The Buena Vista and Inkster school districts have until Monday at 5 p.m. to prove they have funding to operate their schools next season.
In a statement Thursday, State Superintendent Mike Flanagan and State Treasurer Andy Dillon said they had determined that the districts were no longer financially viable and are unable to educate students, pursuant to Public Act 96 of 2013, which was signed into law on July 2, 2013.
Flanagan’s and Dillon’s joint determination is effective at Monday's deadline, unless either of the districts can provide documentation showing they have a commitment from a credible lending institution for enough money to get the district through the next school year, and an opinion letter from their accounting/audit firm, confirming the cash would allow for the district to remain open through the end of the next school year. If either district can provide that documentation, a subsequent public meeting will be held to discuss the district’s financial situation.
Prior to reaching their joint determination, Flanagan and Dillon heard testimony from representatives of the Departments of Education (MDE) and Treasury, who had been working to determine whether any school districts met conditions noted in Section 12(1)(b) of the Act.
Numerous conditions were noted in the departments’ joint report, including:
Buena Vista Schools
The District has shown unsatisfactory progress in eliminating its deficit. MDE’s approval of the district’s Deficit Elimination Plan (DEP) was rescinded in February, 2013 as a result of the district’s failure to implement strategies to reduce the 2012-2013 deficit to projected levels. The district began the fiscal year with an operating general fund deficit of $1 million but projects the deficit has more than tripled to $3.7 million.
The District projects a pupil count decline of 16-percent for the 2013-2014 school year, which represents a revenue reduction of approximately $540,000.
In a June 12, 2013 communication to the State, the district’s legal counsel stated “the District’s 2013-14 budget will more than likely forecast no operational capacity in 2013-14.” As a result, the Local Emergency Financial Assistance Loan Board authorized a $2 million emergency loan to ensure payment of the District’s 2012 state aid note. This will require debt service payments on that loan in subsequent years and the Emergency Loan precludes the district from participating in
the state aid note pool through the Michigan Department of Treasury.
Inkster Public Schools
The District went into deficit on June 30, 2007, by $1.9 million. The deficit increased to $9.3 million as of June 30, 2010 despite a 76-percent pupil count increase (1,803 to 3,173).
The District’s pupil count has steadily decreased since FY 2010 from 3,173 to 2,292 (28-percent) and the District projects its deficit as of June 30, 2013, to grow to $15.8 million (prior to receipt of an emergency loan to cover the August, 2013 repayment of the district’s 2012 state aid note).
While the emergency loan has the effect of reducing the projected deficit by the amount of the loan (approximately $12 million), the District still maintains the corresponding debt, long term, and must pay debt service on the loan for 30 years. Participation in the Emergency Loan Program effectively eliminates the district from the State Aid Note program borrowing that the district has used for cash flow purposes in the past.
The District’s DEP is based on maintaining the same 1,200 pupil count in grades K-8 in the district as in FY 2013. The district lost an average of 93 pupils per year in grades K-8 from 2009 to 2012. With a foundation of $7,623, a loss of 93 pupils would equate to a revenue reduction of over $700,000 for fiscal year 2013-14.
“When a school district is no longer able to effectively operate and educate children, the State has a responsibility to step in,” Dillon said. “It is imperative that we act quickly so parents and students in these districts know they will be in classrooms when school begins this fall.”
If either district does not provide documentation by the July 22nd deadline, the joint determination will be forwarded to its respective ISD, which would then declare the district dissolved and immediately order attachment of the territory of the districts, in whole or in part, to one or more other school districts within the respective intermediate school district.