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School Aid budget meets reality

MIPFS Headlines - Thu, 05/19/2016 - 12:17pm

The state's top economists met on Tuesday, and delivered the not-so-good news: state tax revenue, including school aid funding, was going to be lower than we thought, by almost $175 million this year and $160 million in the next year. Since the state budget has to be balanced, the proposed budgets for next year have to be "adjusted" accordingly.

But, wait - aren't we in a recovery? That depends. On the one hand, employment is up, manufacturing is up, the state economy is growing, and even income tax receipts are up (since people are making more). On the other hand, sales tax revenue is faltering, and it makes up the largest chunk of the School Aid Fund. Why? Retail sales are down, and gas prices are down. We don't tax services, which is where the growth is. On top of that, the corporate income tax revenue was slowing, and was going to be smaller than the tax credits handed out to large businesses under previous agreements.

Here's the bottom line: state revenues are almost $10 billion under the limit set by the state constitution's Headlee Amendment - the lowest ever since the provision was passed in the 1970s. So while the state's economy may be growing, we don't see much of it in the budget - including school aid. Our state has spent a shrinking percentage of our Michigan's economy on K-12 education over the last decade, in good times and bad. We are slowly starving the very school systems that help fuel our economic growth.

You may remember that proposals for next year's school aid budget were upbeat - districts would receive $60 to $120 extra per pupil, and at-risk funding was being expanded. It's an election year, so the Legislature will try hard not to disappoint voters. But something will have to give, since the School Aid Fund will be short $41 million under current projections - and that includes using up leftover balances from this year. Will it be the millions earmarked by the House and Senate for "reimbursing" private schools for things like background checks, keeping vaccine records, and fire drills? How about the odd little grants to lawmakers' pet organizations for programs no one asked for? The hole in the general state budget is even larger, so that can't come to the rescue. We will soon see.

Finally, some useful perspective: the law which remade our state school funding system in 1994 (Proposal A) also included a provision requiring economists to calculate the amount per-pupil funding should change given revenue and student counts. On Tuesday, the top state economists reported that the minimum per-pupil funding should increase by $245, more than double the maximum increase included in the current budget bills. So even by the standards of those who drafted Proposal A, we are falling behind. And none of these calculations and negotiations seek to answer the most important question of all: what do our schools need to provide a quality education for all children?

Departments: CommentaryLegislative newsState budget & taxes

DPS restructuring plans: Darn the people, full speed ahead!

MIPFS Headlines - Thu, 05/05/2016 - 12:31pm

[UPDATED with House-passed plan] After many years under state control - fourteen of the last seventeen - Detroit Public Schools has reached a critical juncture: the district and its emergency management projects that it will run out of money to operate its schools before the end of the current school year. Politicos of all stripes have known this day was coming, and there have been competing proposals on what to do about it. Last year, a coalition of Detroit leaders, parents and citizens - many of them bitter enemies - sat down and hammered out a compromise document that might lead the city’s schools out of the crisis. [See plan comparisons below.] It was a tenuous compromise, with many details remaining to be worked out (and some coalition members have a deep concern that local voices were not in fact heard). But it was a blueprint grudgingly accepted by the people on the spot. The reaction in Lansing? Dismissive statements and knowing smiles. A locally-developed plan wasn’t “on their agenda.”

Any of this sound familiar? Perhaps it bears some resemblance to how the people of Flint were treated when they complained about being poisoned by their municipal water supply? The underlying cause is the same: in both the executive branch and the legislature, what “the people” really want doesn’t matter half as much as what these exalted folks think is best for us, based on their own ideology or technocratic worldview. Detroit may be the most visible example right now, but as Flint proves, it was not the first and - unless we stand together - it will not be the last.

The following table summarizes the proposals put forward by the coalition of Detroit leaders, the Senate (which began as the Governor’s plan but was modified on the journey to passage), and the House (which is their response to the Governor’s plan). Feel free to contrast and compare the difficult steps local leaders thought might turn their community around to what they are being offered by Lansing. It should give all of us pause. (Links to the original documents appear at the end of this article.)

The most important takeaway? Local leaders acknowledge that things have to change, and that a lot of that change has to happen in the way local stakeholders work together. But they also insist that the state clean up its own mess and take steps to change the forces beyond Detroit’s control that have contributed so much to this crisis. In contrast, Lansing seems to believe that tight fiscal oversight and a tiny bit of debt relief is all that’s needed. There are no outside forces to cope with, no systemic problems with how Michigan funds its public schools that need to be addressed. What’s needed, says Lansing, is for the state to provide outside discipline until "they" can demonstrate self-discipline. And goodness knows, there is no need for Lansing to look in the mirror for the reason Detroit children have been poorly served for so many years.

Detroit Coalition Proposal

Governor/Senate Plan (SB 710-711) Update: as passed Senate 3/22/16

House Plan (HB 5382-5387) Update: as passed House 5/5/16

Plan Overview

Control over DPS is returned to an elected school board. A new body would control the opening and closing of schools in the city to prevent over-capacity. The State would assume the operating debt amassed largely under state control. Charters would be required to increase transparency and face greater regulation. Local leadership teams of parents, staff and students would play an advisory role in each DPS school. SRRO would replace EAA and transition schools back to DPS after interventions.

A new "community district" would be formed to take over all functions of DPS. Old DPS would exist to pay down debt using local 18 mill levy. A rapidly elected board would be under the oversight of a financial review commission. Extra funding needed for the new district would come from tobacco settlement funds. A body appointed by the mayor would control school openings and closings for 5 years. The new community district would be required to withdraw from agreements creating the EAA.

As in the Senate plan, a new "community" district would take over functions of DPS, leaving old board to pay down debt. New board would be elected but not take office until 2018 at the earliest. A maximum of $500 million in tobacco settlement funds, at $72 million per year, would be used to fund operations until the old debt was paid.

Political Control

Control of the school district would be returned to an elected school board.

The new community district would begin with a "transition manager" with all powers of a school board, who would also manage the original district until a new board was elected for the community district. All 9 seats on the community district board would be filled in the next regular August election date, with staggered terms eventually lasting 6 years.

The board of the new community district would be appointed by the Governor (5) and Mayor (2), with two of the Governor’s appointees drawn from lists nominated by majority party leaders of the state Legislature. New members to replace appointed board members would be elected in August 2017 at the earliest, taking office in January 2018 and serving staggered 6 year terms.

Handling DPS Debt

The state must assume the $53 million per year of operating debt that was accumulated by DPS under state control. In addition, DPS should be relieved of the burden of paying for legacy costs of MPSERS which were under state control.

In return, DPS would engage in a system-wide audit, and make plans going forward with "appropriate financial oversight" by the state.

Detroit taxpayers would continue to pay $174 million a year to service the district’s capital (bond) debt.

The DPS (old) district would continue to exist solely for the purpose of paying down the district’s outstanding operating debt. The existing district and board would continue to collect the local 18 mills in non-homestead taxes (normally the local contribution to the foundation allowance) and use those funds to pay down the debt.

Until that process is completed, the state would cover the estimated $72 million/year shortfall. The FY17 state budget proposal includes using tobacco settlement funds to cover this cost.

Same as the Senate proposal, except that the $72 million per year would be capped at $500 million, rather than the $715 million in the Senate plan which also covers transition costs.

Administrative Control

The Coalition proposes a new body, a Detroit Education Commission, which would be a "gatekeeper" for the opening and closing of schools in Detroit. Members of this body would be appointed by the Mayor.

The State Reform/Redesign Officer would oversee improvements in former EAA schools as they return to DPS control.

All local schools would have increased autonomy in personnel and budget matters.

Financial matters would be under the supervision of the Detroit Financial Review Commission, which already exists to oversee the city’s transition from bankruptcy. The FRC is appointed, but includes top local elected officials. The superintendent and board chair of the new community district would also sit on the Commission. (City leaders would not vote on school matters and vice versa.) The FRC would have to approve the district budget and any large contracts and collective bargaining agreements (though existing contracts would carry over from DPS).

The community district would remain under FRC supervision until it had met fiscal stringency requirements for ten consecutive years (and the state treasurer certified that the debt has been repaid).

The newly elected school board would hire the first superintendent. The elected school board would also appoint a chief financial officer, with approval of the FRC, and could not fire the CFO without the review commission's approval. District officials on the FRC would not have a vote on decisions regarding the district CFO. The new appointed school board would hire the first district superintendent, subject to the approval of the FRC. The elected board could not fire or change the contract of the superintendent without FRC approval. The district officials on the FRC would have no vote on the superintendent’s approval.

School principals would not automatically transfer to the new district, and would have to reapply for their jobs to the new appointed board. System Structure

Detroit Education Commission would supervise opening and closing of all schools, including charters.

Elected board would manage DPS.

Increased autonomy and local advisory councils at individual building level.

New community district would be created to operate DPS schools, while DPS continued to exist only to pay down debt.

New district would be under financial and partial administrative control of appointed Financial Review Commission for at least 10 years.

New district board would be elected soon after community district was created.

Education Commission would create recommendations for siting new public schools; new schools that did not simply replace existing schools would have to receive approval as being in line with the siting plan. Existing schools could only be replaced by the same governing entity and only if the school had received a good "grade" under the evaluation system imposed below.

New district board would initially appointed, later elected.

No changes to how charter schools operate.

New Powers

The proposed Detroit Education Commission would have the power to regulate public school openings and closings in the city of Detroit, including charter schools. No entity currently has this power to regulate the entrance of new schools or the closing of existing ones.

In Detroit: Financial Review Commission receives sweeping new powers to approve and modify the district budget; approve the appointment of a superintendent; prevent the school board from removing or changing the employment terms of a superintendent; approve all large contracts for goods and services; and approve all collective bargaining agreements.

Statewide: Any school district, including the new Detroit community district, could contract out any or all services - including teaching - to "another public entity." The bills specify that this includes but is not limited to other districts and ISDs, but in fact would also include charter schools, intergovernmental entities such as the EAA, or other entities which might be considered "public." In turn, some of these entities, notably charter schools, can contract out all educational services including teaching to a private company (under current law, local school districts cannot contract out teaching).

In Detroit - Senate passed: A new body, modeled on the DEC proposed by the Coalition, would be put in place to regulate the opening of all public schools inside the new district for 5 years. The Education Commission would have 7 members appointed by the mayor: 2 members representing area charter schools; 2 members representing local district schools; 1 parent each from an area charter and a district school; and 1 member with expertise in school improvement and accountability systems. At least 5 members must reside in the community district.

If the mayor requests it, the SRRO may issue an order extending the authority of the DEC for a further 5 years.

Statewide - House bills only: School employees found to have participated in a strike prohibited by state law (teachers are not allowed to strike under state law) must be fined a day's pay for every partial or full day they participated in the strike. This provision mirrors Senate legislation introduced after the Detroit "sick-outs" to protest miserable conditions in DPS schools.

Addressing Ongoing Fiscal Stress

The Coalition plan calls for the state to relieve DPS of obligations to pay for the unfunded liability in the state school retirement system (MPSERS). In addition, it calls for 3-year revenue projections for all schools in Detroit, and funding to soften the impact of declining enrollment. Coalition members also called on the state to accelerate the school funding adequacy study and to work on a method to provide building funds for charter schools as well as DPS.

Besides making arrangements to cover the financial shortfall while the 18 mill levy is used to pay down debt, the bills make no provisions to change the fiscal conditions facing Detroit public schools. The focus is entirely on regulating the finances of the new district.

However, the Senate plan as passed by the chamber does include an Education Commission that would regulate the opening of all public schools in the community district, including charters, in order to manage capacity and quality.   New Conditions & Requirements  

House plan only

In addition to regulating the new community district’s finances, the House bills also impose requirements often taken from other unsuccessful legislation:

  • Collective bargaining agreements from the current DPS would not carry over.
  • Current employees would transfer to the new district, except for principals and the superintendent, who must re-apply for their positions.
  • The new district may not use more than 6.3% of its operating budget for administrative expenses (to be monitored by the State Treasurer)
  • The new district would have to prioritize a portion of its operating funding for facility improvements, including deferred maintenance, etc.
  • Each October, the SRRO must compile a list of community district schools that must be closed at the end of the school year. This list must include schools that have appeared in the "bottom 5%" listing of schools statewide (as defined in state law) for three of the last 5 years.
  • The new district may employ uncertified teachers in its classrooms, who could use three years of classroom teaching to waive the student teaching requirement
  • Teacher and administrator compensation would be governed by an evaluation system as specified in recent law (which uses test scores as a significant component)

Senate plan only

To determine eligibility for school siting decisions, the SRRO must implement a school rating system at the recommendation of the Education Commission. The system must assign a letter grade to each school, based on metrics predominantly composed of student growth measures (standardized test results), along with student proficiency measures (scores and other indicators) and other nonacademic factors. Student growth must comprise between 50% and 70% of the final score. Nonacademic factors would comprise 20% of the final score.

In addition, schools which receive low grades or are in the "bottom 5%" statewide for a number of years will be required to implement a turnaround strategy specified by the SRRO in consultation with the Education Commission.

A statewide school accountability system would replace these special provisions for the community district.

Read and track activity on the main bill in the Senate package, SB 710, using this link.
Read and track activity on the central bill in the House package, HB 5384, using this link.
A copy of the Detroit Coalition report is attached to this article; other materials may be found here.

AttachmentSize House Fiscal Agency analysis of HB 5384, as introduced161.38 KB Senate Fiscal Agency analysis of SB 710, as introduced208.94 KB Coalition report from March 20152.46 MB