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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Detroit Community Alliance Releases Scathing Report on Detroit Public Schools Disaster

Detroit has been under state takeover for fifteen years, and at the same time Detroit has been a test case for unregulated portfolio school reform with a large for-profit charter sector. School achievement hovers at the lowest level in the nation as measured by test scores.  On Monday night a new Coalition for the Future of Detroit Schoolchildren released a scathing report on the condition of the city’s schools including a set of urgent recommendations the coalition believes will help Detroit get the situation under control.

Although the Coalition’s report does not suggest how the community can negotiate a path through the politics of a powerful and very conservative philanthropic and advocacy sector including the extreme-right Dick and Betsy DeVos (Americans for Prosperity) and the ultra-conservative Mackinac Center for Public Policy, a conservative Republican governor and Michigan legislature, and a politically influential for-profit charter sector, community leaders in Detroit—including philanthropies, civic organizations, religious leaders, state legislators, teachers and school principals, charter school leaders, and the business community—must be commended for putting together an incisive analysis of what has gone wrong.  The report’s authors seem to have few illusions about the difficulties they will face to get their recommendations implemented: “The Coalition for the Future of Detroit Schoolchildren has laid out a comprehensive plan to make quality schools the new norm for Detroit families. Completed in a little over three months, it’s a first step on the long road back to excellence.”

Here is how the report’s authors describe Detroit’s realities: “Fifteen years after the state took over our school system, three years after the Education Achievement Authority (EAA) took control of the city’s lowest-performing schools, academic achievement remains tragically low, by far the worst of any big city in the country.”  Detroit is part of a network of Portfolio School Districts that combine traditional public and charter schools, and the authors do not propose to eliminate the city’s charter sector, while they do insist that it be regulated and that services be coordinated across the district’s traditional public and charter schools.

As the report declares: “No other city in the country has a system of schools quite like that of Detroit.  It is hardly a system but instead an uncoordinated hodgepodge of schools that are not educating Detroit’s schoolchildren well.”  “Detroit’s 119,658 students attend hundreds of different schools, which are run by 14 different entities (authorizers and districts).  These numbers don’t even take into account the many suburban schools that enroll mostly Detroit students.”   According to the report, 25,816 Detroit students attend suburban schools through an inter-district choice plan by which students carry their $7,246 in state aid with them from Detroit to surrounding school districts.  Such an arrangement advantages suburban districts which are also hemorrhaging enrollment in a region that is losing overall population.  In Detroit’s schools services are fragmented, and as the report declares: “There is no coherence or stability… no efficiency… no local responsibility or accountability.”

The report devotes a section to the devastating financial challenges for the Detroit Public Schools (DPS).  “DPS pays $53 million a year on debt service for its operating budget. That’s $1,120 per student before any instruction occurs.”  Since 2002, the number of school-aged children in Detroit has declined from 196,638 to 119,658 in 2013, a drop of 40 percent.  At the same time a publicly funded charter sector has grown explosively, the district has been struggling to downsize its operations including the need to accommodate children across the residential neighborhoods of a geographically large school district. Family poverty has increased:  “Overwhelmingly the population loss came from the middle-and higher-income segments of the city, leaving the schools with a higher percentage of students in poverty, many of whom are identified to have special needs.”  Transportation to and from school is overwhelming for many families: “Currently there is no mechanism for all schools (DPA, EAA, and public charters) to financially support an equitable and practical transportation system.”  “Given the amount of choice occurring and the absence of high-quality neighborhood schools, transportation is a major barrier.  The average Detroit student commutes 3.4 miles each way to and from school.  Ten percent travel more than 6.7 miles each way.  More than 75 percent of students rely on walking, city buses, or cars to get to school.  But the bus system is sometimes unreliable, 25 percent of Detroit families do not have cars, and walking is not an option when schools are so far from home.”

The report emphasizes that school choice must be brought under control and the public schools stabilized and improved to staunch the rapid loss of students to suburban school choice and unregulated charters.  The mechanisms of an unregulated education marketplace have turned Detroit Public Schools into a school district of last resort for the children with the greatest needs and the least capacity to escape through school choice: “DPS is educating a disproportionate share of special education students, partly because individual public charter schools do not have the capacity to accommodate these students’ needs. Going forward, a task force should determine whether Wayne RESA or another entity should provide citywide coordination and consolidation of special education and bilingual services across all schools in Detroit (DPS and public charter schools).  Services must give equal access, offer an equitable funding model, and be provided at the neighborhood level when possible.”

The report recommends substantial and far-reaching overall reforms:

• “Return governance of Detroit Public Schools (DPS) to an elected school board.  DPS should transition from emergency management….
• “Charter authorizers and charter school boards should improve transparency, focus more on quality, and better coordinate all charter schools.  We also believe that changes to state law or local practice must be made to ensure that charters schools adopt best practices for charter authorizing….
• “The state should assume the DPS debt…  Create a new nonpartisan entity, the Detroit Education Commission (DEC), to coordinate and rationalize citywide education functions in partnership with Regional Councils to incorporate neighborhood-level input…
• “Establish advisory School Leadership Teams that include parents, staff, and students so that all schools create a culture of shared responsibility.
• “Empower and fund the State School Reform Office (SSRO) and State School Reform District (SSRD).  The SSRO/SSRD should inherit the Education Achievement Authority (EAA) (the state’s takeover agency for struggling schools) central administration and execute its responsibilities.  The inter-local agreement between the DPS Emergency Manager and Eastern Michigan University should be terminated.  The SSRO should audit and assess EAA schools in Detroit and create a plan to responsibly transition those schools back to DPS….
• “Create shared systems of data, enrollment, and neighborhood transportation.  These improvements will help solidify school choice in Detroit by making it easier for parents to learn about the quality of their options when enrolling their children.” (emphasis in the original)

Each section of the report includes its own more specific prescriptions to remedy particular problems.  The report’s authors seek to return the school district to local governance including, “local decision-making so that those elected by the people of Detroit set the policies that drive what happens in our schools and are held accountable for results.”  The goal is to ensure, “that those closest to the kids—teachers, staff, principals, and parents—are empowered to make key educational decisions at the school level.” The report seeks, “a coherent system of neighborhood schools with a consistent and transparent set of rules.”  In the section on governance, after advocating rapid transitioning out of state emergency management, the authors recommend  holding charter school authorizers more accountable and creating “a new nonpartisan board/legislative body… to coordinate and rationalize citywide education functions.  Members will be appointed by the mayor of Detroit.”

The report demands, “fair student funding that does not penalize current and future generations of schoolchildren for the past mistakes of the state.”  The authors recommend that the state pay for a study of what it costs in Michigan today to provide adequate services for children in public schools, a costing-out study to be completed by the end of 2015.

Teachers are the heart of the schools, and the report suggests the creation of, “a citywide strategy to recruit, develop, compensate, and retain high-quality teachers, school leaders, and other staff for all schools in Detroit.”  This does not mean destroying the teachers union: “Our coalition recognizes that in fact, unions have been advocates for meaningful, research-based education reform.  Therefore, collective bargaining agreements must be honored… and the right of employees to unionize should not be undercut.”

A community facing desperate conditions in the schools that serve its children has come together to demand that the state phase out top down control, provide adequate funding, and help to establish regulation of an out-of-control charter sector.  The question will be whether Detroit’s leaders can wield enough political power on behalf of  a very poor and disenfranchised population in a state dominated by far right philanthropists and think tanks and influential for-profit charter operators.