Last week the Sacramento City Unified School District board unanimously approved spending up to $400,000 for budget advisory services from HYA Corporation, a school consulting group. The next day, the fiscal adviser assigned to the district by Sacramento County Office of Education blocked the deal, much to the board’s frustration.

In a Friday letter to trustees, adviser Luz Cazares wrote that contracting with HYA was inconsistent with the district’s financial recovery. Among other concerns, she wrote that the scope of the agreement was too broad and potentially duplicative of the current chief business officer’s duties.

The deal is dead. Interim superintendent Cancy McArn said that she is more concerned with establishing “plan C” than seeking an appeal, but that she plans to meet with Cazares to better understand her reasoning.

The cancellation of the contract is unlikely to be a make-it-or-break-it move in terms of fixing the district’s budget crisis, but it represents the first time that the school board has been overruled during its struggle to remain fiscally solvent and fight to retain local control over district operations. If the district runs out of cash as it’s projected to in September, it is subject to state takeover.

Board President Tara Jeane said in an interview that she was “incredibly disappointed, but not surprised” by Cazares’ decision.

She and other board members were aware of their overseers’ concerns about the contract before hiring the consultants, which is why they tabled the discussion for a special board meeting on March 26. Jeane said that between adjusting the contract and the public discussion about the proposal, she hoped they had dispelled their fiscal adviser’s concerns.

Warned against hiring consultants

Mike Fine, head of a state-funded school fiscal watchdog agency partnered with the county to oversee SCUSD’s budget crisis, had previously warned Jeane against hiring the consultants.

Fine urged her to reject HYA’s proposal hours before the district first considered it at a March 19 board meeting. The board tabled the discussion until a special meeting one week later, when it was approved 7-0.

In the icy email obtained by The Sacramento Bee via public records request, Fine advised the district against contracting with an “unvetted consultant” for “mission critical” budget services. He referenced a conversation he had with an Oakland Unified School District trustee who was concerned about HYA’s performance as fiscal advisers.

“Frankly, SCUSD does not have the time to ‘start over’ with a new interim (CBO) or team of questionable consultants,” he wrote.

Cazares and Fine did not respond to requests for comment via email.

Trustee bemoans interference

Trustee Taylor Kayatta took to social media, suggesting the cancellation of the contract was political — drawing a connection between the Cazares, current Interim Chief Business Officer Lisa Grant-Dawson (who worked with Cazares at Oakland Unified School District when it was in state receivership) and HYA, which took over Grant-Dawson’s duties as a CBO when she resigned from her former position.

“Our fiscal advisor’s decision appears to me to be more about bad blood between highly paid professionals and their fights at Oakland Unified rather than what Sac City Unified needs,” he wrote.

In his 1,000-word post, Kayatta expressed exasperation over the fiscal recovery process. He questioned the efficacy of Cazares and the county and state agencies she’s backed by, criticized the performance of the district’s interim financial officer and suggested their collective recommendations for the district would deliver it into insolvency.

“State oversight, as shown by this decision to prevent us from a limited contract with an experienced firm who could possibly help us find solutions, is not the answer,” he wrote.

Kayatta also wrote about his disappointment in Grant-Dawson’s performance as interim CBO, a sentiment publicly shared by other trustees. Their criticism amounts to: Grant-Dawson, who joined the district in early January, has consistently delivered them bad news about their financial situation rather than solutions.

Projections have worsened since Grant-Dawson took control of the finances, with this year’s deficit growing to $170 million since the first interim update. She said in an interview earlier this month a that major part of her job so far has been understanding the depth of the problem, including identifying a $100 million deficit that has been “chasing” the district for years.

Why HYA? Why not?

The thought process behind hiring HYA was to build capacity while the district is short-staffed in terms of leadership and budget services. Of the five members of the superintendent’s cabinet, just one person holds their position permanently, Jeane said.

The business department is also thin — Grant-Dawson took over one month after former CBO Janea Marking left for a Bay Area school district and just a few days before the district’s second in command financial officer, Cindy Tao, went on administrative leave following The Bee’s coverage of allegations of fiscal mismanagement against her.

But not everyone thinks that HYA was going to help fill the gap.

Mike Hutchinson identified himself in an interview as the Oakland Unified trustee who spoke to Fine about HYA, offering harsher words about the firm.

“They’re clowns,” he said.

Hutchinson said that HYA consultants have offered no valuable advice since they took control of financial duties in January. Despite facing a $109 million deficit that could place the district back into receivership just one year after escaping it, the firm still has not delivered a fiscal solvency plan.

HYA is better known nationally for its board training and recruitment services. In fact, fiscal advising is not listed as an offered service on the firm’s website. HYA does not comment to the media, according to another page on its website.

The firm was recommended to the district by Oakland Unified leadership, McArn said, including at least one of their trustees.

The three HYA employees consulting Oakland were the same slated to serve SCUSD, which further concerned Hutchinson, who wondered about their capacity to handle both projects at once.

Grant-Dawson previously served as Oakland Unified’s CBO for five years before resigning in December, shortly before HYA’s contract with the district went into effect. HYA effectively took over her duties, but that wasn’t going to be the plan in Sacramento.

McArn advocated for the contract by saying repeatedly that the district needed help helping itself — envisioning a partnership between the consultants and central office staff to better understand the problem and start implementing solutions.

Response to performance criticism

While denying Kayatta’s accusation of bad blood between her and HYA, Grant-Dawson said that she also disagreed with the decision to bring in the outside consultant.

“I’m the same person who released the consultants we were working with in business services,” she said. “I’m not inclined to use a separate entity that I’m not aware of to provide this service.”

She also denies Kayatta’s accusation that she has not asked for help. In January she urged the board to hire for the permanent CBO position despite a district-wide hiring freeze. It was her understanding that she would do “fixer” work while a new permanent CBO would lead the department.

The board didn’t unfreeze that position until earlier this month.

She also advocated for bringing in two retired CBOs paid for by the county to assist her in day-to-day operations.

Grant-Dawson said that she is confident in her work at SCUSD, saying that there is only so much she could do to solve the district’s financial situation given the depth of the problem. She said that if the board is not happy with her work that she does not take it personally.

Jeane emphasized that the district is running out of time.

“The pace is incredibly frustrating,” Jeane said.

Jeane wants to see a fleshed out fiscal solvency plan and a multiyear cash flow projection (a key metric in terms of remaining solvent), which was missing from the second interim budget earlier this month.

Reality Check

How a contract cancellation reveals strain between SCUSD board, staff and watchdogs

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