There were some negative consequences to breaking up Inkster and Buena Vista public schools, as Inkster Mayor Hilliard Hampton explained at a meeting last year. (Ricardo Thomas / The Detroit News)
Last summer, under the authority of a new state law, state officials dissolved two school districts. Their pupils were assigned to neighboring systems. But a thoughtful new study by the Michigan Citizens Research Council suggests that this tactic should be used sparingly.
The two dissolved districts, Buena Vista and Inkster schools, were in severe financial distress. Infamously, the Buena Vista district near Saginaw had to close for two weeks in May when it was unable to pay its employees.
The relatively small Buena Vista district had an operating deficit of $1 million and a total debt of $3 million. Inkster schools had a nearly $13 million deficit and a total debt of $18 million. (These figures are from the close of the 2012 fiscal year.)
The rapid dissolution of the districts assured that students wouldn’t be stranded in the middle of a school year if officials ran out of operating funds.
But the dissolution statute creates problems of its own, the Citizens Research Council study notes — problems that should be considered as state officials ponder what to do with the nearly 10 percent of Michigan school districts that were in deficit at the end of fiscal 2012.
Under the dissolution act, the 18-mill property tax levy on businesses in the dissolved districts remains in effect and is redirected to eliminating the districts’ debt and deficits.
The practical effect of this means the basic support for each transferred pupil must be made up out of the state School Aid Fund. So all of the state’s school districts must shoulder the debt elimination costs of the dissolved districts.
In the cases of Buena Vista and Inkster schools, that amounts to about $21 million that must be diverted from the School Aid Fund, the research council study observes. In addition, the state has to make up the unfunded portion of the pensions of the retirees of the dissolved districts.
Given these facts, it might be more appropriate to allocate additional funds to really distressed districts earlier in the process, after they have been placed under the control of an emergency manager, which has already happened in some other districts.
There are other issues as well. Neighboring districts may have financial problems of their own — as in the case with the districts assigned transfers from Inkster.
According to the study, the state has already created financial incentives for districts to voluntarily merge or consolidate business operations.
Emphasizing those solutions, along with earlier intervention through the emergency manager process, may be the better approach.
Dissolutions should be reserved for extreme emergencies.