For Immediate Release:
December 12, 2013

Contact: Craig Thiel
517.485.9444

CRC Report Takes a Look at Michigan’s New School District Dissolution Policy
In July, Michigan state government officials, acting under the authority of a new state law, dissolved two local school districts, resulting in the closure of all of the districts’ schools and the reassignment of the districts’ students to neighboring districts. The speedy dissolution of the Buena Vista and City of Inkster school districts came after the State Superintendent of Public Instruction, in consultation with the State Treasurer, determined that the districts were no longer financially sustainable. CRC’s new report, School District Dissolutions: Another Approach to Address Local School District Fiscal Distress, examines the state’s new policy allowing for school district dissolutions and its implications for local districts and the state at-large.
Although fiscal distress among Michigan’s nearly 550 local public school districts and almost 275 charter schools is not widespread, a growing number of districts are ending their fiscal years in deficit. Today, the State Superintendent of Public Instruction reported that 50 school districts ended the 2012-13 fiscal year with a General Fund deficit, the largest number of deficit districts since the passage of 1994’s Proposal A. Until recently, state officials relied exclusively on the emergency manager statute to directly intervene in the affairs of local districts to address fiscal distress; now they have another tool at their disposal.
“It is unclear if Public Act 96 was intended as a ‘one off’ policy response or if it will become a permanent tool used by state officials,” said Craig Thiel of CRC. “However, the adoption of a new school district dissolution policy signals that state officials are continuing to search for a policy solution to deal with financially failing school districts.”
CRC’s new report identifies many of the causes of school district fiscal distress and the state’s oversight role in preventing distress from occurring in the first place. Additionally, the report discusses the justifications for state intervention, along with the state’s traditional response when districts are unable to address their problems on their own.
The report also examines a number of issues, some previously not contemplated, associated with the state’s new authority to dissolve local school districts under Public Act 96, including:

• the state’s departure from prior laws that require local voter approval to alter school district boundaries;
• the differences between the new law and the emergency manager law for dealing with fiscal distress;
• the provision of additional state resources to liquidate a dissolved school districts’ debts; and
• the potential inequitable treatment of those responsible for paying the local 18-mill school operating tax.

“Local school districts, as creatures of the state, require consistent and transparent policy guidance from the state government when it comes to confronting fiscal distress,” Thiel added. “The state’s ad hoc reaction for dealing with the unfortunate circumstances in the Buena Vista and Inkster school districts illustrates that state government lacks a uniform model that it will apply when school districts fail.”
CRC’s report is available at no cost on the Citizens Research Council’s website, www.crcmich.org.
Founded in 1916, CRC works to improve government in Michigan. The organization provides factual, unbiased, independent information concerning significant issues of state and local government organization, policy, and finance. By delivery of this information to policymakers and citizens, CRC aims to ensure sound and rational public policy formation in Michigan. For more information, visit www.crcmich.org.