legally reorganize, paying off only a percentage of each of its debts with its available funds, and start over fresh. In some instances, the situation is so bad that the entity (if it is a company or other type of “thing”) has to be completely dissolved and its assets divided up between those it owes.
That was never even remotely the case with the Oakland Unified School District. To paraphrase the Cowardly Lion said in the movie version of “The Wizard Of Oz,” not never, not nohow.
In the spring of 2003, the district discovered that it was not able to meet its final school year payroll and formally requested a loan from the State of California to pay its bills (some of the details of the why’s and how’s of the series of circumstances that led to the state loan have been recounted here and elsewhere; some have yet to be publicly revealed). In any event, a $100,000 state line of credit for OUSD was established, and the state takeover resulted. The final spring, 2003 payroll was met in full, as were all of the other debts and obligations of the district since, including payments on the state loan itself.
So if the actual definition of words have any weight here and in the Wall Street Journal, the Oakland Unified School District was never “bankrupt.” OUSD did not have enough money to pay its bills, so it got a loan from the state to do so. Getting a loan to meet your bills, in the corporate world, is commonly called “refinancing.” It is not called “bankruptcy.”
But perhaps Ms. Riley was simply loose with the use of a popular word, as I was in the above-stated CEDA “moratorium” case, and what she really meant was that OUSD found itself not “bankrupt” but “without enough money to make a debt payment” in the spring of 2003, or, to describe it in the way most of us would, “seriously in debt.” If that is true, however, it leads to a problem in Ms. Riley’s initial assertion about the success of Mr. Ben-Gal’s tenure. If you substitute “seriously in debt” for “bankrupt” in the above-quoted passage, you come up with the following formation: “When Mr. Ben-Gal started his residency, the Oakland Unified School District was [seriously in debt]. … Today, thanks in some part to his efforts, the district is [no longer seriously in debt?] [less in debt?] [out of debt?]…” The fact is, none one of these suggested three final clauses are correct. At the time of the state takeover, the OUSD state administrator drew down $65 million of the $100 million state line of credit in order to meet the spring, 2003 payroll and subsequent operating expenses. Three years later, as his last official act leaving the district last year, OUSD State Administrator Randy Ward drew down the remaining $35 million of that credit line. As a consequence, OUSD is deeper in debt (my emphasis) now than the district was at the time of the state takeover and during the time of Mr. Ben-Gal’s tenure as OUSD Budget Director.
Not that I’m blaming Mr. Ben-Gal for those problems. I simply don’t think he ought get credit for fixing something which is broker (if that’s a proper word) than when he started.
But there are more problems with the factuality (if that’s a proper word, as well) of the Wall Street Journal article.
Mr. Ben-Gal talks of the difficulties of getting competent help in the public sector (which he contrasts with the competence we are so used to seeing in the corporate sector—ha!), and then Ms. Riley continues “Even if you can assemble a team of competent people (and somehow hold on to them without offering merit raises), Mr. Ben-Gal notes that you are still constrained [in a public school district] in ways that would be unimaginable in the private sector. For instance, he [Mr. Ben-Gal] compares the operations of his local school board with the board of a corporation. ‘Corporate boards look at big-picture governance. They ask, “What are the major milestones our CEO should be achieving?” Board conversations are held behind closed doors because the board members are supposed to act as trusted advisers.’ By contrast, the Oakland board, like most school committees, has all of its meetings televised. Every contract, no matter how minuscule, must be put to a vote. And every financial decision has to be put on hold while waiting for a monthly board meeting. As for its members acting as trusted advisers, Mr. Ben-Gal assures me that thanks to the public nature of its meetings, ‘the school board typically knows less than what the staff knows.’”
One wonders what school district, let alone what corporate board, Mr. Ben-Gal is talking about.
During the two years that Mr. Ben-Gal worked at OUSD, the school board functioned as an advisory body only, powerless, with no ability to decide anything. No contracts were put to a vote, if, by vote, we mean the process by which the decision was made. If financial decisions were put off, for a month or for any other period of time, it was at the discretion of the state administrator who was free, under the terms of the state takeover, to make those decisions at any time, without waiting for a school board meeting or a school board opinion.
But, of course, Mr. Ben-Gal’s description of school districts would not appear to apply, even where the school board retains power. Though there are glitches, and the system is far from perfect, the role of the school board in an independent school district is to set policy, and the role of the superintendent—or chancellor, in the case of a college district such as Peralta—is to implement that policy on a day-to-day basis. Sometimes school and trustee boards infringe on the territory of their administrators, and sometimes those administrators take on policy-setting roles that should properly be in the hands of the board. But that’s one of the dynamics and give-and-take of democracy, as these public bodies go about the public business, and because these operations are supposed to take place in full view of the public, the public often intervenes, and these things get themselves corrected.
And that, in the end, seems to be Mr. Ben-Gal’s and Ms. Riley’s real problem here, not with anything specific Oakland Unified. It is not OUSD, but the public operation of the public schools, about which they appear to be complaining. If only the public schools were run in the corporate way—in fact, if only the corporations would be allowed to take them over—things would be done logically, efficiently, smoothly, etc., etc., and etc. That is the implication of the “Another School Dropout” story.
I don’t mind Mr. Ben-Gal and Ms. Riley and the Wall Street Journal saying that. It is, after all, their right, in a democracy, to hold and advocate their own opinions. I learned that particular civics lesson at Highland Elementary, and then at Havenscourt Junior High, and then at Castlemont High School, during the years I attended the Oakland public schools. It wasn’t such a bad education, all things considered, and since I’ve never been to corporate school, I’m not in a position to judge whether corporate education might have been better. In this regard, perhaps Mr. Ben-Gal and Ms. Riley know more than I. If they do, I wish they’d use some actual facts to show me. |
