Nick Krieger (@nckrieger):
THE SENATE PLAN
Last month, the Michigan Senate passed its six-bill Detroit Public Schools restructuring plan, consisting of SB 710 (Substitute S-2), SB 711 (Substitute S-4), SB 819 (Substitute S-1), SB 820 (Substitute S-2), SB 821, and SB 822 (Substitute S-2). Four of the five bills were passed by votes of 21-16-1. SB 711 (S-4) was adopted by a larger majority.
As you’ve probably heard by now, the Senate plan would split the existing Detroit Public Schools (“DPS”) into a qualifying district (the “Old DPS”) and a community district (the “New DPS”).
All debts of DPS would be transferred to the Old DPS, which would exist for the sole purpose of paying off the district’s outstanding obligations. The New DPS would immediately assume ownership of all DPS real and personal property, and would take over the district’s responsibility of educating pupils.
The current DPS Board of Education would continue to serve as the board of the Old DPS; a new board consisting of nine members would be elected to operate the New DPS. Earlier drafts of the legislation would have created an appointed board, to be replaced by an elected board at a later date. Under the plan adopted by the Senate, however, the New DPS board would be elected from the outset, with members chosen from districts for staggered terms at the August 2016 election. Following these initial staggered terms, all board members would be elected for 6-year terms. The legislation would prohibit any member of the Old DPS board from serving on the New DPS board.
The Senate package would transfer all taxing power to the Old DPS, leaving the New DPS without authority to levy any property taxes of its own for approximately 10 to 12 years. The Old DPS would use the revenue generated from the district’s 18-mill non-homestead operating tax to pay down DPS’s current operating debt in the amount of $515 million, plus $200 million in additional operating debt that would be required for the purpose of financing “transitional operating costs.” In other words, Detroit’s non-homestead property owners would pay at least $715 million to satisfy Old DPS operating debt, but would not provide any operating revenue for the New DPS.
Under the Senate plan, the local portion of the New DPS’s foundation allowance—which otherwise would have been provided through the 18-mill operating tax described above—would be drawn from the School Aid Fund. The Senate package provides that, in community districts without taxing authority such as the New DPS, the entire foundation allowance (as opposed to only the state portion) would be payable by the state.
How much would the local portion of the New DPS’s foundation allowance actually cost? At least in the first year, about $72 million—the annual amount currently generated from the 18 operating mills levied on non-homestead property in Detroit. Interestingly, while the Senate plan would pay the New DPS’s entire foundation allowance with state funds, the package does not identify any new revenue source for the increased cost. Governor Snyder has spoken of his preference to use tobacco settlement funds for the added expenditure. However, this part of the deal is simply not spelled out in the Senate legislation, and will therefore need to be enacted by way of a separate bill at a later date.
The Senate package would put in place a number of other changes:
1. The Senate package would permit the New DPS to outsource all core educational functions to other districts or any other “public entity.” What exactly is a “public entity”? Since the term is not defined in the legislation, your guess is as good as mine. But it appears that “public entity” includes a charter school. Despite what some people are saying, the Senate package would allow the New DPS to stop operating its own schools. SB 710 would eliminate language that requires school boards to operate K-12 schools, would allow school boards that do not directly operate their own schools to act as charter school authorizers, and repeatedly refers to “a community district or school district that does not directly operate schools on its own.” Some of these provisions were included to permit constituent school districts within an ISD to outsource their educational functions to the ISD or to another neighboring district. But the fact remains that this outsourcing authority would be given to all general powers school districts under the Senate plan, and the legislation would confer upon community districts such as the New DPS all the powers of a general powers school district.
2. The Financial Review Commission, established under Michigan’s Financial Review Commission Act, would begin to oversee the finances and affairs of the New DPS, in addition to those of the city of Detroit. The membership of the Financial Review Commission would be expanded from 9 to 11, and would include the superintendent and chairperson of the board of the New DPS. A majority of the Financial Review Commission would still consist of members appointed directly by the governor.
3. The Local Emergency Financial Assistance Loan Board, established under Michigan’s Emergency Municipal Loan Act, would be authorized to loan a community district such as the New DPS up to $300 million. It appears that the $200 million in “transitional operating costs” would be included in this overall $300 million amount.
4. The New DPS board would have the sole authority to hire a superintendent. Unlike earlier drafts, the package ultimately passed by the Senate would not require the Financial Review Commission to approve the individual selected to serve as superintendent. It would, however, require the Financial Review Commission to approve the individual chosen to serve as the New DPS’s chief financial officer. The legislation would require the New DPS to select a superintendent with “experience with education reform and redesign” and “expertise in the turnaround of academically underperforming urban schools.”
5. The mayor of Detroit would appoint an Education Commission consisting of seven members. The Education Commission would exist for an initial period of five years, could be renewed for an additional period of five years, and would provide recommendations concerning the siting of all existing and proposed public schools within the city of Detroit—including both traditional public schools and charter schools. Subject to a limited exception, neither the board of the New DPS nor any charter authorizer in the city of Detroit would be permitted to open a new school during the first five years following the transition without the approval of the Education Commission.
6. The Senate package would require the School Reform Office to implement an “A through F” letter grading system for all traditional public schools and charter schools in the city of Detroit. A school’s letter grade would be based on “proficiency measures, growth measures, and nonacademic measures,” which would include, among other things, student test scores, graduation rates, student performance on college entrance examinations, average student growth on standardized assessments, re-enrollment rates, parent participation, and absenteeism rates.
7. The New DPS would be required to withdraw from the interlocal agreement with Eastern Michigan University establishing the Education Achievement Authority (“EAA”) “as soon as possible.” The legislation would prohibit the New DPS from exercising any powers under the EAA agreement after the June following passage of the legislation.
8. The legislation would allow school districts to issue bonds for the purpose of retiring or refinancing short-term school aid anticipation notes. DPS’s current operating debt includes a number of school aid anticipation notes. This provision would allow the Old DPS to refinance many of its short-term cash-flow notes and extend their repayment over a number of years.
9. The Senate package would continue the policy of emphasizing student test scores as a measurement of success. Among other things, it would require the New DPS’s board to issue an annual report highlighting the results of state testing and standardized assessments.
The Senate proposal has been transmitted to the Michigan House of Representatives and referred to the appropriations committee for consideration. However, House approval is far from certain.
THE HOUSE PLAN
The House has its own six-bill plan to restructure DPS. Like the Senate plan, the House plan would divide the district into an Old DPS (to retain the taxing authority and pay down the district’s operating debt) and a New DPS (to assume the duty of educating pupils). The House plan shares many other similarities with the Senate package as well, including the requirement of additional debt for “transitional operating costs,” the creation of an “A through F” letter grading system, and the continued emphasis on high-stakes student testing.
Unlike the Senate plan, however, the House legislation would specifically fund the local portion of the New DPS’s foundation allowance with $72 million per year from individual and corporate income-tax revenue. Under HB 5382 and HB 5383, this income-tax revenue would be transferred to a new Community District Trust Fund, which the state treasurer would use to offset the absence of school operating-millage revenue in the New DPS.
Like the Senate plan, it appears that the House package would permit the New DPS to outsource its educational functions to other entities. The House plan would also require the New DPS to prioritize the closing of more buildings.
The oversight powers of the Financial Review Commission would be expanded; for example, the hiring, employment, and termination of a superintendent for the New DPS would be subject to approval by the commission. Like the Senate legislation, the House bill would expand the membership of the Financial Review Commission from 9 to 11, to include the New DPS superintendent and chairperson of the New DPS board. A majority of the Financial Review Commission would still be appointed directly by the governor.
Under the House plan, there would be no mayor-appointed Education Commission, and the residents of Detroit would be required to wait several years before being permitted to elect the New DPS board of education. During those years, the New DPS would be managed by a board consisting of three members appointed by the mayor of Detroit and six members appointed by the governor. These nine appointed members would serve for staggered terms of two to eight years. Only after eight years would Detroit’s voters be empowered to elect all nine board members.
The House legislation would implement Draconian changes in the areas of merit pay, collective bargaining, employee benefits, teacher certification, and teacher evaluation as well.
Under HB 5384, the New DPS would be authorized to hire nonendorsed, noncertified teachers for any teaching position, so long as it “would be appropriate and in the best interests of the pupils of the community district.” The legislation provides absolutely no clue concerning what would be “appropriate” or “in the best interests of the pupils,” leaving the decision to hire nonendorsed teachers solely to the discretion of “the appropriate official.” Curiously, the bill does not define “the appropriate official” either. The legislation would require the Michigan Department of Education and teacher colleges to waive all student-teaching requirements for the purpose of granting teaching certificates to individuals who teach for at least three years in the New DPS as nonendorsed, noncertified teachers pursuant to this provision.
Also under HB 5384, newly hired teachers in the New DPS would be paid on the basis of a performance-evaluation system that would “include job performance and job accomplishments as the primary factor in determining compensation,” and would “evaluate a teacher’s . . . performance primarily based upon data of student growth as measured by assessments and other objective criteria.” That’s right, folks—under the House plan, the salaries of newly hired teachers would be directly linked to student test scores. What a concept! Additionally, the New DPS would be prohibited from considering longevity and the attainment of advanced academic degrees in determining compensation for new teachers.
Under HB 5386, newly hired teachers in the New DPS would not qualify for retirement benefits administered by the State Office of Retirement Services/MPSERS, and would have defined-contribution plans only. And in accordance with HB 5387, educators would be severely punished for engaging in strikes or work stoppages. Moreover, numerous traditional subjects of collective bargaining would be prohibited for teachers in the New DPS. Teachers would be barred from bargaining over the placement of employees, scheduling, downsizing, the hiring of contractors and staffing companies, staff reductions, performance-evaluation procedures, and the discipline and discharge of employees.
Unlike the Senate plan, the House proposal would require year-round school for the New DPS, mandating “a balanced school-year calendar that ensures that there is no period during which school is not in session that exceeds 30 consecutive calendar days.”
The House legislation would not explicitly require the New DPS to withdraw from the EAA interlocal agreement.
As you can see, the House legislation is designed to force the New DPS out of existence by incentivizing the outsourcing of educational functions, as well as making the New DPS an extremely unpleasant working environment for teachers and education professionals.
Certain members of the Michigan House of Representatives have already indicated that they are disinclined to approve the Senate’s plan.
HOUSE PLAN UPDATE 5/02/2016
Under a series of House Substitutes--including Substitute H-1 for HB 5382 which will be considered by the Michigan House of Representatives Appropriations Committee tomorrow morning--the House plan would be amended to put $72 million per year from individual and corporate income-tax revenue into a new Community District Trust Fund for only seven years (or $500 million in total). As originally drafted, HB 5382 would have placed $72 million per year into the trust fund for ten years. In other words, under the House substitutes, the local portion of the New DPS’s foundation allowance would only be funded through FY 2022-2023 rather than through 2026 as initially proposed.
Also under the House substitutes, the total current operating debt of DPS would be characterized as about $467 million instead of $515 million. Further, the House substitutes would reduce the amount of additional debt that would be issued for “transitional operating costs.” The House amendments would allow the issuance of only $33 million in new debt, instead of $200 million, for transition costs. Thus, the total current operating debt under the amended House plan would be about $500 million rather than $715 million.
It was originally estimated that it would take the Old DPS 10 to 12 years to pay off the current operating debt. Under the proposed amendments to the House plan, the annual $72 million payments to fund the local portion of the district’s foundation allowance would run out after 2023. Thus, depending how long it takes for the Old DPS to pay off the $500 million in operating debt, there could potentially be a gap of one or more years during which the New DPS would receive no state funds to satisfy the local portion of the foundation allowance, but would also have no authority to levy the 18-mill operating tax on non-homestead property.
Substitute H-1 for HB 5384 would remove some of the original emphasis on linking teacher merit pay to pupil test scores, and would also eliminate the specific language requiring DPS to transition to a year-round academic calendar. However, under the substitute, the New DPS would still be prohibited from considering seniority and the attainment of advanced degrees in the determination of compensation for new teachers.
Substitute H-2 for HB 5387 would set forth fewer prohibited subjects of bargaining for community district employees, but would provide that a community district is not a successor employer for any purpose and has no obligation to honor any individual contract or collective bargaining agreement of the old district from which its powers have been transferred. This provision, if enacted, could be interpreted as requiring all existing DPS employees to reapply for their jobs in order to remain employed by the New DPS.
As always, FixTheMitten will provide more details as they become available.