As we await election results after performing our civic duty at the polls today (which Democracy Tree is sure all of its readers have done), now is a good time to contemplate those beleaguered communities across Michigan that have lost their democratic right to home rule under emergency management, along with the increasing number of municipalities and school districts teetering on the edge of fiscal crisis.
Last week we learned that Benton Harbor Area Schools have fallen under the specter Public Act 436 — the emergency manager law. This, on the heels of the city recently escaping the harsh realities of the same law. As elected officials transition back to home rule — now they’ve come for the community’s schools.
The district has been struggling financially for quite some time, having filed two Deficit Eliminations Plans — the first one being rejected by the Michigan Department of Education for containing “assumptions that were not acceptable”. A subsequent plan, which projected deficit elimination to stretch to 2027-28, was submitted last February to the MDE for their consideration.
Much like hurricanes, the MDE uses a category system to rate the level of fiscal stress of school districts. As of earlier this year, Benton Harbor had been rated Category 2 — as a district that began FY2014 in deficit, but was projected to end the year with a reduced deficit. In 2011, State Superintendent Mike Flanagan had been ready to pull the trigger on emergency management under Public Act 4, but upon learning the district had taken some serious actions indicating they were prepared to tackle the problem, he gave them a reprieve. School leaders did the following:
• Closed two buildings at semester end in January 2012,
• Closed the District’s 5-6 grade center at year end,
• Approved the layoff of 13 teachers, an administrator, and several support staff,
• Hired Plante Moran to manage the District’s financial services,
• Approved the Berrien County Land Bank to demolish six vacant District buildings and sell others,
• Worked closely with the City of Benton Harbor emergency manager and major corporations to help facilitate the deficit elimination, and
• Teacher acceptance of a 10% reduction in pay for the second semester and increased copays.
That apparently wasn’t enough to avoid triggering PA 436. The school district’s revenue to deficit ratio is a disturbing negative 46 percent, rivaled only by Pontiac Schools who are at negative 60 percent. With a deficit of $14.7 million, the tiny district, which receives the lowest allowable per pupil funding for its 2,680 students, is sinking fast. Although they were on schedule with the state’s Category 2 prediction of ending the school year with a lower deficit than it began, the review team’s report still flagged them as in financial crisis.
The law gives district leaders ten days to opt between emergency management, a consent agreement, neutral arbitration, or bankruptcy.
At this time, the district is not subject to the possibility of state-mandated dissolution under Public Act 96 — but that could change, and quickly. Benton Harbor schools have seen a 46 percent reduction in enrollment over the past decade, but they are still above the maximum of 2,500 students to trigger the dissolution law. However, emergency management, in-and-of-itself, is an enrollment killer.
The law may be invoked if all of these four criteria are met:
- Failure to submit a deficit elimination plan or failure to win state approval of their plan.
- The district is determined as not fiscally viable.
- Student population is under 2500.
- The district incurred a 10 percent, or greater, decline in enrollment in the previous school year.
Benton Harbor has already met the first two qualifications, and the last two are a very likely outcome.
Democracy Tree reported earlier this year on the failings of the dissolution plan — findings that were echoed in a report from the Citizens Research Council which found the law deeply flawed, and worried over possible future applications. The CRC painted PA 96 as a poorly thought-out fiscal boondoggle in which the cure is worse than the disease. They asserted that emergency management was even preferable to dissolution.
State government, through its adoption of the new policy, is signaling that some financial problems cannot be solved without the aid of additional funds. If this is the case, then it might be appropriate to provide these resources sooner, through an emergency manager process, rather than as a last resort.
Democracy Tree posits that the state shouldn’t even wait until emergency management is invoked — they should fund schools properly in the first place. And, it appears there’s only one way to accomplish that goal — by voting for leaders who support our schools.