By Olin Ericksen
Staff Writer

April 11 -- Looming financial storm clouds could impact increases to a school funding agreement that currently adds millions to the School District's cash-strapped bottom line, The Lookout News has learned.

After months of negotiations, Santa Monica City and school officials said Tuesday that they have finally agreed to an amount for the annual adjustment to a 2004 school funding agreement that last year contributed $6.2 million to the financially strained school district.

Officials, however, declined to reveal the amount of the first major readjustment to a historic school funding agreement until the April 24 City Council meeting.

Yet because the City's long-term spending currently outstrips revenues in its 5-year budget, the amount will likely fall short of the more than $1 million the district could receive if the City's financial engine showed signs it will operate at full throttle, many interviewed suggested.

"Some people will be happy and other won't," said School Board President Kathy Wisnicki of the closed-door agreement "But then there will always be people who won't be happy with wherever that number ended up."

Under the agreement, that funding could range from hundreds of thousands of dollars to $1 million more in annual funding for the local schools, which face a shortfall after agreeing to a 5 percent pay hike for teachers last month.

"Whatever we end up with is far better than schools across the state," said Wisnicki "With the additional (City) funds, it should bring us up just below the national average for school funding per student, while students across the state are fare below the national average."

Still, the financially stretched District "could certainly use the million dollars," Wisnicki said, although school officials did not go into negotiations with any set amount in mind.

Mayor Richard Bloom, who was present during talks, said the City would need to meet certain financial conditions before the funding could be increased to the full amount called for under the agreement.

"The agreement did not provide for an automatic increase if conditions were met," said Bloom, a lawyer by profession. "It said rather that the intentions are there to maximize the amount of money to the district and that the revenues act as a bellwether to determine the amount."

Further, long-term spending for City operations shows a deficit may be looming in the future, City officials said.

"This isn't a one year deal," Bloom said. "We don't know what other needs for the City need to be met."

Education activists from Community for Excellent Public Schools -- the group that pressured the City into the agreement by threatening a ballot measure -- believe the City can support the full increase.

"Our review of the City's revenues in the audited financials led us to believe that the benchmark revenue amounts had been met," said Shari Davis, co-chair of CEPS.

"CEPS was very hopeful that the rebasing of the Joint Use Agreement between the City of Santa Monica and SMMUSD would follow the formula agreed upon in 2004 and result in the maximum increase of $1 million."

"The delicate balance that was reached in 2004 was based on a community value CEPS embraced that as the City prospered, so should the schools," she said.

"Since state funding for public schools is far short of adequate, these additional dollars from the City of Santa Monica are vital for our local schools to have the resources they need to meet educational goals we all expect."

In addition to discussions over the amount of the increase, negotiations also touched on the longstanding issues of financial accountability and oversight in the district, which some City officials have said is lacking.

"Financial oversight at the District became an important part of the talks, and we will be asking for additional levels of accountability so the district will move forward in a fiscally responsible manner," said Bloom.

While a rancorous vote in May of 2004 -- City Council member Pam O'Connor, who ultimately voted for the agreement, referred to CEPS activists as "school-yard bullies” -- all the parties involved said there was a much different atmosphere during the recent negotiations.

"There was a really vibrant discussion, but no dissention," Bloom said.

Wisnicki and City officials agreed.

"We were in complete agreement that about how good this agreement has been for the students and that this has been a mutually beneficial relationship," she said.

The five-year agreement -- which allows public use of district facilities -- calls for a cost of living adjustment of between 2 and 4 percent in addition to the base $6 million annually carved out by they city.

The additional increase negotiated this year depended on the fiscal health at the City's "Big Eight" revenue streams, but also took into account the overall health of long-term municipal finances.

If the revenue streams falter enough, City payments could be held constant or reduced by no more than $1 million.

After five years, the original agreement could be renegotiated for two 2½-year terms that could further boost the amount the district receives.