Implication of financial trickery 'not true'

In an article in the June 13 issue, The Bulletin in Bend implied the Sisters School District pulled a fast one in securing a 10-year payback of $1.2 million to the Oregon Department of Education when funds from the sale of land could have been available.

Not true, according to Superintendent Elaine Drakulich.

Not only was the information on the Lundgren Mill funds presented to the state, there has never been sufficient funds available from the sale to pay the ODE in full.

ODE has told her since The Bulletin story came out that they are not unhappy with the deal.

The $1.2 million was originally paid to the Sisters School District as state school support for students attending an alternative school. The state, after receiving a complaint, later determined the district had erred in administering the program and did not qualify for state support for those students.

The state asked the district to repay the amount in either one year or over five years. The district, under the direction of Drakulich, negotiated a 10-year repayment schedule.

The Bulletin article, written by reporter Patrick Cliff, states that Drakulich had told the state that the one-year payment would require cutting 15 days off the school year, and even if paid over five years, the withholding of funds would have an impact. There is an implication of dishonesty that the Lundgren Mill funds were not disclosed and could have been used with no adverse impact on education.

The existence of the Lundgren Mill account was known to the state; according to Drakulich, it was included in documentation sent to the state. At the time of the negotiation, there was $111,000 in the account, less than one year's payment. Since that time, another annual payment has been made to the district from buyers of the property and there is $860,000 in the account, still less than the $1.2 million owed.

Drakulich said that Bulletin reporter Cliff had chosen not to disclose in his story that there has never been enough funds in the Lundgren Mill account to pay the full amount of the debt, despite her making this very clear to him.

"That made it look like we could have paid the entire $1.2 million from the account and that is not true," Drakulich said.

She said the reporter kept asking her, "did you tell them to use Lundgren Mill, did you tell them to use Lundgren Mill? Are you aware they are in the process of charging other districts for violations?' I said 'yes.' Their (other districts') issues are different than ours. These other districts are unhappy and that is all being looked into as a process for settlement."

Drakulich said all she really knows of the process of other districts is that "some are fighting (state demands for repayment), some fought and are appealing the decision; we settled it."

As to borrowing against future proceeds from Lundgren Mill, Drakulich said that taking on more of that kind of bank debt at the current time would have been a "bizarre" decision.

"We are trying to provide a consistent program for these kids... with the money borrowed to put in the heating system and roof (at the elementary school) we have those payments to make in a financial situation that looks like it might be less with enrollment decline."

In that light, the board's passing a resolution to use Lundgren Mill proceeds to pay off the debt at $120,000 a year "so we could move forward" rather than fire teachers, was a move to protect the quality of education in Sisters, according to Drakulich.

It was simply a matter of determining how, once a repayment schedule had been negotiated, to allocate for the repayment (actually a deduction from annual state school support) with a minimum impact on education, according to Drakulich.

As a result, the board passed a resolution that would allow for the amount to come from Lundgren Mill sale proceeds which had been put off-limits by a prior board resolution years before.

Even so, continued income from the sale of the Lundgren Mill property is not guaranteed.

The State of Oregon was also surprised by the tone and direction of The Bulletin story, according to Drakulich.

In The Bulletin article, Sue MacGlashan, Assistant Superintendent of Finance and Administration for the state, was said to be surprised at the action of the school board in allowing Lundgren Mill funds to be used, and that the state never knew that the Lundgren Mill Funds might become available, that the info "was not made known to us," and "we're learning a lot."

The implication was that the state did not like the negotiated deal.

But in a phone message to Drakulich that arrived after the article was published, MacGlashan said while she had not read the article, the information she had received about it was a "shock."

"... Ed (Dennis, Deputy State Superintendent) and I talked to this reporter several times and I specifically said yesterday I think we made the right decision in terms of the 10-year payback plan. We had to consider a lot of things, not just, uh ...

"He's (Bulletin reporter Patrick Cliff) trying to make an issue out of this Lundgren Mill Fund and the fact that the board did some action to unrestrict those funds as a source of paying us back ... As I said, I will look for that article and I will read it and if that's the way things were characterized, I will be very, very disappointed..."

In an editorial the following day, on June 14 in The Bulletin, the editors did state that the 10-year repayment schedule serves everyone well.