Rapid Charter Expansion Is Primary Cause of Detroit Schools’ Fiscal Catastrophe

Here is how David Arnsen of Michigan State University and his colleagues frame one of the issues they investigate in a new study on the impact of rapid growth of charters on the fiscal conditions in school districts in the state of Michigan.  The study will be published this autumn in the Journal of Education Finance:  “Thus far, the state has appointed emergency managers in three school districts (Detroit, Muskegon Heights, Highland Park), has dissolved two school districts (Inkster and Saginaw Buena Vista) and established consent decrees in one (Pontiac)… All except Inkster experienced large declines in enrollment between 2002 and 2012.  Compared to districts statewide, all six of these districts experienced much higher loss of resident students to charter schools and higher shares of special education students.”

The researchers conclude: “(T)he deficit districts in which the state intervened were significantly different from deficit districts in which it did not intervene on each of the demographic characteristics examined.  They had significantly higher shares of African American students (86% versus 40%), and significantly higher shares of low-income students (85% versus 67%).  Districts in which the state intervened also had significantly higher charter penetration (29% versus 11%) of resident students.”

The authors caution that their findings about Michigan may not perfectly apply in other states due to Michigan’s method of funding schools.  Michigan reformed its school funding in 1994 to shift funding responsibility primarily to the state; most states instead  balance state and local responsibility for raising revenue.  And Michigan’s system allows students transferring to a charter or to another school district through inter-district public school choice to carry all of their financing with them. However, due to fixed costs and laws that protect services for particular students, school districts are unable quickly to achieve economies of scale to compensate for declining enrollment.

Even when emergency managers have imposed austerity by raising class sizes and eliminating elective courses, Michigan’s most vulnerable school districts have, due to school choice, faced financial ruin.  The near bankruptcy of the Detroit Public Schools, for example, has occurred during years’ of state imposed austerity by a succession of emergency fiscal managers: “(T)he grounds for this emergency intervention under state law are strictly financial.  State policy presumes that local district fiscal distress is caused by local officials’ poor decision-making and management…. Our findings, however, indicate that state school finance and choice policies significantly contribute to the financial problems of Michigan’s most hard-pressed districts.  Most of the explained variation in district fund balances is due to changes in districts’ state funding, enrollment changes including those associated with school choice policies, and special education students whose required services are inadequately reimbursed by the state.”

Jennifer Berkshire interviewed David Arnsen, the report’s lead author, and the interview was reprinted on Friday by Valerie Strauss in the Washington Post.  In the interview Arnsen very concisely explains the results of the new research study: “We saw very significant and large impacts of charter penetration on district fund balances for different thresholds, whether there were 15, 20, or 25 percent of the students going to charter schools. That was really striking. At every one of those thresholds, the higher the charter penetration, the higher the adverse impact on district finances.  They’re big jumps, and they’re all very significant statistically.  What’s clear is that when the percentage gets up to the neighborhood of 20 percent or so, these are sizeable adverse impacts on district finances.” “We have districts getting into extreme fiscal distress because they’re losing revenue so fast.”  The report examines the budgets of school districts in “central cities statewide and their foundation revenue, which is both a function of per-pupil funding and enrollment.  They had lost about 22 percent of their funding over a decade.  If you put that in inflation adjusted terms, it means that they had lost 46 percent of their revenue in a span of 10 years… The emergency managers…. had all the authority and they cut programs and salaries, but they couldn’t balance the budgets in Detroit and elsewhere, because it wasn’t about local decision making, it was about state policy.  And when they made those cuts, more kids left and took their state funding with them.”

In the interview, Arnsen explains further:  “The law presumes that financial problems in these districts are caused by poor decision making of local officials, and this justifies their displacement through emergency management.  Yet our findings suggest that state school finance and choice policies were in large part responsible for the underlying financial problems.”

Arnsen’s study documents what many have suspected: the rapid growth of charter schools is itself a factor destabilizing so-called “portfolio school districts” which are conceptualized as school marketplaces managed like a business portfolio in which new schools are opened and so-called “failing” schools are shut down in a constant cycle of churn.  Arnsen concludes his interview with Berkshire: “A place like Detroit is just chaotic. It’s the foremost example nationally of the adverse consequences of a poorly regulated education market… Our charter sector in Michigan is unusual nationally in the extent to which the schools are run by for-profit management companies… (W)e have a situation in Michigan where the charter interests are very influential in the state legislature.  It makes it much harder in this state to reach consensus not only on coherent choice and finance policies, but also on policy relating to all sorts of education issues….”

In other words, in a state where far-right Dick DeVos and his Great Lakes Education Project along with owners of the for-profit charters are actively buying political influence, it is very difficult to get the legislature to regulate what is an out of control charter school marketplace.

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3 thoughts on “Rapid Charter Expansion Is Primary Cause of Detroit Schools’ Fiscal Catastrophe

  1. Pingback: Business Ethics Blog Posts 7-18-2016 The Neoliberalism Slam Edition – Pilant's Business Ethics Blog

  2. Pingback: Business Ethics Blog Posts 7-18-2016 The Neoliberalism Slam Edition - Pilant's Business Ethics

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