Double Standard On School District Deficits

The Muskegon Heights School District has been in deficit nine consecutive years, dating back to the 2004-05 school year, according to the Michigan Department of Education.

Mosaica Education, a national charter public school operator, ran the Muskegon County school district for two years, but made no progress in ending the cycle of debt and now is ending its contract with the district.

This had a few state lawmakers and State Superintendent Mike Flanagan questioning whether the state should hand an entire district over to charter public school operators, according to an article posted on the Michigan Radio website. 

Muskegon Heights has a history of deficits, which steadily increased through the years, jumping from $863,468 in 2007-08 to $11.8 million in 2011-12. The charter public school operator took over in 2012-13.

But it was hardly the only conventional public school district to have a long history of deficits. Once a school district has a deficit, it submits a deficit elimination plan to the Michigan Department of Education for approval. Yet many districts still end up in deficit year after year.

Flanagan gave his report that there were 45 school districts projected to be in deficit at the end of this 2013-14 school, down from the record 55 districts in deficit from a year ago.

According to Michigan Radio, State Rep. Terry Brown, D-Pigeon, was caught off guard when he was told by the MDE’s Dan Hanrahan that the charter public school operator was not going to follow through on the deficit elimination plan for Muskegon Heights because it was no longer going to be working with the district.

Michigan Radio reported this exchange:

"Now that (Mosaica) is leaving, they pretty much told us they're not going to do (the district's) deficit elimination plan. To follow up on that, we should wait for the new management company and deal with them," Dan Hanrahan, Michigan Department of Education's director of state aid and school finance, told the panel.

"We sort of acquiesced on that in regards to..." Hanrahan continued, when he was interrupted by State Rep. Terry Brown, D-Pigeon.

"Wait, did I hear you say they said they're not going to do the (deficit elimination plan)?" Brown asked.

"Yes," Hanrahan answered.

"I wasn't sure. And they can do that?" Brown asked.

"They're not, they shouldn't do that, but the reality of the situation is that they're out the door here in a couple of weeks," Hanrahan said.

However, it's somewhat common for conventional public school districts not to follow through on their deficit elimination plans.

For example, Redford Union Schools in Wayne County has been in deficit 11 of the last 13 school years, including the last five in a row. Hancock Public Schools in Houghton County has had a deficit eight consecutive years. Clintondale Community Schools in Macomb County has had a deficit for nine consecutive years.

MDE Spokesmen Bill DiSessa said the department "works collaboratively with deficit districts" to help them get back on sound financial footing.

"For deficit districts showing progress, we are likely to maintain that collaboration and grant extensions of deadlines for when they must eliminate their deficits," DiSessa said. "When necessary, however, we have withheld state aid payments from districts or initiated the preliminary review process under PA 436."

He added, "If an emergency exists, the school chooses between an emergency manager, consent agreement, mediation or bankruptcy."

Gary Naeyaert, executive director of the Great Lakes Education Project and an advocate for charter public schools, was at the meeting and wondered why there was so much discussion about one charter public school when there were 40-plus conventional public schools also with deficits.

"They used the opportunity to criticize charters," Naeyaert said. "There are dozens of districts that are chronically in deficit and there are no repercussions."

Audrey Spalding, education policy director at the Mackinac Center for Public Policy, said it is rare for a conventional school district to be closed or to suffer penalties for managing money irresponsibly.

"However, charter public schools close all the time due to academic or financial mismanagement," Spalding said. "The charter schools face real consequences while the traditional districts typically do not."