District used temporary pandemic funds to expand administrative empire, now faces fiscal cliff as money runs out

By Tom Wong, Independent Investigative Reporter
July 7, 2025

The most damaging aspect of Hayward Unified School District’s financial crisis isn’t just the deficit spending or administrative bloat — it’s how the district systematically misused millions in federal COVID relief funds to create a permanent budget disaster. Rather than using these temporary resources for their intended purpose of pandemic recovery, HUSD administrators treated them as a slush fund for empire building and contractor enrichment.

Now that the federal money is running out, taxpayers face the bill for HUSD’s fiscal irresponsibility. The district admits to funding permanent positions with temporary revenues while continuing deficit spending, creating a financial cliff that will require massive cuts or tax increases to resolve.

The Federal Funding Windfall

HUSD received substantial federal COVID relief funding through multiple programs:

Elementary and Secondary School Emergency Relief (ESSER) Funds:

• ESSER I (CARES Act): Estimated $5+ million
• ESSER II (CRRSA Act): Estimated $15+ million
• ESSER III (American Rescue Plan): Estimated $35+ million
• Total ESSER funding: $55+ million

Additional Federal Programs:

• Emergency Connectivity Fund: $2+ million
• Child Nutrition Program supplements: $3+ million
• Title I increases: $1+ million
• Special education supplements: $2+ million

Total estimated federal COVID relief: $63+ million

This massive infusion of temporary funding should have been used for pandemic recovery, learning loss mitigation, and health safety measures. Instead, HUSD used it to avoid making difficult budget decisions.

The Permanent Position Shell Game

HUSD’s most egregious misuse of federal funds was creating permanent administrative positions funded with temporary money:

Positions Likely Funded with Temporary Federal Money:

• Additional assistant superintendent roles
• Program coordinators and specialists
• Administrative support positions
• Consultant and contractor agreements
• Technology and curriculum specialists

The district’s own admission that it has “positions funded with one-time revenues that are due to expire” reveals the scope of this fiscal malpractice.

The LCFF Allocation Mismanagement

Beyond federal COVID relief, HUSD mismanages substantial state funding through the Local Control Funding Formula:

Annual LCFF Allocations (Estimated):

• Base funding: $280+ million
• Supplemental grants (high-need students): $25+ million
• Concentration grants (very high-need): $15+ million
• Total LCFF funding: $320+ million annually

These funds are specifically intended to improve outcomes for disadvantaged students. Instead, HUSD has created an administrative apparatus to manage the money while student achievement stagnates.

The Grant Dependency Crisis

HUSD has become addicted to grant funding that masks underlying budget problems:

Major Grant Dependencies:

• California Community Schools Partnership Program: $19.5 million (5 years)
• Additional Community Schools funding: $5.5 million (5 years)
• Measure I bond proceeds: $550 million authorization
• Various categorical grants: $10+ million annually

Rather than using grants to supplement core services, HUSD uses them to fund basic operations that should be covered by regular revenue.

The Maintenance Assessment Double-Dip

While claiming budget constraints, HUSD continues extracting money through special assessments:

Maintenance Assessment District (MAD):

• Annual assessment: $28.00 per household
• Total annual revenue: $1,368,696
• Purpose: School grounds maintenance and improvement
• Duration: Indefinite (approved in 1997)

This represents additional taxation beyond regular property taxes, yet HUSD still claims insufficient resources for basic maintenance.

The Bond Measure Bait and Switch

HUSD convinced voters to approve Measure I’s $550 million bond authorization by claiming urgent facility needs:

Measure I Promises vs. Reality:

• Promised: Classroom and lab upgrades
• Reality: Consultant fees and administrative overhead
• Promised: Safety and security improvements
• Reality: No-bid contracts and change orders
• Promised: Technology and equipment upgrades
• Reality: Contractor enrichment and project delays

The first $60 million issuance was completed in April 2025, with taxpayers on the hook for 30+ years of debt service.

The Revenue Forecasting Failures

HUSD’s budget crisis stems partly from systematic revenue forecasting errors:

Forecasting Failures:

• Overestimating sustainable revenue growth
• Treating temporary federal funds as permanent
• Ignoring enrollment decline impacts on per-pupil funding
• Failing to account for pension and benefit cost increases
• Underestimating contractor cost escalation

These aren’t minor miscalculations — they’re fundamental failures that any competent CFO should avoid.

The Federal Compliance Violations

HUSD’s misuse of federal COVID relief likely violates compliance requirements:

Potential Compliance Issues:

• Using temporary funds for permanent positions
• Insufficient documentation of pandemic-related expenditures
• Lack of learning loss mitigation focus
• Administrative overhead exceeding allowable limits
• Inadequate public reporting of fund usage

These violations could trigger federal audits and repayment demands.

The State Funding Formula Gaming

HUSD manipulates state funding formulas to maximize revenue while minimizing accountability:

Formula Gaming Strategies:

• Maximizing reported disadvantaged student counts
• Strategic program categorization to access additional funds
• Grant application strategies that prioritize funding over outcomes
• Compliance reporting that emphasizes inputs over results

The Transportation and Food Service Revenue Gaps

HUSD’s budget problems extend to auxiliary services:

Transportation Program:

• Rising fuel and maintenance costs
• Driver shortage requiring contractor services
• Route inefficiencies increasing per-student costs
• Limited state reimbursement for actual expenses

Food Service Program:

• Federal reimbursement rates below actual costs
• Supply chain disruptions increasing food costs
• Staffing challenges requiring contractor support
• Facility and equipment maintenance needs

The Technology Funding Boondoggle

HUSD received substantial technology funding that produced minimal educational benefit:

Technology Investments:

• Emergency Connectivity Fund: $2+ million
• Device purchases and software licenses: $5+ million
• Infrastructure upgrades: $3+ million
• Training and support contracts: $1+ million

Despite this massive investment, student achievement remains stagnant while technology contractors profit from ongoing support agreements.

The Special Education Funding Crisis

HUSD’s special education program faces a massive funding gap:

Special Education Financial Reality:

• Federal IDEA funding: ~15% of actual costs
• State funding: ~25% of actual costs
• Local general fund subsidy: ~60% of actual costs
• Total special education costs: $50+ million annually

This funding gap forces general fund subsidies that contribute to district-wide budget problems.

The Comparative Revenue Analysis

Other districts manage similar revenue sources more effectively:

Dublin Unified School District:

• Strategic use of federal COVID relief for temporary needs
• Conservative revenue forecasting with contingency planning
• Transparent reporting of all funding sources
• Sustainable spending aligned with permanent revenue

San Lorenzo Unified School District:

• Appropriate use of grants for supplemental programs
• Balanced approach to federal funding opportunities
• Realistic budget projections based on historical trends
• Community engagement in revenue and spending priorities

The Audit and Accountability Gaps

HUSD lacks adequate oversight of revenue management:

Missing Accountability Measures:

• Independent audits of federal fund usage
• Public reporting of grant performance and outcomes
• Board oversight of revenue forecasting accuracy
• Community input on spending priorities
• Transparency in contractor and vendor selection

What Taxpayers Should Demand

Before approving any revenue increases, taxpayers should require:

1. Complete audit of all federal COVID relief fund usage
2. Public accounting of every grant and funding source
3. Revenue forecasting accuracy reporting with explanations for errors
4. Elimination of positions funded with temporary money
5. Transparent reporting of all revenue sources and restrictions
6. Community oversight of major funding decisions

The Bottom Line

HUSD’s revenue mismanagement represents a fundamental betrayal of federal and state funding intentions. Rather than using temporary COVID relief to address pandemic impacts, administrators used it to avoid difficult budget decisions while expanding their administrative empire.

The district’s admission that it continues deficit spending while funding permanent positions with temporary revenues reveals the scope of fiscal irresponsibility. When the federal money runs out — as it inevitably must — taxpayers will face the bill for years of administrative excess.

Superintendent Wu-Fernandez and her team have created a revenue dependency that prioritizes administrative growth over student outcomes. Their systematic misuse of federal funds, state grants, and local revenues has produced a budget crisis that threatens the district’s long-term viability.

Until HUSD replaces failed financial leadership with competent administrators who understand the difference between temporary and permanent funding, the revenue mismanagement will continue. The federal funding windfall should have strengthened the district’s financial foundation — instead, it’s created a fiscal cliff that will require years to resolve.

Taxpayers deserve honest revenue management that aligns spending with sustainable funding sources. They deserve transparency about how their money is used and accountability for the results. HUSD’s current approach delivers neither while enriching contractors and expanding administrative overhead.

The COVID cash grab at HUSD isn’t just fiscal mismanagement — it’s a violation of public trust that will burden taxpayers for years while delivering declining educational services. The reckoning is coming, and it won’t be pretty.