'A self-induced problem': Weed Union School District is clinging to solvency. How'd this happen?

The Siskiyou County Office of Education has sent letters notifying a Siskiyou County school district it will be unable to meet its financial obligations in the current and following two school years with its current budget. 

The Weed Union School District discovered infestations of toxic black mold and structural issues in five out of six of its buildings in 2020 and 2021. It began constructing a new campus in 2021, borrowing money from its reserves and entering a financial spiral, Superintendent Jon Ray said. 

Here's what the Weed Union School District is facing:

• The district owes more than $8 million and does not have funds to support its contractual commitments, Siskiyou Superintendent of Schools, Kermith Walters, wrote in a letter to the district obtained by the Record Searchlight.
• Weed Union Elementary is facing a shortfall of over $2.8 million, Walters wrote. 
• After its February payroll, Weed Union Elementary only had $20,000 remaining in its general fund but issued raises to its 62 staff, according to the letter. Salaries and benefits take up nearly 78% of a typical district’s budget, Walters wrote. 

Walters also outlined a series of tasks the district could follow to get out of debt, including appointing a fiscal expert to come up with a plan to address its financial condition. 

“In my 16 years as superintendent, this is the first time this has happened,” Walters said. “This is a self-induced problem. It’s something that they did to themselves. … I’m hoping they come out of this.”

Ray, a relatively new school district leader at Weed Union Elementary, said he is aware of the fiscal issues. In its financial report submitted to the county in February, the district board self-certified as "qualified," a flag indicating they may not be able to make their financial obligations, Ray said.  

Ray said the issues discovered in the district buildings, constructed in the 1940s and 1960s, made them unsafe for students to occupy. The school district is taking unprecedented steps to solve the critical design flaws that have landed it on the financial watch list.

The new construction needs to be completed as soon as possible, he said, and the financial shortfalls are due to the ongoing construction costs. 

“No one was coming to our calls of distress and help,” Ray said. “We literally had to drive this ship very close to the rocks. Twenty thousand dollars close to the rocks.”                            

The case for construction

Every morning, as Ray weaves through the makeshift portable classrooms of Weed Union Elementary, he stops to high five, hug and cheer on students. Two tan Labrador retrievers, Kona and Stella, follow him.

Ray said although he began less than two years ago, he already knows the name of every one of the 325 students who go to the school. He was raised in Weed and after working across the state — most recently as superintendent at Klamath-Trinity Joint Unified School District in Humboldt County — he joined Weed Union Elementary in June 2020.

Upon Ray’s arrival, he noticed a familiar pungent smell in three of the six school buildings. The stench made him recall his time at Klamath-Trinity, where he started a project to rebuild nine school buildings due to a black mold issue. He smelled the lingering odor of those hallways again in Weed, he said.

After closer inspection, an industrial hygienist from Asbestos Science Technologies Inc. discovered black mold growing in the administration and library building in October 2020. The mold was growing due to an issue in the 1960-designed building structure, Ray said.

That’s when the district began borrowing money from its reserves to create a temporary, portable campus, Ray said.

“There is no revenue source or funding for a temporary campus and insurance wasn’t an option, as mold is not covered in school insurance policies,” he said.

Later, in June 2021, the Regas Group environmental consulting firm found more black mold growing in two classroom buildings holding third-through eighth-grade students, making them unfit for habitation.

Black mold grows in places that have had water damage or elevated moisture levels. It releases lethal mold spores into the air called mycotoxins, which damage the indoor air quality and cause health issues when inhaled.

When snow fell, it drifted into the exposed dormer-roofed structures of the buildings and eventually melted, leaking inside the walls. The district used to close the buildings every year while Aztec Construction scraped off the mold, according to a trail of annual repair bills from the company Ray said were given to him when he took over.

That same month, the Division of State Architects, a company that oversees the construction and design of facilities, also found a structural issue in the cafeteria, prompting its closure. The company also uncovered a "seismic design concern" in the building housing kindergarten through second-grade classes, Ray said.

Translation: During an earthquake, the building would collapse.

The district moved its students to portable classrooms, Ray said. In the fall of 2021, the school board learned that repairing the school buildings would cost more than 50% of the school’s value, Ray said. The board decided to rebuild the school buildings instead of repair them, in keeping with state law, he said.

The new school would cost approximately $32 million, Ray said. To fund the construction, Ray first reached out to the county education office for a loan in October 2021, but the county office didn’t have the resources, he said. 

So the district continued to borrow money from its reserves and broke ground on constructing its new campus that month, Ray said. 

Weed Union Elementary is using $5 million from its own budget to fund constructing the new campus and is anticipating to receive about $27 million from the state, Ray said.

The construction project isn't the cause of the low cash levels, but the district's continued borrowing money from its reserves to fund construction is, said Walters, the Siskiyou superintendent, an interview with the Record Searchlight. 

But the district is only borrowing funds that it is confident the state will replenish, Ray insists. Ray said he is in contact with the Office of Public School Construction (OPSC), which is aware of the actions he's taking.

In a letter from the California Department of General Services in February, Operations and Policy Manager Bran Lapask confirmed that Weed Union Elementary has met multiple times with the OPSC to discuss the construction project after seeking financial hardship assistance in June 2021.

According to the letter the OPSC is “concerned about the speed at which the projects are moving” and that decisions are being made before OPSC can confirm the amount the district is eligible to receive.

But on April 29, Ray received a check from OPSC for $8 million, replenishing the district’s reserves, paying off construction contracts and allowing Ray to stay afloat until at least August 2022, he said.

Issuing employee raises

Although the pandemic sent students home and schools transitioned to distance learning in the spring and fall of 2020, Weed Union Elementary kept its doors open in the fall of 2020 and allowed its then-265 students to return to their classes, Ray said. Enrollment grew, reaching 360 students before the district capped it, he said.

The incoming one-time $1.8 million COVID-19 relief funding went to hiring more staff, Ray said. The 10 instructional assistants increased to 20. The two custodial staff became five.

But the district also issued raises to staff to match inflation, Ray said. The raises are concerning and cost an additional $522,160 in 2021-22, according to SCOE. And the district is already struggling to pay off its contracts. So the raises pose a challenge for the district’s ability to pay its staff, according to SCOE’s letter.

But Ray said he raised the salaries knowing the amount of money in the general fund and confident that he will be receiving money from the state. He also relied on the COVID-19 relief funds.

After the February payroll, Weed Union Elementary only had $20,000 in the general fund, as SCOE outlined. That amount went to pay staff in March. In the same month, Ray issued at least 10 COVID-19 staff hires along with layoff notices, he said. 

In April, Weed Union Elementary received an expected $478,000 payment from the state as part of the financial plan, Ray said.

All of the district’s employees were paid their monthly salaries, he added.

“There’s a give and take,” Ray said.

What is Weed Union's financial plan?

With the staff salaries taken care of, the $8 million check from OPSC is what will pull the district out of its remaining financial troubles for now, Ray said.  

According to the district’s six-month plan, it will first replenish the money in its reserves and then pay its construction bills.

The plan is evolving, Ray said. It started in October 2020 and is updated every Wednesday, he said.

“We calculate our cash flow for at least six months out,” he said.

Here is the district’s six-month plan to utilize the $8 million:

• May: A total of $930,000 will be paid to vendors and $1.1 million will be returned to the district’s reserves, Ray said. This will pull the district out of its qualified standing. That leaves $5.97 million.
• June: Ray is anticipating another $1.2 million in construction and $720,000 bill coming up. That leaves $4.05 million. 
• July: A total of $1.5 million in construction bills is due. That leaves $2.55 million 
• August: A total of $2 million is due in construction costs. That leaves $500,000. Ray anticipates that he will need to borrow $10 million from investors in the private market,
• October: Ray is expecting to receive a $17.5 million check from the state to pay back the investors, he said. 

SCOE wants to see Weed Union's plan

About a 30-minute drive north of Weed Union Elementary, Siskiyou Superintendent of Schools Walters said he is still waiting to hear from Weed Union Elementary about its financial plan to move away from its negative certification.

Ray has until mid-May to early June to share the plan with the county office, Walters said.

“It’s great that they got that $8 million, but that’s not the infusion of cash into their general fund,” he said. “It’s not going to solve their long-term cash flow issues.”

Nada Atieh is a Report For America corps member and education reporter focusing on childhood trauma and the achievement gap for the Redding Record Searchlight. Follow her on Twitter at @nadatieh_RS. Help local journalism thrive by subscribing today! And if you are able, please consider a tax-deductible gift toward her work.