By Bill Turque
Washington Post Staff Writer
Thursday, April 29, 2010; A01
The District's chief financial officer has rejected an unusual plan to fund a portion of pay raises for teachers with private foundation money, saying conditions attached to the donations are unacceptable, a top District official with knowledge of the issue said Wednesday.
Natwar M. Gandhi's rebuff of the unorthodox $21 million financing arrangement is one of two problems that have city officials scrambling to complete financing of the proposed five-year pact with the Washington Teachers' Union. Schools Chancellor Michelle A. Rhee and Mayor Adrian M. Fenty unveiled the contract three weeks ago as a national model of education reform.
Fenty (D) and Rhee also must fill a $29 million gap in the contract that opened two weeks ago, when Gandhi told Rhee that a budget surplus she was counting on to help fund the 20 percent raise promised in the new agreement with teachers does not exist.
All told, Rhee and the administration must find an estimated $50 million in new financing to make the contract acceptable to Gandhi in advance of his appearance Friday before the D.C. Council. Rhee is also scheduled to testify at that hearing.
Gandhi, in a brief interview, said that his analysis of the contract is not complete. "This is a contract of historic importance. We all know that," he said. "I think we want to examine very thoroughly the financial and legal implications. It's a very important issue for us."
The clash between two of the city's most powerful officials puts at risk pay raises that took more than two years to negotiate as well as Rhee's long-held plans to improve the quality of instruction by offering teachers incentive pay and holding them more accountable for student performance.
The deal, which includes three years of retroactive pay, has been regarded as Rhee's signature achievement. It includes a provision to award teachers an extra $20,000 to $30,000 a year for student improvements on test scores and other measures. It also affirms Rhee's power to reassign "excessed" teachers -- those who have lost their positions because of enrollment declines at schools or other developments -- with less regard for seniority.
The private foundations have pledged an additional $43 million to finance changes such as the pay-for-performance plan. Those funds are not a formal part of the proposed contract, however, so they are not at issue in Gandhi's analysis.
Rhee declined to comment on contract issues Wednesday. "I can't say anything," she said. "Dr. Gandhi and I agreed that we would be communicating directly about things."
Washington Teachers' Union President George Parker said Wednesday evening that he could not confirm Gandhi's conclusion. But he said the uncertainty and confusion surrounding the contract has taken a toll. "It's been a frustrating roller-coaster ride that teachers and students have had to endure," he said. "We were promised and assured that they had the funds for this contract."
The official, who insisted on anonymity because deliberations over how to finance the contract are continuing, said Gandhi has determined that conditions placed on the $64.5 million donation by four foundations will not pass muster. The organizations reserved the right to withdraw the money if Rhee does not continue as chancellor, and it demanded specific annual improvements in test scores.
The dollars that underwrite salaries in a collective-bargaining agreement must be "unconditional," the official said.
The official said that the District is not barred from using foundation money to fund the raises but that the contract cannot be certified as fiscally sound unless all the money is actually part of the city budget. The private funders -- the Broad, Robertson, Arnold and Walton foundations -- are refusing to do that until the contract is certified by the city and approved by the union.
Gandhi has signaled his concern over the continued uncertainty of private financing since shortly after the tentative agreement was announced April 7, the official said. The official added that the assessment was reaffirmed as recently as Wednesday morning, when Gandhi's general counsel, David Tseng, spoke with D.C. Attorney General Peter Nickles.
Nickles denied hearing any such assessment from Tseng. He said that although the conditions posed by the foundations present legal issues, he had not been informed by Gandhi or anyone else that the private funding could not be included in the contract.
"We've been focusing on the conditions and dealing with them as matters that need to be dealt with," Nickles said. He added that the District has been in direct conversations with the foundations.
A number of options for completing financing of the $140 million teacher pact are still on the table, officials said. One would involve setting up a reserve fund of public dollars that could help underwrite the contract until the private dollars are released. Then the reserves could be redirected by the council for other District needs.
Even if the foundation funds ultimately are approved for the teachers' contract, Fenty and Rhee face serious challenges in funding the rest of the contract. The official said a search is underway within the public schools and other city agencies for the estimated $29 million that is needed, which could be a tall order in light of the District's fiscal straits.
Council member Jack Evans (D-Ward 2), chairman of the council's finance committee, said at a hearing Wednesday that all council committees are being asked to go back to the agencies they oversee and ask for additional cuts that could be made in their budgets.