Incompetence or corruption at Stockton Unified; It’s got to be one or the other

Ruinous financial decisions by sketchy school officials are steering Stockton’s largest school district towards insolvency, the San Joaquin County Grand Jury reported last week.

Here’s what the Grand Jury did not say: many actions by leaders in Stockton Unified School District raise suspicions of corruption. It is no secret the FBI is investigating.

“With deficits approaching $30 million per year by fiscal year 2024-2025, the financial forecast for Stockton Unified School District is dire,” the Grand Jury concluded in a scathing 46-page report.

This crisis is all the harder to understand as in recent years the district has been awash in hundreds of millions in federal rescue dollars – though where that money went is unclear.

Incompetence, suspicious dealings, missing records, and the looming financial train wreck – it’s a fishy smelling fiasco.

The Grand Jury report blandly mentions district leaders “not adhering to policies and procedures regarding financial transactions.” In fact, leaders show alarming fiscal irresponsibility and disregard for rules.

·         The district is spending $26.3 million of federal rescue money a year on essentials such as salaries and benefits. Uncle Sam’s money is scheduled to dry up in 2025. The doomed practice of using one-time money for ongoing expenses helped bankrupt the City of Stockton.

·         The dysfunctional Business Services Department, or BSD, which manages district finances (accounting, budgeting, payroll, etc.) is staffed by newbies who don’t know what they are doing and who lost track of millions of dollars, the Grand Jury reported.

The BSD “is not able to provide the data and accounting for key reports,” the report laments. Of the whopping $241 million in relief from Uncle Sam, “… the Grand Jury was unable to determine specifically how spending of relief money … was conducted.”

Even Trustee Angel Ann Flores, the lone board dissenter, has trouble obtaining financial information.

“We don’t get to see bank statements,” Flores said. “We only get to see the documents they provide us.”

·         District leaders blow off oversight of “change orders” on construction projects, “leaving the Board and senior management unaware of overruns,” the report says. Of 31 contracts reviewed by an outside consultant, only one change order was taken to the Board of Trustees.

The upshot: millions in cost overruns. “For example, athletic facility projects at Franklin High School had an overrun of approximately $6 million. No change order was submitted to the Board …”

·         Grants can amount to free money. But Stockton Unified disbanded its Grant Development Office in 2021. Now no single department or individual is in charge and the district is missing out on millions in grants, causing “unnecessary spending from the general fund.”

Incompetence may not be the only story here. The San Joaquin County District Attorney’s Office and the FBI have been questioning Stockton Unified’s leaders and whistleblowers for weeks.

The Grand Jury report offers some clues why.

·         When Stockton Unified’s previous Superintendent, John Ramirez Jr., came aboard in 2021, many senior executives quit or were replaced. One position that turned over is Chief Budget Officer, or CBO. New CBO Marcus Battle was hired “contrary to Board Policy … without a search, screening process or interviews … creating diminished internal and external confidence.”

The CBO manages district finances, including the millions of dollars neither the district nor the Grand Jury can account for.

In 2021, SUSD hired the state Fiscal Crisis and Management Assistance Team to audit the district’s budget and contracting process. Even these specialists were partly stymied by Stockton Unified’s opacity. “FCMAT requested but did not receive district documentation for all funding sources.”

Now – in a sign something is seriously amiss in Stockton Unified – FCMAT is going deep, conducting an unprecedented “AB139 Extraordinary Audit” over the next 12-18 months.

Ramirez resigned earlier this month, citing the need to take care of his elderly parents.

·         The Board of Trustees often ignores the “qualifications-based selection process” required for consultants and services, and routinely disregards staff recommendations, “potentially causing the hiring of lesser qualified and/more costly vendors.”

Trustees have little or no public discussion when discussing big contracts and sometimes discussion “was cut short by the board president.” Meaning trustees are either ill-informed or deciding behind closed doors in violation of the law.

The report also notes the curious “inability of Trustees to recall how they voted on major contracts.”

Nor was the Grand Jury able to overcome board amnesia by searching records. “…many Board meeting minutes were not publicly posted and the District did not fully comply with a subpoena for minutes and recordings.”

This last transgression, not complying with a subpoena, is the reddest of red flags.

What should not get lost in this story are Stockton Unified’s 37,559 students. They are key to whether Stockton thrives or languishes. Taxpayers might also worry about higher taxes should Stockton Unified go deeper into the red.

The Grand Jury report says if Stockton Unified doesn’t clean up its act, it may have to be taken into receivership by the San Joaquin County Office of Education.

If incompetence is the problem in Stockton Unified, that course may do the trick. Though additionally, all board members except the brave dissenter Angel Ann Flores should be voted out of office. Certain hires by former superintendent Ramirez also should be replaced.

If, however, the problem is corruption, receivership by an educational bureaucracy may not be a strong enough measure. The district should be taken into receivership by a law enforcement agency that conducts further interviews, forensic audits, uncovers crimes, and leads crooks off in handcuffs.

Michael Fitzgerald’s column runs on Wednesdays. Phone (209) 687-9585. On Twitter and Instagram as Stocktonopolis. Email: michaelf@stocktonia.org.

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