For the second year in a row, Berkeley Unified issued its only charter school a notice of violation for fiscal mismanagement, a precursor to the possible revocation of the charter.
The citation, approved unanimously at the Feb. 7 School Board meeting, targets only the middle school portion of REALM Charter School, which also has a high school in Berkeley. The school has until April 11 to come up with a plan to remedy its financial issues, or the School Board could pursue the closure of the middle school. The high school, which is in better shape, would stay in operation.
REALM Middle School’s financials have actually improved this year, due to teacher layoffs and other changes, but the district says it is still on shaky ground. Even though the school is projected to end the 2017-18 school year with a $270,000 surplus, it will still carry a $1.2 million deficit.
To the district, the latest figures demonstrate that REALM has not been able to emerge from the financial challenges that have plagued the schools for some time. The district cautiously renewed the charter in 2015, on the condition that REALM would soon balance its budget and provide monthly financial reports to BUSD.
After an audit found that the middle school ended the 2015-16 year with a negative balance of more than $1 million, and deficit-spent after projecting a surplus that year as well, BUSD issued its first notice of violation, to both REALM campuses, in January 2017. The district ultimately allowed the schools to stay in operation this year, but reviewed the situation this past fall and said REALM’s finances had not improved enough.
“Even though there’s a surplus, we’re still very concerned about the negative ending fund balances,” said Pauline Follansbee, interim assistant superintendent of business services, at the Feb. 7 board meeting. “And we’re obligated on the law to avoid fiscal mismanagement.”
REALM’s leadership has taken issue with the district’s decision to issue a notice of violation this year, and with the process it followed to get there.
The January 2017 notice gave the charter school until that July to come up with a remedy. REALM responded on time, providing answers to each of the district’s questions about its situation. If BUSD had wanted to pursue revocation at that time, the district would have needed to do so within 60 days. Because it didn’t, nothing happened to REALM.
REALM Director Victor Diaz said it has come as a surprise that BUSD is still unhappy, given that staff did not comment on the charter school’s remedy plan over the summer, or tell the leadership they should be doing anything differently than they had planned to do at the time.
“We implemented everything we said we would,” and the improvement demonstrates that, Diaz told Berkeleyside. The school laid off teachers for the first time since it opened, and cut back on other costs, he said. This year, REALM staffed its schools based on actual enrollment numbers, not on projections, like it previously had.
In August, district staff did send a letter to Diaz expressing concern about REALM’s financial situation. But it focused on the previous issues and did not comment on the school’s improvement plan.
Regardless, BUSD staffers say their worries extend beyond the content of last year’s notice.
In the notice issued last week, BUSD Superintendent Donald Evans wrote that the district is skeptical REALM Middle School will meet its projections of large increases in revenue and enrollment in the next two years. Although the student body at the middle school has dropped by more than 100 kids over the past two years, REALM says it is expecting a 50-student increase next year. Diaz said he expects to recover students lost during years of uncertainty, and draw more when REALM moves to a better location next year.
If the middle school does not meet its projected enrollment numbers, it will end up much worse off than it expects to. State funding is highly dependent on average attendance at schools, and more funds are awarded based on the number of vulnerable students attending a school.
Even if the schools do improve to the extent they expect to, the middle school will still end the 2019-20 year with a negative balance, according to BUSD.
The district also expressed concern that REALM has not been able to pay for various services it uses and is indebted to lenders. Alameda County has stopped providing counseling services to REALM due to unpaid bills.
The notice also said REALM has not provided the monthly budget updates it agreed to.
Middle school set to move to North Berkeley
Regardless of the financial strife, REALM is still moving forward with plans to relocate its middle school campus to the Pacific School of Religion on North Berkeley’s “Holy Hill” this fall, Diaz said.
Currently, REALM’s middle school rents space at BUSD’s West Campus and the high school operates out of a building on Eighth Street.
The district initially declined to extend REALM’s lease at West Campus for the 2017-18 school year, citing plans for construction. Eventually REALM was allowed to use a smaller set of classrooms there under the condition that it would vacate this summer. The planned construction has not yet begun at West Campus, but the School Board recently gave final approval for the $10 million project, which will set up the site to serve as a “swing campus” during construction at other schools.
In October, the Pacific School of Religion (PSR) announced that it had entered into an agreement with REALM to move the middle school to the North Berkeley “Holy Hill” campus in 2018-19.
REALM and PSR consider the move mutually beneficial. PSR’s population will be better connected to the community and a fellow educational institution, and the campus will again be brought to life with student activity, since most graduate students now live off-campus. REALM will have better access to nearby UC Berkeley, where students already participate in robotics competitions and other events. The also cash-strapped PSR will bring in revenue from rent, and REALM expects to access a grant it already uses at the Eighth Street property, to cover much of the rent.
Diaz designed REALM, first chartered in 2011, to provide a hands-on, “project-based learning” program focused on social justice and innovation. The schools have received accolades for their work. Each year, REALM students have received coveted scholarships and gotten into prestigious colleges, according to Diaz.
“I think you’re doing a lot of great things at REALM,” board member Judy Appel told Diaz at the Feb. 7 meeting. “That’s not, I don’t think, in front of us. I think the question is our responsibility as a fiscal oversight agent.”
REALM families have implored the district to do anything it can to allow the charter schools to keep operating in Berkeley.
Because REALM is a charter school, students do not have to live in Berkeley. (It is an unusual charter school in that the teaching staff is unionized, however.) If REALM served more kids from Berkeley, it would be entitled to more money from district. Many of REALM’s students come from the Richmond area, and the percentages of low-income students and students of color are higher than at other BUSD schools. Some students and parents have told the School Board they consider REALM a refuge from pressures they faced at schools in their own district.
However, the enrollment numbers dropped by about 50 students between 2015-16 and again the following year, likely in part because of the uncertainty of REALM’s future.
If the board decides to pursue revocation after April 11, there will be a public hearing and a vote before the new school year is set to begin.
“That’s only on the assumption they don’t make changes to their budget,” Josh Daniels, School Board president, told Berkeleyside. “There’s no guarantee.”