Lawmakers may strip schools of EM choice

Chad Livengood
Detroit News Lansing Bureau

Lansing — Lawmakers may strip financially troubled schools districts of the choice of accepting assistance from a state emergency manager to balance their budgets — two years after giving school boards options to rein in their deficits.

A five-bill package that passed a House committee Thursday includes a bill empowering State Treasurer Kevin Clinton to install an emergency manager in a school district that fails to adhere to a budget deficit reduction plan through early intervention measures.

The Republican-controlled House Financial Liability Reform Committee approved the bills Thursday afternoon on party-line votes. School groups and the American Federation of State, County and Municipal Employees Council 25 testified against the bills.

The bills now advance to the floor of the House for consideration before the Legislature adjourns Dec. 18 for the year. The Republican-controlled Senate passed the bills Dec. 3.

Critics of the legislation say it runs counter to the options of a consent agreement, mediation or bankruptcy that the Legislature built into an emergency manager law passed in December 2012 — one month after voters repealed an earlier version of the controversial law.

“The governor promised that nobody would be placed under emergency management unless requested,” said Nick Ciaramitaro, director of legislation and public policy for AFSCME Council 25, which bankrolled the 2012 repeal of Public Act 4. “We think this proposal gives way too much power to one department of state government.”

The Republican-authored bills seek to create an early warning system for the Treasury Department to more quickly identify school districts beset with financial problems, typically caused by declining enrollment, stagnant state aid or skyrocketing legacy costs.

“The whole idea, though, is not to see anybody end up in a deficit, not to see anybody end up” with an emergency manager, said Rep. Earl Poleski, chair of the committee and a Jackson Republican.

The bills create a new “enhanced” deficit reduction plan and would allow the treasurer to force school districts to agree to a “financial recovery agreement.” Failure to adhere to that budget-cutting plan could trigger an emergency manager being appointed by Clinton.

“There’s a lot of appeals process built in,” Paul Connors, a legislative affairs specialist for the Treasury Department, told the committee.

Since Public Act 436, the emergency manager law, took effect in March 2013, two school boards — Pontiac and Benton Harbor — have agreed to financial reform goals in consent agreements with the state to avoid emergency management.

Three other school districts — Detroit, Highland Park and Muskegon Heights — had emergency managers prior to the new law going on the books and remain under state control.

One of the bills in the package, Senate Bill 957, mandates all school districts and charter schools submit to the Education Department by July 7 annually a report detailing budgetary assumptions, including enrollment projections, expected amount of state aid and operating costs per student for the previous and current fiscal years.

The Treasury Department also would have the discretion to require school districts to submit periodic financial update reports.

A lobbyist for the Michigan Association of School Administrators said the bill creates “too much paperwork.”

“There are typically less than 50 districts in deficit, which means we’re writing legislation that will impact every district in the state for 5 percent of districts that are typically in deficit,” said Brad Biladeau, associate executive director for government relations at MASA.

The Michigan Association of School Boards supports creating an early warning system to intervene before financial problems worsen, said Jennifer Smith, a lobbyist for the organization.

“But we don’t believe these bills are the way to do it,” Smith said.

Ciaramitaro, whose union represents school support staff, said the bills wrongly presume “a school district is guilty until proven innocent” and hit local school leaders “over the head with a stick rather than trying to work with them.”

Another bill gives Treasury officials the expanded power to withhold state aid payments to districts that fail to adhere to the Uniform Budgeting and Accounting Act or post their spending plans online.

“These bills create threats of removing all of their allocated revenue,” said Rep. Vicki Barnett, D-Farmington Hills, who voted against the bills under protest in committee. “They call that the stick.”