Pontiac Schools (Update: @Detroit News via Leo Tomkow)

July 2, 2013 at 1:00 am

School district crises outpace remedies under Mich. emergency manager law

• Chad Livengood
• Detroit News Lansing Bureau
• 12 Comments

The 5,000-student Pontiac school district has an estimated $34 million in unpaid vendor bills. Charles V. Tines, file / The Detroit News (Charles V. Tines)

Lansing— The state’s controversial emergency manager law is proving too slow to deal with some school financial crises, a situation that has forced the Legislature to take increasingly drastic measures that it may expand in the future.

The six-month-old emergency manager law is not quickly tackling some of the record 55 school districts that operated with deficits this year, some lawmakers acknowledge. That is why the Republican-led Legislature fast-tracked a bill to Gov. Rick Snyder’s desk tailored to dissolve the financially beleaguered Buena Vista and Inkster school districts and merge them with neighboring schools.

The legislation, which the governor plans to sign today, is limited because the prospect of the state eliminating entire school districts caused consternation for Democratic lawmakers and some Republicans. But when legislators return to Lansing in late August from their nine-week summer recess, they face another fiscal crisis.

The 5,000-student Pontiac school district has an estimated $34 million in unpaid vendor bills, including $12 million for its union-affiliated health insurance, $4.2 million in employee pensions, $2.8 million for busing students and $1.3 million for custodial and food services that have gone unpaid for up to 18 months, according to records obtained by The Detroit News.

“Without additional cash assistance, there’s no way they’re going to operate the entire next school year,” said Bob Moore, deputy superintendent of Oakland Schools intermediate school district, which is owed nearly $1 million for running Pontiac’s technology department. “This situation is clearly in a crisis because it’s an unknown when the vendors are going to say, ‘That’s it.’”

After Michigan voters repealed the 2011 emergency manager law in a November statewide referendum, the Legislature passed a replacement law in December that contains more options for financially struggling cities and school districts. Besides the appointment of an emergency manager with broad powers to cancel contracts and sideline elected officials, cities and schools districts can choose to settle their financial problems with a mediator, operate under a state-supervised consent agreement or declare municipal bankruptcy.

The new law hasn’t headed off some problems.

Last week, state school Superintendent Mike Flanagan reported the Buena Vista district is in probable financial distress — the first step in the process that could lead to an emergency manager. It came nearly two months after Buena Vista’s schools closed for two weeks. The district couldn’t make payroll because the state reclaimed money the district received for educating students who no longer attended district schools.

Unpaid bills for Pontiac

In Pontiac, one of the district’s largest vendors, the Michigan Education Special Services Association, decided last week to drop health insurance for 430 school employees on July 31 because the district hasn’t consistently paid its bills since late 2011, MESSA spokesman Gary Fralick said.

“We’ve never faced a situation in our entire 52-year history where a district basically started thumbing its noses at us,” Fralick said. “It’s shocking.”

Despite its unpaid bills, Pontiac doesn’t have an emergency manager. State officials have found “probable financial stress” exists in Pontiac and have recommended Snyder appoint a financial review team that could lead to the appointment of an emergency manager. The governor has not acted yet.

The Legislature intentionally exempted Pontiac from dissolution on the advice of the state Treasury Department that the Oakland County district has enough cash to function until June 2014, said state Sen. Phil Pavlov, R-St. Clair Township.

“We needed to take care of the first two that were immediately in danger of not opening (this fall),” said Pavlov, chairman of the Senate Education Committee.

Pontiac teachers are fuming because they’ve been contributing up to 40 percent of the cost of the insurance premiums and MESSA has received only a small portion of their payments from the district, said Aimee McKeever, president of the Pontiac Education Association. “Where is the rest of (the money)?” she asked.

Pontiac’s interim superintendent, Kelley Williams, and school board president, Carol Turpin, did not return messages seeking comment.

“It’s becoming increasing clear they’re suffering from extreme mismanagement,” said House Minority Leader Tim Greimel, D-Auburn Hills, whose 29th District includes Pontiac. “In general, I’ve been skeptical of emergency managers, but something has to give here.”

Policing troubled districts

State Sen. Jim Marleau said the extra steps added in the emergency manager law, designed to prevent communities from being “steamrolled” in a state takeover, could prevent Pontiac from dealing with its unpaid vendor bills quickly.

“I’m feeling and others are feeling the restraint is holding back getting some help to this district that could use it,” said Marleau, R-Lake Orion, whose 12th District includes part of the Pontiac school system.

State Rep. Al Pscholka, R-Stevensville, author of the 2011 emergency manager law, said the state Department of Education needs to do a better job policing school districts in deficit to prevent them from reaching the point of insolvency. “I’m a little frustrated that the Department of Education hasn’t realized these problems earlier,” he said.

Flanagan, who will be given the power to dissolve the Inkster and Buena Vista schools when Snyder signs the bill, was not available for an interview, a spokeswoman said.

Critics said policymakers are ignoring the impact of past cuts to state funding and ballooning legacy costs that increasingly consume a larger portion of school budgets.

“The question is ‘When do you run out of boxes of Band-Aids?’ ” said Tom Watkins, a Democrat and former state superintendent of schools under Govs. John Engler and Jennifer Granholm. “If you’re going to address this issue, when do you stop doing it in a piecemeal fashion?”