Superintendent Says District Worse Off Despite Getting More Overall State Money
Kalamazoo superintendent ignores tens of millions of dollars to make his case
The Kalamazoo Public Schools get about $53 more per student in state funding this year than the district received in 2010-2011.
Yet Michael Rice, the district’s superintendent, said in a recent column in Bridge Magazine that the Kalamazoo schools and others across the state were better off three years ago.
Rice, like others asking for more money from the state, makes the case in his column that funding has decreased because some schools receive less money today from the state’s foundation allowance. The foundation allowance is a base per pupil dollar amount that schools receive, but is just part of the total amount of state funding each school districts get.
Kalamazoo’s foundation allowance was $7,930 per pupil in 2010-11 and $7,451 in 2013-14.
But Rice is discounting $15.3 million the district received in 2013-14 from the state for things such as special education, adult education and payments to cover the cost of employee retirement costs in the Michigan Public Schools Employees Retirement System.
For example, the state paid $4.4 million in 2013-14 to help cover some of the district’s retirement costs.
In his column, Rice said: “The increased cost of the state-controlled Michigan Public School Employees Retirement Systems (MPSERS) has been substantial and has in fact diverted funds from the classroom. … Another reason for the rise in the cost of MPSERS has been the fact that the state does not require charter schools, whose numbers are no longer capped by the state, to contribute to MPSERS. When charter schools are permitted to opt out of MPSERS, those that are still in the system by law — traditional public schools — have to pay higher rates."
However, blaming charter public schools for problems with MPSERS is wrong, said Gary Naeyaert, executive director of the Great Lakes Education Project, a bipartisan, nonprofit organization that promotes school choice.
Naeyaert said there are about 4,000 charter public school teachers who are not members of MPSERS. There were 223,769 active members in MPSERS as of Sept. 30, 2012 (the most recent available). That means the non-member charter school teachers account for fewer than 2 percent of the total membership.
“It would not impact the cost. Period,” Naeyaert said.
The Kalamazoo Regional Educational Service Agency has authorized two charter public schools, the Lakeside Charter School and the Youth Advancement Academy.
What has taken more potential members away from MPSERS is the privatization of non-instructional services, which typically saves districts money.
Kalamazoo Public Schools has privatized its food service manager position as well as some of its custodial services, according to the Mackinac Center for Public Policy’s 2013 survey of public schools.
About 66 percent of school districts contracted out for food, custodial or transportation services in 2013.
Regardless, James Hohman, assistant director of fiscal policy at the Mackinac Center, said Rice wanting to add more people to spread the cost of paying for the retirement system’s $24.3 billion unfunded liability isn’t a solution.
“Regardless if there are two people in the system or a million people in the system, you still have the underfunded liabilities,” Hohman said. “The amount the state needs to put in to catch up to pension underfunding is the same. Their answer is, ‘We just have to get more people to pay for it.’ No. You have to fix the main problem, which is open-ended liabilities that the state isn’t funding correctly.”
Hohman said to do that, the state has to close MPSERS to new members, offer a 401(k)-type plan and pay down the unfunded liability.
A spokesman for Kalamazoo Public Schools did not respond to requests for comment.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.
A Better Way to Protect Detroit Pensioners
Make it a 'contract city'
Recent press accounts describe the potential for steeper pension cuts for Detroit retirees if they reject a bankruptcy proposal made in February, and instead accept a new plan that, among other things, would insulate works in the city's art museum from potentially being sold off to satisfy both pensioners and creditors. The amended plan would also require a partial state bailout of the city.
Pensioners and residents would do better if Detroit took a more aggressive approach to selling assets, contracting out some services and eliminating others that are "nice to haves" rather than "need to haves."
The best outcome for retirees would probably come if Detroit dramatically downsizes city government, in effect converting itself into a "contract city" along the lines of Sandy Springs, Georgia, or Pontiac.
The Mackinac Center for Public Policy has argued it is unfair to use state dollars to once again bail out the Motor City rather than address other critical statewide needs. Moreover, the state's bailout-for-art deal doesn't actually solve Detroit's financial or infrastructure problems. And by inflicting greater losses on lenders, it may also risk increasing borrowing costs for other communities in the state.
Gov. Rick Snyder and the leaders of some large foundations want the state to commit $350 million to Detroit over 20 years. That would be enough to annually fill more than 875,000 potholes around the state for the next two decades.
That's one measure of the price a state bailout would inflict on residents in other communities who were not responsible for the well-known fiscal and managerial malpractice committed for decades by politicians Detroit voters chose.
Michigan taxpayers have already been forced for years to help fund Detroit's mismanagement through generous financial favors.
For example, a 2013 Citizens Research Council report showed that in 2010 alone Detroit received $335 per person in state support, compared to the second most generously supported city that year, Pontiac, which got $176 per person. Mackinac Center researchers James Hohman and Jarret Skorup have detailed many other ways in which Lansing politicians have previously bailed out Detroit.
The Mackinac Center has warned that a pension reckoning was inevitable without reform. It has offered many constructive proposals for this, such as a special issue of the Mackinac Center's Michigan Privatization Report back in 2000 that focused on Detroit.
There was simply no excuse for dismissing the warning signs years ago, when the city may have been able to prevent the cuts in their long-term obligations that are being discussed now.
This should not be rewarded with yet another special deal. Indeed, doing so creates the likelihood that other municipalities will also demand bailouts.
Pensioners and creditors both stand the best chance of being kept whole by the city fundamentally rethinking how it delivers services to residents, dramatically downsizing its bureaucracy, selling off more assets, aggressively contracting out many services and ending certain others altogether.
These steps also increase Detroit's potential to become a vibrant regional center that attracts residents and employers rather than driving them away.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.
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