House panel OKs DPS plan despite funding issues

Jonathan Oosting and Chad Livengood
Detroit News Lansing Bureau
Detroit Federation of Teachers organizing for a rally outside the DPS offices in Detroit.

Lansing — A $500 million plan to save the Detroit Public Schools from crippling debt advanced to the floor of the Michigan House on Tuesday despite unanswered funding questions, union criticism and uniform opposition from Democrats, including Detroit legislators.

The new plan calls for less state aid than the $715 million package that won bipartisan support last month in the Senate. It would impose new limits on collective bargaining in Detroit schools and does not include the long-discussed Detroit Education Commission backed by Gov. Rick Snyder and Mayor Mike Duggan but strongly opposed by charter school advocates.

“I think it’ll have to be a Republican plan,” House Appropriations Chairman Al Pscholka, R-Stevensville, said after a series of mostly party-line panel votes. He predicted approval by the full GOP-led House later this week.

Pscholka entered Tuesday’s hearing with a message for Detroit teachers participating in this week’s mass sickouts.“You are going to get paid,” he said, staring directly at a television camera. “Get back to work.”

But Democrats questioned the math underlying the Republican plan and asked whether the proposed funding would ensure the district can pay the majority of Detroit teachers who are on extended payment schedules through the summer.

The threat of payless paydays prompted the sickouts that closed most Detroit schools Monday and Tuesday. It is illegal for teachers to strike in Michigan, but masses of teachers who call in sick are more difficult for school administrators to punish.

The legislation would divert $72 million from the state general fund each of the next seven years, providing up to $500 million in total state aid to a newly-formed community district while an existing millage is used to pay down roughly $467 million in old debt.

A liaison from the Michigan Treasury was unable to tell legislators whether the remaining $33 million would supply the district with enough cash to pay teachers for all work completed through June 30 and prior to a state school aid payment on Oct. 10. He said the department had not fully reviewed legislative language provided Monday evening.

“I don’t understand how this package of bills can be characterized as a solution,” said Rep. Adam Zemke, D-Ann Arbor. “It’s not.”

Report raises issues

A Treasury Department report obtained by The Detroit News shows the $33 million may not be sufficient to carry the Detroit school district through the summer months and into the next school year.

Detroit Public Schools has to make separate payments of $26.1 million in both July and August to repay money the district borrowed this school year to stay afloat, according to the cash flow report.

When the payments are factored into the monthly budgets, along with payroll, the district will be $18.4 million short in July and $33.8 million short in August. The July and August shortfalls total $52.2 million — the exact amount the Detroit district owes in debt payments to the state.

In September, the fiscal forecast gets worse. A district spokeswoman confirmed the summertime payments are for retiring debt from the current school year.

The Detroit district says it will be $85.5 million short in September, in part, because school districts don’t get a state aid payment that month, according to the Treasury report. Like dozens of other school districts, DPS typically borrows against future state aid in September each year to make payroll during the one-month lapse in state funding.

But in recent years, the Detroit district has fallen behind on repaying the short-term loans for cash flow purposes. For this school year, DPS has been paying off an $83 million loan from last school year in addition to $120 million borrowed last September and October and a $53 million payment on bonds issued in 2011 and 2012, district records show.

All told, the district’s debt from prior school years consumes about $3,000 of the $7,296 per student grant it gets from the state, The Detroit News first reported in January.

Rep. Chris Afendoulis, R-Grand Rapids Township, argued the overall funding package would help the district avoid two $26.1 million debt payments, suggesting the $33 million would then be sufficient to cover any cash flow shortfall in coming months.

“It’s incumbent for us to move things forward so that on July 1 we don’t have a crisis,” Afendoulis said.

GOP pushes plan

Republicans pushed for a committee vote on the plan despite Treasury’s inability to answer various funding questions. But Pscholka said he is confident the $33 million will keep the district afloat through October, when it would begin receiving larger per-pupil funding allowances from the state.

Pscholka told reporters Republicans on the appropriations committee were “not buying” the need for additional transition costs proposed by Snyder and approved by the Senate.

“We think it’s fair,” he said of the $500 million House plan, noting the full Legislature already approved $48.7 million in stop-gap funding for the district. “That’s quite a commitment from the taxpayers of Michigan.”

Pscholka said the recent teacher sickouts made it more difficult to advance the Detroit schools plan, making several lawmakers “nervous” about providing the district with additional state aid.

Rep. Earl Poleski, R-Jackson, urged his colleagues to vote for the DPS plan despite what he called “educational malpractice” by the Detroit Federation of Teachers and “grossly unprofessional” behavior by union members.

The revised House GOP plan goes beyond the Senate version by including additional oversight measures for Detroit schools and a slower return to an elected school board.

It would also prohibit the transfer of existing collective bargaining agreements to the new community district, a proposal blasted by the Michigan chapter of the American Federation of Teachers. New collective agreements could not include provisions related to employee work schedules or the school calendar.

State Rep. Henry Yanez, D-Sterling Heights, called the legislation a “bald-faced” attempt at “union busting” and proposed a failed amendment to transfer collective bargaining agreements to the new district.

“They negotiated their contract in good faith, and we should be living up to that good faith negotiation,” Yanez said.

Commission excluded

The advancing House plan would expand the city’s financial review commission to include oversight of the new community district. The commission would have final say on the hiring of a new superintendent for Detroit schools.

An initial school board would be appointed by Snyder (five members) and Duggan (two members). Members would be replaced in January 2018 by the top seven vote getters in an August 2017 election.

The House plan does not include the Senate-approved Detroit Education Commission, which would generally regulate the opening of new traditional or charter schools within the city. Duggan has indicated he could not support a DPS rescue plan without the commission, which he argues is needed to ensure quality schools are rationally distributed throughout Detroit.

Sen. Goeff Hansen, R-Hart, acknowledged that the proposed commission “has been a challenge all the way through” the legislative process, but told House members the proposal was the result of extensive conversations with Detroit leaders, teachers and parents.

“As you go through it, there are parts of Detroit that have no schools and some that have lots of schools. There’s just no coordination,” Hansen said.

Republicans rejected a proposed amendment to include the Detroit Education Commission in the House plan, frustrating Democrats on the committee.

“We all want to see good schools in our district whether its public or charter, but I think that one of the concerns, particularly coming from the citizens of Detroit, is the influx of charter schools that have been coming in but have been failing,” said Rep. Fred Durhal III, D-Detroit.

Under the House plan, the state School Reform Office could automatically close a traditional public school that performed in the lowest-five percent of all Michigan districts for three of the last five years. Upon notification from the state, a charter authorizer would have to revoke the contract for any charter school that performs as poorly.

The legislation would also prohibit the community district or a charter authorizer from opening a new school in the same location as a forced closure unless it had a significantly different leadership structure and curriculum offerings and was approved by the School Reform Office.

“We just don’t think it’s necessary,” Pscholka said of the Detroit Education Commission. “We think it’s another layer of bureaucracy, and we really think the way we’ve written the bills, the School Reform Office will handle closings and the school board should be able to do the rest.”