East Bay college district embroiled in tumult over money, ethics as election nears

Jeffrey Heyman, spokesman for the Peralta Community College District for 18 years, retires in March 2018 months after filing a whistleblower complaint alleging malfeasance by district leaders. Jeffrey Heyman, spokesman for the Peralta Community College District for 18 years, retires in March 2018 months after filing a whistleblower complaint alleging malfeasance by district leaders. Photo: Peralta Community College District / Photo: Peralta Community College District / Image 1 of / 5 Caption Close East Bay college district embroiled in tumult over money, ethics as election nears 1 / 5 Back to Gallery

It looks like a routine request of voters: a November ballot proposal in Alameda County to extend the $48-per-parcel property tax that raises $8 million a year for the area’s community colleges.

Yet the debate this year over the Peralta Community College District tax and how it’s being spent is anything but normal. It has spilled into the races to fill two seats on the district’s board of trustees, raised questions about the competence of Peralta’s top executive and resulted in the departures of a district watchdog and a spokesman who filed a complaint alleging financial misdeeds.

Underlying the tumult are concerns about how the district’s finances are managed and reported to the board, doubts over whether money raised through the property tax is being spent as intended, swelling administrative ranks as enrollment declines, crowded classrooms and ethics violations.

“The faculty and the staff are amazing. Despite horrendous working conditions they continue to teach and support their students really well,” said Trustee Nicky González Yuen. “The problem is with the central district administration and the board that will not hold them accountable.”

Still, Yuen said, he supports renewing the parcel tax because the district needs stable funding.

Photo: Jessica Christian / The Chronicle An old, faded map of campus is seen at Laney College in Oakland,...

About 50,000 students are enrolled in Peralta’s four East Bay campuses: Laney and Merritt in Oakland, Berkeley City College and the College of Alameda. Many students are low- income and the first in their families to attend college.

Critics say Peralta has fattened up its spending on executives even as it loses students: Enrollment dropped by more than 2,100 from 2012 to 2017, a 4 percent loss, while the number of administrators grew by 45 percent, to 74 from 51, Peralta reported to the state.

Similarly, an audit of the parcel tax approved by voters in 2012 to help Peralta’s “core academic programs” shows that tax spending on books and supplies dropped by 25 percent, to $84,334 from $112,150 in the year after the current chancellor arrived in 2015 — whereas it had nearly doubled in the first two years of the tax. At the same time, the tax money devoted to faculty salaries plunged by nearly two-thirds.

Those who say the district is being mismanaged include faculty union leaders, two college trustees who have endorsed challengers to their incumbent colleagues, and several former administrators. The chair of the parcel-tax oversight committee quit last month in frustration, and the district spokesman for 18 years filed a whistleblower complaint and then stepped down in March.

Photo: Paul Chinn / The Chronicle 2018 Jowel Laguerre, chancellor of the Peralta Community College...

The critics say that since Chancellor Jowel Laguerre’s arrival three years ago, they have lost confidence in the budget’s accuracy. They say they’re unsure the district is spending funds from the $48-per-parcel tax as intended, and also that the district has poor fiscal controls, evidenced by its failure to collect $12 million in student fees over the past two years and then writing off the loss.

They cite high turnover among Peralta’s finance directors — a problem echoed by Moody’s, the bond credit rating company — and claim that no-bid contracts are common and cronyism rampant.

“There is an atmosphere of fear,” said Yuen, who, with Trustee Karen Weinstein, is endorsing Corean Todd and Cindi Reiss, who are challenging incumbents Linda Handy and Bill Riley in the trustee race.

Yuen said his fellow trustees have been “asleep at the wheel” to allow $6 million a year in student fees to go uncollected — nearly as much as the parcel tax brings in — rather than to help them apply for government grants that would pay the bill.

Handy argued that not all students should have to pay the schools’ $46-a-unit fee — or $552 a semester for a full course load — because “education is a ticket out of poverty, and to deny access would be counterintuitive to our mission.”

She and Laguerre dismissed the criticism and said Peralta is doing fine. Bolstering that view is last year’s independent audit of the parcel tax, which found no evidence of mismanagement from 2013 to 2016, the years surveyed.

“The district is doing well,” said Handy, who declined to be interviewed but responded to written questions. She said she’d like to know “why a set group of folks keep disparaging the administration and the data. The real story is maintaining success for our students despite shortfalls, and the amazing employees that work together to make that happen!”

Riley did not respond to requests for comment.

A look at Peralta college district The Peralta Community College District has four schools: Laney and Merritt in Oakland, Berkeley City College and the College of Alameda. Here are facts across the entire district: Five-year enrollment loss: 2,121 students, 4%, to 50,864 in 2017-18. Part-time students, spring 2018: 77% Tenured / tenure-track instructors, fall 2017: 341 Temporary instructors, fall 2017: 775 Educational administrators, fall 2017: 74 District general fund, 2018-19: $146 million 2018-19 budgets for: Laney College: $34 million (18,000 students, 2017-18) Merritt College: $20 million (11,500 students, 2017-18) Berkeley City College: $19 million (11,000 students, 2017-18) College of Alameda: $18 million (10,000 students, 2017-18)

The dispute occurs as county voters are expected to make informed decisions at the polls Nov. 6.

“For three years, I have seen the misuse of your parcel tax dollars,” says a ballot statement opposing Measure E, the Peralta district’s request that voters approve an eight-year extension of the current parcel tax, which expires in 2020.

The statement came from Michael Mills, who served from 2015 until last month as chair of the Citizens’ Oversight Committee, which is supposed to ensure that the parcel tax is spent properly. Mills says it isn’t.

“Since 2015, taxpayer money has been shifted from the colleges, classrooms and students to pay for non-academic District office expenditures,” his statement says. “An audit disclosed a drastic reduction in parcel tax-funded academic expenditures.”

Mills said he and other committee members repeatedly asked for detailed accounting of how the money was spent, and plans for future spending, but never received them.

“The district has no plan,” Mills said. The chancellor “uses it as he wishes.”

Laguerre said there have been no improper expenditures. Use of the parcel tax for student instruction has risen during his tenure, he said, despite an 80 percent drop in spending on counselors, librarians and nurses, and this year’s elimination of the tax for books and supplies.

Laguerre approved his first Peralta budget in 2016. Since then, the largest increase in parcel tax expenditures — six-fold — has been on part-time faculty, which is considered an appropriate use for a temporary tax, figures provided by Laguerre show.

“Academically we’re doing great,” he said. “We really have been doing an excellent job providing a good education not only to the diversity (of students), but to the number of students. We’re doing really good things for the students, the community, the employees.”

But Laguerre’s figures are mostly guesswork, said Jennifer Shanoski, president of the Peralta Faculty Union, noting that it typically takes two years for an auditor to verify the district’s expenditures — “and our unaudited (spending) is notoriously incorrect.”

The result for students, Shanoski said, is crowded classrooms.

“Many classes are held with 60 or 80 students,” she said. “It’s well established that large class sizes do not support student success.”

In June 2017, a senior district official sent the Board of Trustees a four-page whistle-blower report alleging Peralta has more serious problems.

Jeff Heyman, who had served as the Peralta district’s official spokesman and a member of the chancellor’s cabinet since 1999, alleged legal violations and cited examples of professional misconduct on the part of the chancellor and unnamed trustees.

He accused Laguerre of creating a “shadow finance department to manage soft money outside (the district’s) publicly accountable general fund.” He said he had been required to lie to the media about property negotiations, witnessed illegal hiring of contractors and learned of staff members who were promised a “kickback” for steering foreign students into private housing run by preferred groups, among other allegations.

Heyman said Laguerre and the trustees violated board policies with “persistent out-of-state and foreign travel,” and improperly used public funds for private travel.

Laguerre and the trustees denied the allegations and hired a Sacramento law firm, Van Dermyden Maddux, to investigate. According to the contract, the firm would perform an “impartial investigation” of the allegations, with the work to be approved by Laguerre. In January, the board extended that initial $24,999 contract to $150,000.

On July 6, a Peralta district lawyer, Edwin Prather, informed Heyman in a letter that the firm had cleared the chancellor and trustees of all allegations but one: failing to acknowledge a reporter’s request for public information within the legally required 10-day time frame.

Prather said the lawyers hadn’t looked into each allegation because some had been investigated previously. He said the 94-page investigation was protected by attorney-client privilege and would remain private.

Heyman, who has since retired, said he is disappointed.

“It doesn’t seem fair to me that the subject of the investigation would also be the person approving the investigation. It’s a little like the fox guarding the henhouse,” he said. “I don’t understand why a report paid for with public money that is intended to serve the public good is not made public.”

Prather said he hadn’t seen the contract allowing Laguerre to approve the report, but said it did not happen. “He did not sign off on the work,” Prather said. “He did not get an advance copy.”

Yet Laguerre had the authority to do so, and Ann Skeet, senior director of leadership ethics at Santa Clara University’s Markkula Center for Applied Ethics, said Laguerre “should have recused himself.”

And although it’s within Peralta’s right to keep the report private, doing so “is going to feel like a cover-up,” said Don Heider, the center’s executive director.

Meanwhile, some of the critics said they plan to vote for the parcel tax and bond measure on the November ballot but that money needs to be managed differently.

“We need a board that’s willing to hold the chancellor accountable,” Shanoski said. “There needs to be a shift.”

Nanette Asimov is a San Francisco Chronicle staff writer. Email: nasimov@sfchronicle.com Twitter: @NanetteAsimov