Michigan tops states for authorizing fiscal power over school districts

State takeovers of school districts facing financial trouble have been on the rise across the nation, but just a handful of states have laws threatening the majority of these interventions, according to new research from Michigan State University.

The study, released by the National Education Policy Center, is the first to evaluate and compare laws giving states fiscal power over school districts in all 50 states.

Michigan, the researchers found, gives officials more potential options to intercede in local school districts' financial matters than other states. Multiple districts in Michigan, most notably Detroit, have faced financial takeover, while others have been forced to consolidate.

"We were really curious about the system of laws that makes this possible in Michigan and in other states. And we wanted to establish a foundation for understanding the power that individual states reserve for themselves," said Kristine L. Bowman, a professor of education law at MSU and co-author of the research brief. "How much of an outlier is Michigan? It’s definitely leading the pack in terms of frequency and intensity."

Bowman and co-author Dirk F. Zuschlag, MSU doctoral candidate in education policy, analyzed 449 state statutory provisions that authorize over 1,000 potential interventions nationwide, which focus most heavily on providing assistance to districts or responding to budget missteps but can go as far as replacing superintendents and dissolving districts.

Their analysis proposes that states can be organized into four categories based on the extent of their fiscal intervention policies along two key dimensions, frequency and intensity. Along with Michigan, other states authorizing strong fiscal interventions include California, New Jersey, Nevada, Pennsylvania and Rhode Island.

The researchers also reviewed student demographic data and school finance grades from Education Week for each state to consider relationships between financial intervention policy and other education policy issues.

"When we think about the states reserving greater power for themselves, we also need to be mindful about the context in which that’s happening," said Bowman.

States with higher potential for interventions, they observed, also have higher charter school enrollment, proportionally fewer white students and lower-rated school finance system grades.

Zuschlag and Bowman make four recommendations for policymakers and fellow researchers in the NEPC research brief, "States' Intervention in School Districts' Finances."

• National organizations such as the Education Commission of the States and the National Conference of State Legislatures should bring together state policymakers to help them learn about existing laws and underlying policies, and to facilitate the assessment and adoption of best practices.
• Governors or legislative education committees should evaluate their state fiscal intervention policies and how they are being implemented. In particular, they should ask how that system interacts with other systems such as those regulating school funding and enabling charter schools, and how implementation could impact school districts that vary in student demographics and resources.
• Similarly, researchers should explore connections between a state’s articulated power over school districts’ finances and other policies such as state-based school funding and how charter schools are regulated.
• Researchers should also further investigate possible connections among potential fiscal interventions, school choice policies, student enrollment and composition, and other factors in local districts’ contexts.

"Despite variation among states, there do appear to be patterns in the types of regulations enacted by states, and that leads to questions about how much they are centralizing financial control at the expense of local districts," said Zuschlag.

###