PCS under fire for heavy handed pressure to “donate”

The Santa Cruz County Office of Education has consulted legal counsel regarding the fundraising tactics of Pacific Collegiate School.  In April 2011 Principal Archie Douglas sent a heavy-handed personal letter (see below) to PCS parents who did not contribute to the school’s Annual Fund Drive.  Public schools practices are under close watch by the ACLU and the legislature as practices begin to drift further and further from the free public education promised by law.  The outcome of the investigation by the County Board is still pending.  COE board members are reported to be divided in their response on this issue.

In the interim, the issue is garnering national attention through a flurry of comments on the Thoughts on Public Education news site and blogs.

In addition to the ethical questions raised when the principal, the academic leader of a school, is pressuring specific parents directly to donate, there are questions about the transparency of the actual financial status of PCS.  In the Annual Report distributed to parents, the school shows only a very slight excess of revenue over expenses. In its messaging, PCS states that parent donations are essential for the day to day operations of the school.  It is made abundantly clear to parents that the programs that serve their children are dependent on their individual contributions (“you get what you pay for” – Archie Douglas).

And yet.  The actual financial reports – not distributed to parents, but available by public records request – show that the school ended the year with almost $300,000 in excess revenue.  The Annual Fund Drive brought in $771,000 from parent donations.  Instead of meeting the needs of the students currently enrolled, nearly half of those parent donations have been added to the school’s already astounding cash reserves.

Charter schools are required to maintain an economic uncertainty reserve of 5% of operating expenses. PCS wisely set their target at a conservative 17.5%.  After years of a high pressure donation campaign (including collections calls from other parents and board members) for “day to day” needs, PCS has accumulated cash reserves of 68% of their operating budget.  A school with annual revenues and expenses under $4 million is sitting on $2.4 million in cash.

In a recent board meeting, the excess revenue was acknowledged.  The board voted to grant Principal Archie Douglas a $6,000 bonus and give teachers a 2% increase in base pay. The remainder of the excess will be addressed in the 2011-12 budget yet to be made pubic.

It is appalling that parents are shamed and named into paying $3,000 per year per student under the misleading impression that PCS is under-funded while the board – with no oversight from its chartering authority – accumulates cash at an astonishing rate.  The PCS board has not disclosed their intent, but recent discussion with a realtor indicate that parents may have been contributing to a capitol campaign all along.

Letter sent to 93 non-contributing Pacific Collegiate families:

April 28, 2011
Mr. **** and Ms. ****
Dear *** and ***,
Everyone knows we’re a public school, and no one is unaware of the financially challenging times we’re all experiencing these days. Whether you’re a family or a school, every penny counts, right? I am currently working with the Finance Committee on next year’s budget. With that said, while I know you have not been able to make a financial contribution to PCS yet this year, I am writing today to urge your participation in this year’s Annual Fund.
I don’t mean to appear insensitive in making this request. We know our families are grateful for the quality educational experience that PCS provides, but the fact is that it just cannot be provided with public funding alone. If you don’t make a tax-deductible gift to the Annual Fund this year, your share of that burden will be passed along to other families, and we will be that much more limited in what we can offer, whether it be through staff compensation or program resources and support.
Of course, your decision not to participate in this year’s Annual Fund Drive might be rooted in other issues or concerns. If that is the case, I hope you will follow up and let me know. I have yet to work in a school that could not improve, and that effort always begins with communication and understanding. I hope you will feel free to arrange a meeting with me at any time to talk through troubling issues.
I firmly believe that in education, you get what you pay for: there are no bargains. The great success of the PCS Annual Fund over the years stands as proof of that assertion; it makes the difference between excellence and mediocrity. All of us are being careful with our money today, so why not make PCS your philanthropic priority? Yes, we ask for $3,000 per student, but we also know that not everyone can dig that deep. So do what you can – please. We need you, and every family like you, to contribute what you can to the PCS Annual Fund Drive.
Please help us get to the fiscal finish line on June 30 without compromise to our great program. Know that every gift – no matter the size – makes a financial difference, and that every contributing family joins a large circle of community support. PCS is special – join us in keeping it that way!
Thanks for your support,
Archie Douglas


County Office of Education challenged on PCS Charter Renewal

The rescheduled public hearing is supposed to take place in fewer than 48 hours.  We have just received a lengthy challenge to the PCS charter renewal that addresses issues with discrimination, diversity, access, public meeting laws, admissions policies and more. The County Office of Education has received a letter from the Dannis, Wolliver, Kelly law firm outlining a number of issues with the Pacific Collegiate School charter.  The primary areas of concern are:

  • Discrimination, Racial & Ethnic Balance
  • Admission Preferences and Requirements that Prevent Diversity
  • Unlawfully Requiring Parents to make Financial Contributions & Work for the School
  • Charter must be Denied Absent Countywide Admissions
  • Brown Act Violations
  • Violation of Lease Terms
  • Failure to Produce Memorandum of Understanding

The letter references and includes excerpts from the Diversity Task Force report and includes a letter from former PCS board members imploring them to adopt the Diversity recommendations.

The letter may be downloaded here. (62 pgs, 2.7 MB)

The hearing will take place during the regular meeting of the County Office of Education, 2:00 p.m. Thursday, August 19th.

Brown Act violations in June

The Pacific Collegiate board met twice in June in addition to the posted and noticed June 2 full meeting of the board.  According to minutes recently released, the board met on June 7 and June 29.

According to the First Amendment Coalition and others, public agencies must use their regular practices to notice all meetings.  Because PCS has established the practice of noticing meetings on their website, they cannot selectively choose not to notice certain meetings. There are no two-tiered communications allowed in publicly funded organization; it is clear that members received exclusive communication, but non-members were excluded from attending this meetings.  Both meetings covered important issues relating to the facility lease and the charter renewal.

PCS faces small deficit. And a huge cash stash.

From the Santa Cruz Sentinel:

SANTA CRUZ — Pacific Collegiate School will need to cut $50,000 to balance the charter school’s projected $3.8 million budget for 2010-2011, a far cry from the $150,000 it had to cut the year before.

At its monthly board meeting Wednesday, where new board leadership was voted in, Principal Archie Douglas said the cuts would not come from staff, whose salaries are about 45 percent of the budget. Instead the school is looking to increase hours in a couple of subjects, and Douglas said the cuts could come in programming that he said sets the school apart.

“It’s a deficit that represents a threat to quality,” he said. “We’re bending over backward to not take it out of staff.”

PCS, with approximately 480 students in grades 7-12, has won numerous accolades over the years, and with admission by lottery, turns away many more students than it can accept. The school requests a $3,000 donation from all families in attendance, which in theory would provide the school $1.4 million per year. The budget is based on receiving half that and Douglas said the donation amount would not be raised. The budget must be presented to the County Office of Education by June 15, said Douglas.

The board also discussed classified employees, who are usually support and clerical staff, paying for the first time into their own retirements at 7 percent of each paycheck. Previously the school made the entire contribution, but as the amount required continues to climb, said Trustee Jigisha Desai, the cost becomes prohibitive.

Yet, despite belt tightening measures, the school maintains a 17 percent reserve, well over the state-mandated 3 percent. The high percentage of funds socked away is in part because of reduced state contributions, said Business Manager Mary Navas. Other school districts in Santa Cruz County, facing large budget deficits, are struggling to maintain three percent reserves.

The next year will be pivotal for the school and its new board president, Andrew Townsend. He will help lead the renewal of the schools charter and its lease. The school is currently on Swift Street in Santa Cruz, and may stay there, but is also looking at buying or leasing property on Harvey West Boulevard.

Townsend said he was confident in the school’s ability to manage both, adding, “I think that the community will stand behind us.”

Fascinating.  Especially this:

Yet, despite belt tightening measures, the school maintains a 17 percent reserve, well over the state-mandated 3 percent. The high percentage of funds socked away is in part because of reduced state contributions, said Business Manager Mary Navas. Other school districts in Santa Cruz County, facing large budget deficits, are struggling to maintain three percent reserves.

On an operating budget of $3.8 million, the cash on-hand for this school of 480 students is over $2 million; $800,000 set aside in a restricted account to be applied to facilities.  That is not by any stretch a 3% reserve.  Nor a 17% reserve.  In this economy, while making decisions to take more from janitors and students, this public agency has a reserve of nearly 60%. That is the public’s money, to be applied to educating the community’s children.  Someone has some explaining to do.

Don’t take our word for it.  Download PCS financial information from the Board Packets available here.

Follow the Money

During lease negotiations, PCS set out to stay at Natural Bridges paying less than half of what they pay now.  Their best offer, made AFTER negotiations closed, was?  STILL less than they pay today.

Why would they put their students at risk?  Why wouldn”t they just pay a fair rent?  PCS says they just can’t afford it.  But is that really true?  Let’s follow the money—at least the parts the PCS board has been willing to release publicly.

Last week, PCS released new figures to their Finance Committee. These reports are not available on the PCS website; they were made available in hard copy only.  It is important for the community to understand the full extent of PCS’s ability to pay a reasonable, market rate rent for the 47,000 sf/9.4 acres Natural Bridges campus.

At every opportunity to discuss their financial health, PCS will only admit to a 17% “economic uncertainty” reserve (state law requires 5%). PCS refuses to acknowledge the extent of its real fund reserves.  Yet here they are, based on figures compiled by PCS’s Finance Committee, in dollars, and as a percentage of the operating budget:

  • June 2008: $1,808,435 (or 48%)
  • June 2009: $1,883,562 (or 46%)
  • June 2010: $2,247,045 (or 54%)
  • June 2011: $2,638,191 (or 62%)

Parents and staff at PCS and in SCCS, as well as local taxpayers, should be asking: What is the source of these excess funds? State funds (intended to be expended on today’s students) or parent donations (based on the annual $3K/student appeal)?

According to the PCS annual report, parent donations are expended in full on the following:

  • Rent: 35%
  • Teacher bonuses 16%
  • Student support 7%
  • Arts supplies 3%
  • Instructional supplies 26%
  • Professional Development 3%
  • Activities 3%
  • Technology 7%

Notably absent from the list above is a category called “cash reserves.”  PCS parents are expected to donate $3,000 per child, per year, yet the fund reserves are accumulating at an alarming rate.  Do PCS parents know where their money is actually going?

If the cash reserve is not based on parent donations, perhaps it is based on unspent state funds.  That raises serious concerns about transparency and appropriate use of public money.  If PCS were governed by an elected, accountable board—one that had an unassailable history of following the Brown Act and open meeting guidelines—it would be easier to get answers to these critical questions.

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Charter School Finance: Overview


California charter schools, much like regular school districts, are required to retain cash reserves of 3-5% to ensure operations during times of financial uncertainty. PCS set their own target reserves at an admirable 17%.

The 2007/8 projected cash flow for Pacific Collegiate School shows an ending balance in June 2008 of $1,519,426 in cash reserves, or 40.8% of the operating budget.

Source: PCS June 2008 Board Packet

The 2008/9 projected cash flow for Pacific Collegiate School forecasts an operating budget of $4,080,903, ending June 2009 with cash reserves of $1,866,595, or 46% of the operating budget.

Source: PCS October 2008 Board Packet (removed from PCS website week of 10/6/08)


The PCS governing board’s first obligation is to the financial health of its charter school. On numerous occasions, including the Town Hall forum on October 21st, the board has had the opportunity to share the full extent of that health with its community. Again the board reiterated its 17% benchmark for cash reserves, but declined to confirm in public that the actual reserves will approach 50% by June 2009. It is deceptive to withhold that information when the parent community comes together with tremendous concern about the future of their school.

We call upon PCS leadership to state for the record the actual size of the reserve today, both in real dollars and as a percentage of operating expense.

Why should we care? Money received from the State of California for the operation of public schools is intended to be spent on “these kids, this year”, with a modest 5% reserve required. In addition to the money PCS receives from the state, they ask for $3,000 per child, per year from their parent community, with the explanation that it costs $8,000/year/student to provide a PCS education.  The annual fund drive target is about $650,000. The fund supports rent, repair, maintenance, teacher bonuses, student support, school supplies, professional development, activities and technology services.  [Source: PCS Annual Report] Today, the PCS cash reserves are equivalent to more than two years of the annual fund drive, and roughly equal to the required cash reserve of the entire SCCS school district.

It boils down to two simple questions:

What is the source of the reserve?  What is the intent of the reserve?

Public school finances are a matter of public record. Every taxpayer and parent donor has a right to know how these funds are accumulated and spent.

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