A financial health-indicator system created by Michigan State University scholars could prevent many Michigan school districts from reaching the crisis point.
Gov. Rick Snyder has prioritized increased transparency and accountability in school finance. During his State of the State address Jan. 20, Snyder called for the creation of a financial scorecard for Michigan schools.
Fifty-seven Michigan school districts ended 2014 with a deficit or projected deficit, and many are in danger of entering a severe fiscal crisis.
The MSU system, outlined in a new paper, uses research on what fiscal indicators best predict fiscal stress as well as information on what other states are doing to analyze the fiscal health of school districts.
The authors – graduate students Rachel White and Kacy Martin, MSU Extension economist Eric Scorsone and MSU law professor Kristi Bowman – argue Michigan should build fiscal scorecards for school districts using a number of readily available economic and environmental indicators.
“The best system would give both the school district and the state plenty of warning before schools ever reached the point of financial crisis,” Scorsone said.
A recent crop of bills introduced to help Michigan schools before they incur deficits, however, only created mechanisms to intervene because of noncompliance with reporting requirements rather than indicators of fiscal stress. This, the paper argues, would be too little, too late for many Michigan schools.
“The goal should be about schools and the state working together to keep schools out of financial crisis and not just about intervention once they already find themselves in one,” said White, a student of educational policy. “We looked at the available research and the results of evidence-based policy decisions made in places like New York and Pennsylvania and tried to build something that would work for Michigan.”
The deficits in Michigan districts range anywhere from $5,000 to the more than $169 million deficit of Detroit Public Schools and are driven primarily by increasing obligations to retirement costs, Scorsone said. As recently as 2012, an average of nearly $1,400 of a district’s per-pupil revenue went directly toward payments into the Michigan Public School Employees Retirement System.