State uses stick, not carrot on MCS

MUNCIE, Ind. —  The state of Indiana is threatening to use a stick on Muncie Community Schools before first offering a carrot.

A sensible state response to school districts struggling financially should be "first use the carrot, then the stick," according to the Thomas Fordham Institute, a conservative-leaning, education-policy think tank.

The institute's 2015 policy brief — "Who Should Be in Charge When School Districts Go Into the Red?" — reported that state interventions "are often haphazard, occur arbitrarily and routinely place politics over sound economies."

Few districts need drastic measures, according to the institute. It suggests that states should first offer "quiet" technical support and assistance, and then try providing financial management before appointing an administrator to supersede the superintendent and school board, aka a state takeover. The goal of a state takeover is "to remove ineffective leaders and prevent district bankruptcy and closure."

The state has not offered MCS any carrots, according to the school board president.

Democratic state representatives claim the Republican-controlled Indiana House arbitrarily and unexpectedly began threatening MCS with a big stick the first week of April. In a party-line vote (64-30), the House on April 5 approved an amendment to place MCS finances and academics under the full control of a state-appointed emergency manager.

POLITICS: GOP supports, Democrats oppose state takeover

Indianapolis Rep. Cherrish Pryor was among Democrats who argued the amendment was unfair because the state has not identified any of the conditions that give the state authority to override the Muncie school board or any other Hoosier school board.

The Star Press was able to identify some examples of state laws that give a state the authority to take over school districts that are financially insolvent or headed there.

In Arizona, for example, the state board of education is authorized to appoint a receiver or fiscal crisis team if one or more of seven specific criteria are met, including inability to pay debts, employee salaries remain unpaid for 45 days, and default on bond payments for 60 days. In California, state intervention may begin when a district asks for a state loan that exceeds 200 percent of the amount  of the reserve recommended under state standards. In Michigan, school districts are forbidden by law to run a deficit. If a district is running a deficit and fails to educate students for a full year, the state will dissolve the district.

During Indiana House debate, Rep. Melanie Wright, D-Yorktown, also argued that no such criteria exist to authorize a state takeover of Muncie schools.

The Star Press asked Debbie Feick, president of the Muncie school board, whether the state offered the corporation any carrots before threatening to use the stick.

"No, we had no technical assistance at all from the state that has been state-driven," she said. "They offered none of those intermediate kinds of things. But we certainly would appreciate a more incremental support system. For us, this was completely out of the blue."

Senate Bill 567, which has been referred to a House-Senate conference committee, would place Gary and Muncie school corporations under state control.Gary asked for it; MCS, the mayor of Muncie, city council and others oppose it. The conference committee is expected to meet this week.

JEFF WARD: State takeover is what MCS needs

Brian Smith, director of the Indiana School Boards Association, said the committee should be asked, "With the submission of a workable financial plan by the (Muncie) district, could a one-year implementation delay be allowed so the district could demonstrate their ability to deal with the financial crisis?" ISBA supports local control.

The National School Boards Association is opposed to state takeovers. Its position is that before any intervention, "state, municipal, and territorial governments in collaboration with education policy makers (which must include state school boards associations) should establish specific criteria, conditions, timelines and procedures under which intervention in local schools/districts may occur; local schools/districts shall receive the necessary resources, support, and time period to improve; and local schools/districts must be returned to local school board governance."

Teresa Meredith, president of the Indiana State Teachers Association, told The Star Press: "We think the Legislature needs to take a step back and look at defining some triggers. The way it stands right now, there is nothing in that bill that defines what it takes to get put into a state takeover. If the intent is truly fiscal soundness, that needs to be defined."

She wonders if there is a hidden agenda, noting that the House Ways and Means Committee didn't allow MCS leaders to testify until after the committee voted to place MCS under state control in another party-line vote. "What else is going on here?" she asked.

The proposed state takeover of MCS was initiated by Ways and Means Chairman Tim Brown, R-Crawfordsville, whose stated reasons include:

• Citing State Board of Accounts audit reports, Brown calculated an $18.7 million budget deficit at MCS. Compared to other school districts, audits show Muncie and Gary "far and away" have the largest budget deficits in the state, he said.

• Quoting The Star Press, Brown said MCS spent bond revenue earmarked for school improvements for operating expenses like salaries, and there were temporary heat outages in school buildings this past winter. He said vendors who are owed money by the corporation only get paid if they go to the business office and make a complaint.

• MCS has said it might not be able to meet payroll this summer.

• Citing a report published by Ball State University economist Michael Hicks, Brown said MCS has failed to align school buildings and staff costs to a 50-year trend of declining enrollment. "That's what we're trying to do, correct that and align it to the trend  and to the revenues we have available. Revenues don't grow on trees,"  Brown said.

Though Brown didn't quote from it, a recent state fact-finder report on the collective-bargaining dispute between MCS and the Muncie Teachers Association blasted school leaders for inaccurate information, "unfounded" claims, lack of documentary evidence and a likely attempt to "create an artificial appearance." The fact finder ruled that MCS's reaction to the “extraordinarily difficult financial position” that it “created for itself” appears to be “haphazard and disorganized.”

LOOK BACK: State fact finder blisters MCS leaders

Rep. Ed Delaney, D-Indianapolis, questioned during floor debate how a state takeover will help. "We don't have any provisions in here to give them grants or debt relief. We can loan them money, which is their problem, so that's not going to solve their problem."

The Fordham Institute policy brief defines three types of remedies for a successful state takeover: new people to govern the district, new powers like asset liquidation, school consolidation and turning control over to charter operators; and new money, such as short-term advances from the state, long-term loans, grants and emergency bailouts.

"Let us be clear: This brief is for those districts that have a decent chance of turning themselves around …," the authors wrote. "It's not for places that are already too far gone. Some districts aren't worth saving. They are too bankrupt, financially and/or academically, to invest in any further. For them, the time for more supports and more cash has passed. They need real governance change in the form of a state takeover, outsourcing of their schools, and maybe even closing the district."

Contact Seth Slabaugh at (765) 213-5834.