If a school teaches the Gettysburg Address, should it get more money for doing so? What if it prepares boys and girls for earthquakes? Or notifies parents their kids have been truant?
In California, the answer is yes, thanks to a hidden and costly corner of school finance known as "mandates."

Under the mandate system, public schools get money -- usually with no questions asked -- to pay them back for providing certain programs required by the state. Over the past five years, the system has paid nearly a billion dollars to schools for doing things many people would expect them to do.

Posting agendas for public meetings, keeping track of immunizations, teaching science to sophomores, collective bargaining -- these are but a few of the tasks schools are being reimbursed for in what has become a hot source of cash for desperate districts. In one example of the fiscal feeding frenzy, people have spent time counting all the pages in history textbooks, looking for something they could bill to the state. When the mandate money rolls in, districts can spend it however they wish.

This strange funding arrangement tolerates startling differences from one district to the next in what they claim to spend on identical tasks.

It allows consultants to make more cash through the process every year.

And it has given rise to the Mount Everest of paperwork in public education -- a bureaucratic heap so dense and vast that only a few claims ever get a thorough look by the state.

In an extensive review of the mandate reimbursement process, The Bee read through stacks of claim files at the state Controller's Office, studied five years worth of statewide budget data on mandates, and interviewed people in the Capitol and throughout the state who are involved in this obscure system.

Not once did The Bee encounter anyone fully satisfied with the process.

"What's that saying about the manure pile?" said Joann Steinmeier, a school board member from Arcadia who recently served on the Commission on State Mandates, which oversees the process. " 'With a pile of manure this big, there's got to be a pony in there somewhere.' Well, in this case, everybody's got a pony in there."

State finance leaders view mandates as a money grab by school districts and their consultants. Schools find the system odious in its red tape and confusion, yet insist they must file every claim they can because the state has piled so many responsibilities on them without providing enough money.

Recent audits by the state Controller's Office and the Bureau of State Audits have halted payment on millions in school mandate claims that were found questionable or inappropriate. The Legislative Analyst's Office repeatedly has slammed mandates for being inequitable and an inefficient use of tax dollars. Legislators have begun passing bills aimed at reining in the massive system.

Yet for now, mandates are locked in place, safely ensconced in the sanctuary of California's Constitution.

Spurred by Prop 13
Mandates had their genesis in the big taxpayer revolt of the late 1970s. At the time, voters were fed up with rising taxes and in 1978 passed Proposition 13, a measure that stripped school districts, cities and counties of much of their ability to raise property taxes.
To help compensate for this enormous hit, Proposition 4, passed a year later, included a constitutional amendment that said if the state imposed a new program or higher level of service on a local agency, it had to pay for it. The provision applied to any state requirements created after 1975.

The concept seemed simple and reasonable, but the way it has played out is mind-boggling.

Take a mandate known as "Graduation Requirements."

In the late 1980s, the state adopted a law saying students had to complete a second year of science to earn a diploma. Through the mandate process, schools now bill the state extra -- beyond their standard per-pupil allocations -- for the costs of salaries, books and supplies involved in providing sophomore biology and other life science courses.

Yet they don't bill extra for any other required courses, such as history or English, because those provisions were in place before 1975.

Another mandate, "American Government Documents," has generated claims that have left people in the Capitol shaking their heads.

In 1996, a former Republican assemblyman from Southern California, Keith Olberg, pushed through a law that required schools to explicitly teach six American government documents: the Declaration of Independence, the Constitution including the Bill of Rights, the Federalist Papers, the Emancipation Proclamation, the Gettysburg Address and George Washington's farewell address.

So now, schools submit claims to the state for the time they spend reviewing textbooks to see which documents are covered, for ordering copies of documents and for training teachers to teach them.

A review of American Government Documents claims shows how far schools have gone to find something to claim. In the files for Los Angeles Unified, handwritten lists turned up with line after line like this:

"Magruders American Gov't 30/798 = 3.8% $285.58."

Translation: Someone actually had thumbed through history textbooks to see how many pages contained references to the specified documents, then billed the state for those portions of the books.

Contacted recently, Olberg was stunned to learn that the state had paid districts $1.367 million between 1996 and 2001 for the American Government Documents mandate.

"It makes no sense," said Olberg, who left the Legislature three years ago and is working as an education consultant on curriculum. "That to me should be a part of the basic core curriculum. That bill was designed to redirect education, not create an opportunity for districts to tax the state for added fees."

Districts more aggressive
Those involved with public schools see things differently. Legislators, they say, frequently create new programs without money attached. Doing so avoids the tough appropriations process, which requires a two-thirds approval rather than just a majority.
"The Legislature can't keep heaping responsibilities on the schools and foregoing the resources to do them," said Bob Blattner, a consultant with School Services of California, a Sacramento firm. "If a certain program is important enough to identify and to create, it should be important enough to fund."

He and others pointed to the Michelle Montoya case as typical of the backward pattern. Montoya was the Rio Linda High School senior killed on campus by a substitute janitor. The shock of her death prompted the Legislature to pass a law in 1997 requiring districts to do more criminal background checks on employees. But the bill provided no money for the checks.

So schools filed a "test claim" with the Commission on State Mandates seeking to prove the new requirement was a mandate ripe for reimbursement. The commission agreed, and soon districts were billing for their costs: equipment, materials and time spent training staff, reviewing employment records and obtaining fingerprints.

In its first four years, the program generated about $25 million in claims paid by the state.

The test claim process is like everything else with mandates -- complicated and time-consuming. The high-powered Commission on State Mandates, which meets every other month at the Capitol, includes the state's finance director, state controller and state treasurer. Members hear test claims not just from schools, but also from cities and counties as well, and give the majority at least partial approval.

In recent years, school districts and their consultants have grown increasingly aggressive about filing test claims. The San Diego Unified School District -- the state's second largest district -- has an entire unit dedicated to bringing in mandate money, with four full-time employees. It has a reputation for being king of the hill when it comes to filing test claims. Other districts are happy to bestow the title; when San Diego succeeds at the Capitol, it means another stream of mandate dollars for everyone else.

A decade ago, there were fewer than 20 mandate areas in education. Today there are about 40 approved categories, plus another 17 approved but not yet funded. Many more test claims are in the pipeline.

Mandates are not unique to California. Other states have similar mechanisms set up to pay for big expenses such as bus transportation or special education. But no other state in the nation has such an extensive web of reimbursement categories, according to Stephen Smith, senior policy specialist for the National Conference of State Legislatures, based in Denver.

The largest education mandate in California is collective bargaining. During the past five years, the state paid out $210 million for it.

Sacramento City Unified, long troubled by labor clashes, claimed and collected $1 million from this mandate over the past two years. Attached to the claims were hundreds of receipts for attorney hours, trips to Southern California to interview a former district employee, meals at Il Fornaio, canceled arbitration sessions and airport parking fees. Many of the expenses were related to a complaint by the teachers union that new teachers weren't getting the pay required in their contract. In the end, the teachers won, and taxpayers absorbed the cost of the district's failed defense.

Other mandates may involve less money, but districts still aggressively pursue them. One allows schools to collect $12.91 every time they send a letter home to parents about truant children. Another says they can tally up the expenses of notifying teachers when one of their students has a history of violent behavior. Yet another allows schools to charge for the time it takes to prepare agendas for public meetings.

"It is getting really wild," said Christine Draa, mandated-cost coordinator for the Woodland Joint Unified School District, where annual mandate income grew from about $400,000 to $900,000 in just three years. "We don't claim fire drills, but we can claim duck-and-cover drills for earthquakes. It's a really crazy system."

There is even a mandate that allows schools to bill for the costs they incur in creating all the other mandate claims: the "Mandate Reimbursement" mandate. It cost the state about $12 million last year, much of it in consultant fees.

Consultants have key role
Nearly all districts in the state hire consultants to handle their mandate claims, in part because the reimbursement process is so cloudy and cumbersome. That has led to a growing source of income for consulting firms.
Last year, for example, one mandate reimbursement consultant -- Mandated Cost Systems Inc. in Rancho Cordova -- brought in $730,345 from the four-county Sacramento region alone. That total was generated by 47 local school systems that were clients of the firm; the company has contracts with more than 600 districts statewide to do mandate claims. The Sacramento-area contracts, which ranged from $3,800 to $83,800, were stapled to the mandate reimbursement claims of each of the 47 local districts. A review of those claims showed that the districts, in turn, billed the state for the contracts.

"If people knew how mandates were being implemented, it would leave them less than satisfied," said Marianne O'Malley, who has been studying mandates for the Legislative Analyst's Office. "Because of reimbursement, there is little incentive or pressure on districts to try to economize."

Steve Smith, founder of Mandated Cost Systems, said that while one of his company's goals is to turn a profit, the firm also serves a greater good: helping districts secure money they deserve, that will be used to improve education for children.

"The only reason the business has grown is because the Legislature keeps passing mandates," he said.

Districts justify their hiring of professional help because the consultants bring in more money than they cost.

"The mandate reimbursement claim is wonderful because it enables you to use a consultant and recover your costs," said Kelly Avilla, director of fiscal services in Woodland Unified.

School districts are strapped for cash, Avilla said, with little opportunity to raise additional dollars. The mandate system is one of the few ways districts can "maximize revenues," she and others said.

In Woodland, the system is seen as so important that principals receive a share of mandate proceeds to spend as they wish at their schools, providing an incentive for doing as much documenting as possible. Sacramento City Unified is considering doing that too, said internal audit manager Michele Dodge.

"I think a lot of mandates are ridiculous," Dodge said. "But our approach is, as long as you're doing it legally, the more you can get, the more you can do for your kids."

Sue Burr, who has held high-ranking posts in both state and local education, agreed the process is dysfunctional, but said schools are not to blame.

"Desperate districts will do anything to help their kids," said Burr, who recently left the Elk Grove Unified School District to work for the state County Superintendents Association. "It is a back-door way around the issue of adequate financing for schools."

Like many districts, the Grant Joint Union High School system has cranked up its efforts to recover mandated costs.

For years, Grant contracted with Mandated Cost Systems to do its claims. Last year, the district hired Rob Roach, who had been a consultant with Mandated Cost Systems, to do most of its mandate work.

Roach spends his days coaching principals, teachers and school secretaries in how to document every moment, every phone call, every meeting, every sheet of paper that goes toward every individual mandate.

"The way school districts look at mandated cost claims is it's gravy," Roach said. "If you can get something out of it, great. If you can't, no big deal."

Roach enjoys his job and is getting results. Until he arrived, the district had been collecting $300,000 to $400,000 a year from mandates. Last year, it received $1.2 million.

In one category -- notices of truancy to parents -- Grant increased its annual claim 45 percent, from $40,000 to $58,000.

"I'll take credit for that," said Roach, whose $41,000 annual salary gets covered through the mandate reimbursement category. "I went out to the warehouse and found the boxes of letters and counted them all. I think it was well worth my effort. Earning my salary."

Mountain of paperwork
In California's education budget, mandates turn up as one of the state's many categorical programs. Categoricals are special pots of money dedicated to specific purposes, such as class-size reduction. The state has more than 100 such pots, totaling $11 billion in an overall $40 billion schools budget.
The mandates fund, one of the larger categoricals, is really a collection of many smaller funds. In the 2002-03 fiscal year budget, the state set aside $125 million for school mandates, but nearly all has been deferred to a later year because of the fiscal crisis. In the five years before that, between 1997-98 and 2001-02, the state spent $946 million on education mandates.

According to Art Palkowitz, San Diego Unified's mandate administrator, mandates should not be blown out of proportion because they are but a sliver of the overall school funding picture. San Diego, for example, claims about $4 million to $5 million a year -- which represents less than half a percent of the district's overall $1 billion budget.

Get close to the process, however, and words such as huge and staggering come to mind.

In an out-of-the-way building in east Sacramento, near C and 33rd streets, a quiet crew at the state Controller's Office does its best to manage a mountain of mandate paperwork that grows taller every year. Virtually every step in this last line of defense for taxpayers -- from date-stamping to data entry -- is done by hand.

The claims, sometimes 2 and 3 inches thick, roll in every January from the state's 1,000 school districts -- roughly 50,000 a year. Employees sort the documents into boxes, type the claimed amounts into computers, label and hole-punch file folders, then store all the claims in a giant filing room.

The processors watch the claims for totals that seem excessive, math that seems off or documentation that seems shaky. The amounts of claims may be reduced during these cursory "desk audits." Others are flagged for possible further "field audits. " But given the volume, very few of those deeper reviews ever occur.

During most of the 1990s, there were virtually none, O'Malley said. In the four years since 1999, 25 field audits were completed for some of the larger education mandates. About 40 more are under way.

"The number of field audits is minuscule compared to the number of claims," she said.

When the more thorough audits occur, they tend to turn up significant red flags.

In a recent summary of field audits in eight districts, $30 million of the $39 million claimed was deemed unallowable by state controller auditors, in categories including truancy notifications and student transfers. In such instances, most of the money must be repaid or it is docked from subsequent years' claims.

Most of the problems uncovered by audits involve inadequate record keeping and documentation, said Greg Larson, chief of staff to state Controller Steve Westly.

"I wish we could audit every claim," Larson said, "but that would be impossible in this current budget environment."

He noted that more audits are coming. The Legislature has authorized the controller to add 21 auditors to the staff of 12. But with 60,000 to 70,000 claims a year coming in from schools, plus cities and counties, that still won't be enough to cover all the paper on the mandate trail.

Disparities among districts
Looking at the claims on file at the Controller's Office for the first time is like walking from sunshine into darkness. It takes a while to adjust to the pages and pages of forms filled with codes, formulas and labels such as "Increased Direct Costs Less Contract Services" and "Offsetting Savings."
Collective bargaining claims are the fattest, often containing hundreds of receipts for legal sessions, travel, meals and faxing fees. The science graduation requirement claims can include everything from science teacher salaries to receipts for fetal pigs. School accountability report-card claims indicate the amount of time staff members spend digging out test scores, dropout rates and other statistics to include in these public reports. Open meetings claims calculate costs down to the number of minutes that employees, who are identified by name and hourly salary, devote to individual agenda items.

The claims show enormous disparities from one district to the next.

Under a mandate for open meetings, the Folsom Cordova Unified School District -- which has about 17,000 students -- billed $7,846. The nearby Grant Joint Union High School District -- which has a smaller enrollment of 12,320 students -- billed more than twice as much at $19,777. Those claims were for the most recent year, 2001-02, and have not yet been processed.

The same disparities turn up with the School Accountability Report Card mandate. In Placer County, a claim from two years ago by the Alta-Dutch Flat District stated that the principal spent five hours, the secretary 15 hours and the business manager 25 hours preparing the report card for the only school in the district at the time. In contrast, the Foresthill District in Placer County -- with two schools -- billed for 2 1/2 hours of secretarial time and three hours by a computer technician.

The Legislative Analyst's Office, in a study last year, found these discrepancies of such concern that it recommended the mandate system be overhauled.

The study looked at collective bargaining reimbursements over a five-year period and found extreme variations. Sacramento City Unified spent $16.24 per pupil annually, compared with $3.80 for Los Angeles Unified and $6.63 for San Juan Unified, according to the study. Other districts, including Oakland and Atascadero, spent even more per student than Sacramento City.

Michele Dodge, who handles mandate claims for Sacramento City Unified, said collective bargaining costs do vary widely from year to year, depending on the difficulty of negotiations. Other local school officials defended the overall unevenness of mandate claims, saying no two districts are alike. For example, a district doing a lot of hiring would need to conduct many criminal background checks, while another district might have no employee openings at all.

The Legislative Analyst's Office found other unsettling reasons for the disparities.

"The variation ... seems to reflect local record keeping and claim-filing practices more than policy objectives, need or legislative intent," the analyst's report stated.

Changes considered
State leaders got a wake-up call about mandates last spring when the California Bureau of State Audits looked at "School Bus Safety II," a mandate that imposed new requirements, including monitoring students to make sure they got on and off buses safely. The investigation revealed a quagmire where the claims reviewed were unsubstantiated, and where the amounts claimed were not only huge, but also varied wildly from district to district. The report raised questions about the aggressive claiming approach of one particular consultant: Mandated Cost Systems.
Smith, Mandated's founder, blamed the mess on unclear reporting requirements by the state, also a common complaint of districts. The state withheld paying the claims and ordered the Commission on State Mandates to clarify and tighten the regulations. Districts are in the process of revising their claims.

The bus safety audit prompted some legislators to question the motivation of consultants and districts. Among them was a state senator, Steve Peace, who publicly slammed mandates using terms such as "theft" and "fraud."

Peace is now the state's finance director and a member of the mandates commission. When asked for his thoughts on mandates last month, he said, "It is fair to assume my opinion didn't change when my title changed."

Last year, the Legislature and governor signed off on two bills to tighten mandate regulations and step up auditing. In the process, lawmakers gave the state Controller's Office an added $1.6 million, which will help pay for the 21 new auditors. Another provision sets limits on how much time districts have to file test claims after a law is passed.

More recently, the legislative analyst's review of the 2003-04 state budget called for ending the clunky claiming system and instead distributing mandate money as part of a block grant to schools, to be used at their discretion.

Early signs of a possible crackdown have districts and consultants scouring the Education Code for regulations that could be turned into reimbursable mandates before time limits expire.

"It's going to have the effect of having people filing test claims on every piddly thing," said Carol Berg, executive vice president with School Services of California, who advises districts on mandates. She is among those preparing new test claims.

The consequences could be anything but piddly.

One pending test claim seeks to make algebra instruction a reimbursable mandate because the state deemed it a graduation requirement three years ago. Another seeks reimbursement for the high school exit exam, also required by the state. Mandated Cost System's Smith estimated the exit exam could add $20 million or more a year to mandate costs. An algebra mandate could lead to bills for all the algebra textbooks in the state.

And that's just two of the mandates in waiting. As of May 1, there were 29 test claims winding their way through the system.