Facing both declining enrollment and a shrinking budget reserve, Lakeside is not only considering merger or annexation with another neighboring school district, but also how to provide services for its seventh- and eighth-grade students. Lakeside serves grades K-6, but is obligated to provide educational services for grades K-8. Lakeside board members unanimously agreed during a Feb. 7 meeting they won't be paying Loma Prieta Joint Union Elementary School District additional funds to educate middle school students who transfer there from Lakeside.

As a revenue-limit district, Loma Prieta receives funds from the state based on average daily attendance of students. In contrast, Lakeside is a basic aid district, meaning the majority of its revenue comes from property taxes. Lakeside officials recently approached the Loma Prieta district requesting that Loma Prieta find a way to help serve their middle school students.

"It wasn't like we went to them," Loma Prieta's Superintendent Henry Castaniada said.

Castaniada proposed Lakeside pay an additional $3,700 per student educated in the Loma Prieta district. The funds would help Loma Prieta share the costs with Lakeside of an additional teacher who would need to be hired to meet teacher-to-student ratios in the classroom and to enrich curriculum at the middle school level.

"We're not in a situation where we can do that with Loma," said Parker Stokes, Lakeside's board president. "The money can't follow the child. It's not legal. To be fiscally responsible we have to be within our means."

Lakeside board members determined the reimbursement request would be illegal because it would involve a gift of public funds. They decided not to pursue further discussions related to the proposal.

But Castaniada claims there was nothing illegal proposed by Loma Prieta, and added the negotiations have been completely positive. Castaniada said he was just trying to come up with options to serve Lakeside students and share the financial burden, since Loma Prieta wouldn't be able to absorb the financial costs of hiring another teacher.

"We could have found a solution to meet Lakeside's request to give its students preferential treatment and share the costs of hiring a teacher," Castaniada said. "We could have found options if we'd had that discussion."

Reaching "a roadblock" where the two school districts had differing opinions, Castaniada said there should have been more discussion in resolving the discussion.

"We have our master schedule for our students, and we were just trying to help Lakeside out," he said.

Castaniada went on to explain when there's space to additionally load smaller classes at Loma Prieta with inter-district transfer students, the vacant slots are filled through a lottery. The inter-district transfers come from Lakeside or other nearby schools districts. Even though Lakeside board members rejected Loma Prieta's proposal, Castaniada said Lakeside students will still be included in the future lotteries. But Castaniada said Lakeside students will be fortunate if they are able to attend Loma Prieta because there are so few openings available.

"If you're lucky, you get to come here if there's an opening. But it's a random drawing," he said.

Castaniada wished Lakeside the best in solving its challenging situation. As a temporary remedy to the problem, Lakeside board members unanimously approved the second year of a two-year, annually reviewed agreement on Jan. 25. The agreement states that educational services will continue for Lakeside eighth-graders at Fisher Middle School for the 2005­06 school year. But Lakeside can't afford to continue this relationship without going bankrupt because it will have to pay the Los Gatos Union School District approximately $4,900 per student under this agreement. The Los Gatos school district, which includes Fisher, is also a basic aid district, and there are about seven Lakeside students who will benefit from this agreement. Los Gatos school board unanimously ratified the agreement at a Feb. 8 meeting.