Submitted by Darren Smith, Weekend Contributor
In the Los Angeles area a quickly drawn school board meeting demanded by members of the public, a hearing was held on the total compensation package of Centinela Valley Union High School District Superintendent Jose Fernandez. The package with salary, benefits, and perks for the calendar year 2013 amounted to $663,365.00. The school district has 6,600 students enrolled. This compares, or rather contrasts, with that of John Deasey, Superintendent of the Los Angeles Unified School District who received a total compensation package of $309,997.00 and enrollment of 650,000 students. President Obama receives a compensation package of $569,000.00
In addition to Jose’s base salary the compensation package included a loan of $910,000.00 to purchase a residence in the affluent Ladera Heights neighborhood with a term of 40 years and an annually compounded interest rate of 2%, half the prevailing market rate at the time.
Is this a compensation package commensurate with the talent brought to the school district or another example of news reports of questionable public employee compensation endemic in California as of late? Much more intrigue follows.
Reports by the Daily Breeze state that though Centinela Valley High School District is made up of just three comprehensive high schools and a continuation school in Hawthorne and Lawndale, Jose’s payout in 2013 more than doubled that of his peers in larger neighboring South Bay districts. Prior to Jose’s tenure the school district was on the verge of insolvency, nearly being taken over by the State of California. Since this time the financial stability of the school district has improved and test scores have improved. But one has to ask was the improvement efficient with the extremely high compensation level Jose commanded and could a much less costly talent provided the same benefit?When comparing the cost of the compensation packages between Jose and the Los Angeles Unified School District’s superintendent the cost per student is two orders of magnitude higher. Jose’s is $100.51 per student compared to 48 cents per student with John’s at LAUSD.
Perks Perk up Ears
The spike in the level of compensation provided to Jose roughly coincided in the same year, 2012, with a bond issue that Jose was instrumental in receiving voter approval. The bond issue provided an additional $4.7 million per year in additional operating revenue for the school district, bringing the total to just under $50 million. The benefits package that was above the salary level alone was just under 8.5% of the revenue increase.
In a quite disturbing clause in the employment contract Jose signed with the district he was to be provided with a loan providing for his housing. The loan was as previously stated $910,000.00 for a property located in an upscale neighborhood. The district carried the contract secured with a promissory note and deed of trust. The curious part of this was the loan was floated despite Jose having filed for bankruptcy and there was no provision for any down payment toward the loan, in other words a nearly 100% loan to value on a high risk borrower at submarket interest rate for 40 years where convention is no longer than 30 with no down payment.
One Million Dollar Man
News reports mentioned that in addition in the contract of a whole life insurance policy as part of the compensation policy. Your author reviewed the contract (a link is at the bottom of this article) and found the following provisions.
“As a management incentive granted due to the unique nature of duties [unique nature of duties is mentioned often in the contract] performed the District shall provide Superintendent, at District’s expense, with a fully paid Custom Whole Life insurance policy from New York Life in the Face amount of $1,000,000. The beneficiary of any such policy of life insurance shall be the District for the first $200,000 and the beneficiary selected by the Superintendent for the remaining policy value. If Superintendent separates from service for any reason the policy and its premiums shall become the sole responsibility of the Superintendent and Superintendent shall have the right to change or name beneficiaries as he desires. The endowment period for the policy shall be ten (10) years from inception.”
Your author does not have the specifics of this New York Life policy but in reading the provisions in the contract the following tenants are common to Whole Life policies.
A wholly paid policy such as this means that the insurance policy is funded by a single payment made at the policy’s inception and generally no further premium payments are required. If Jose becomes no longer employed by the district he may, at his election, choose to remove the school district as a beneficiary. The endowment period of ten years means that if Jose does not die before the end of the ten year period he receives the full $1,000,000.00 as a cash payout at its conclusion. Additionally, whole life policies have cash value, especially if fully funded at inception, where the policy holder may take out loans secured by this cash value; a very helpful benefit for a person with poor credit.
The million dollar payout in ten years is not the only, as one could put it, retirement benefit that Jose received. There is in the contract a clause allowing him to be reimbursed by the district for purchasing “air time,” or up to five years of service to add to the number of years he actually worked, so as to boost his lifetime pension in the PERS retirement system. What this means is that the district buys forward an extra five years of contributions for pension plan. The clause provides that the school district will pay both the district’s obligation and the employee’s portion of the payment. This benefit amounted to $215,000.00. Of course it was optional for Jose to choose to accept this benefit, but why would he not considering it was five years of pension contributions for effectively no cost to him personally.
Work Less Paid More
Additional perks included a 215 day work year compared with 245 for superintendents in the area plus a 30 day vacation benefit. So effectively this amounts to sixty days of vacation per year. There is also a stipulation that Jose could only be fired by a vote of 4 out of 5 school board members with a clause of up to 18 months of severance pay depending on time of year the decision was made. A monthly expense account in the amount of $1,000.00 is provided and he receives $7,200 in mileage expense compared with $2,436 for the LAUSD superintendent.
Trust But Don’t Verify
One could argue such a generous compensation package might be commensurate with high marks on annual performance evaluations as the employment contract requires. According to The Daily Breeze, Jose had received only one annual evaluation since 2009. Conveniently, the employment contract called for automatic renewal should he not be evaluated at the end of any given school year. It appears that this happened in every year save for fall of 2011, when then-board member Sandra Suarez — his biggest critic — demanded that the board conduct one.
“It kept getting postponed and postponed,” said Sandra, who lost her seat later that year to Lorena Gonzalez, the only new member of the five-member board. “Finally, they did one. And it was a joke.”
Sandra said the evaluation process was conducted so hastily that the district didn’t even have evaluation forms for the board members. She said board member Hugo Rojas — a former school board trustee in Hawthorne — had to bring a copy of that district’s evaluation form to use as a template.
“It was just absurd,” said Sandra, who was once censured by her board colleagues on the basis that her frequent inquiries were a drain on district resources. “It wasn’t done at all professionally, the way it should have been.”
Not all of the marks were negative. She gave Jose the top rating on about a third of the 60 questions, such as this one: “Informs the board and general public in an annual report or in a series of reports on the state of the schools in the district.”
She gave him the lowest rating on 10 items. On an item pertaining to “taking an active role in (the) development of salary schedules … which, within budgetary limitations, will best serve the interests of the district,” she gave him the lowest rating.
And she added a comment: “Score should be less. Gives himself allowances, perks and stipends but is not fair compared to what workers and teachers should be getting.”
Suzanne Meraz, a spokeswoman with the California School Boards Association, said she believes it is custom for school boards across the state to conduct one evaluation of a superintendent every school year.
Seeds of Discontent
The political intrigue in the school board began in April 2009, According to The Daily Breeze Jose received a 9 percent raise. Although the adjustment boosted his salary to a still fairly modest $163,000 at that time, teachers at the time were livid. About 100 of them held a demonstration at Leuzinger High School in Lawndale to protest the hike while they were facing the prospect of mass layoffs.
In November 2009, a dramatic local election would later prove a boon for Jose. The two incumbents on the school board supported by the teachers union — and who voted against making Jose the permanent superintendent — were replaced by former Hawthorne school board member Hugo Rojas and then-23-year-old Maritza Molina, who had just graduated from UC Santa Barbara.
To this day, Hugo and Maritza, along with longtime board member Rocio Pizano, have been loyal supporters of Jose. In December 2009 — about a month after they were elected — the three of them, along with Sandra and current board member Gloria Ramos, unanimously approved Jose’s current employment contract.
The Beginning of the End Game
The community, teacher, and union participants at the public hearing conveyed great dissatisfaction to sheer outrage as to what they perceived as a monumental scandal with this compensation package when other areas were being neglected.
“I can’t believe in the post-Bell era of high compensation that my own school district was paying an enormous salary to the superintendent,” said longtime Lawndale resident Cynthia Mosquada, prompting loud cheers. “I hope this board makes a change. If you don’t, the people here will be campaigning in the next election and we will.” [She is referring to a corruption scandal at the city of Bell, California where various officials received prison sentences]
Danielle Sevilla, a lifetime resident of Lawndale resident, said: “It’s with great embarrassment that I say I would not send my children to Leuzinger High School. It’s unacceptable that the superintendent was paid more than $600,000. The money should be put where it’s clearly needed most, the students. You’ve taken advantage of the people least able to advocate for themselves.”
Also weighing in Tuesday night were leaders of both the teachers union and classified union serving non-teaching employees.
“Many of the things you said before were a lie,” said Cesar Perez, president of the classified union. “We were told, ‘There is no money, there is no money.’ We had to basically beg for crumbs.”
One school district teacher testified that there was no money available to her for paper for her students to use in class. She said that she had to go to an office supply store and purchase it out of her own pocket.
Another gentleman in the crowd testified that he certainly was going to make an effort for a recall election to remove the school board from office.
Crow is a Dish Best Served Cold
In wave of back peddling school board members at the meeting expressed regret, pleaded ignorance, defended the district’s progress under Jose, and hinted that changes to the contract will be made.
“When the article came out, I reflected back and said: ‘This amount is large but the $271,000 was what we voted on,” said board member Hugo Rojas, referring to the amount the district has cited as Jose’s base salary. “I know my colleagues personally, that we would not knowingly give that high a salary.”
At that point, someone in the audience yelled: “Ignorance is bliss.”
Hugo continued: ”I am embarrassed, yes. I take passion in what I do. Contrary to what you hear in the media, we have to find facts behind what we’re looking at. And we’re going to be looking at this contract here and taking a lot of considerations.”
For his part in the end Jose declined to address any of the complaints about his compensation package, choosing instead to express his appreciation to the board for its support and touting his accomplishments.
“I want to thank the board for their support,” he said, over catcalls coming from a few members of the audience. “I want to thank residents in the area who voted for the bonds that funded new buildings, new science labs. “I do hear you. I’ve listened very carefully and I will sit and work with the board on your concerns. I want to thank you all for coming here and expressing your concerns. I want to thank you all again. Good evening.”
And to top that off, Jose did not have to resort to hyperbole when he said upon his arrival at the school district in 2008 “The facilities here were, my God, some of them were similar to the situation in Haiti.” If he was talking about the potential for enrichment and graft as was rife within the government of Haiti, perhaps he was this time being quite truthful.
Here is a report on the emergency board meeting from KCAL9 via YouTube. It is certainly worthwhile.
By Darren Smith
The views expressed in this posting are the author’s alone and not those of the blog, the host, or other weekend bloggers. As an open forum, weekend bloggers post independently without pre-approval or review. Content and any displays or art are solely their decision and responsibility.