Detroit-Area District, in Emergency, Outsources Schools

Published August 23, 2012

Highland Park School District entered uncharted territory for Michigan, outsourcing its three schools to charter company Leona Group, LLC starting this fall. The summer announcement followed a January state audit and resulting appointment of an emergency manager.

“To my knowledge, this is untried in Michigan,” said Michael Van Beek, director of education policy at the Mackinac Center for Public Policy.

The district has an $11.3 million deficit and debt of approximately $5 million. Its budget is $18.9 million.  Between fiscal years 2010 and 2011, enrollment dropped 28 percent to 1,331 in the district, which sits surrounded by Detroit neighborhoods. Enrollment at the time of the audit was estimated 969 students.

Michigan school district Muskegon Heights, in similar fiscal circumstances, has also decided to outsource itself to a charter company, but the new management hasn’t begun to operate.

Failed Management
Highland Park spent $16,500 per pupil in fiscal year 2011. Under charter control, per-pupil spending will be closer to $10,000.

“If it, in fact, does succeed, and they are in the black, the school board will have a decision to make. They have to decide whether or not they want to retake control of the schools. [Their control] is a contributing factor in them having a large number of fiscal problems.”

It will likely take twelve years before the school board can accomplish its shared goal of controlling Highland Park schools, said Michael Atkins, Leona Group’s general counsel. He said for this to happen, the board must pay off all creditors except the state.

“It’s the Highland Park schools and it needs to stay the Highland Park schools,” he said. “We’re getting them there. We’re very pro-public schools.”

Academic Paucity
The Leona Group not only promises financial but academic redemption in one of the state’s worst-performing districts.

State standardized tests show 32.6 percent of Highland Park fourth-graders in proficient in reading and 13 percent proficient in math, compared to a statewide average of 67.7 percent and 39.9 percent, respectively. Eighth grade students average 47.5 percent proficient in reading against the 60.5 percent statewide average. In math, 5.2 percent of Highland Park eighth graders are proficient, compared to 29.4 percent statewide.

“A lot depends on whether or not parents in those districts are choosing to send their kids to these schools,” Van Beek said. “If their enrollment is growing, that would definitely be a positive sign for the management company and the community.”

A side effect of saving money while improving education is rehiring. Though the Leona Group typically hires back 70 percent of staff at schools they enter, they must adjust to smaller paychecks. Highland Park’s former average teacher salary was almost $65,000 a year, not including benefits. Leona Group teacher salaries average approximately $36,000.

The Referendum
In November, Michigan voters  will decide whether the emergency manager law that allowed setting aside union contracts for school restructuring, as in Highland Park, should be repealed. In the meantime, a judge has suspended the law.

Though Parker’s union-abrogating powers are suspended, Gov. Rick Snyder re-appointed her under an older emergency manager statute. It limits Parker’s powers—she must now negotiate with the school board to make decisions. This doesn’t, however negate the actions she took before the law was suspended, Atkins said.

“From our seat, nothing changes until someone tells us to change things,” Atkins said. “The system has the charter, the lease, and the contractors all in place. We’re the only one who has necessary resources. If the system disappears, then we’re at risk for that, but it’s a risk we’re willing to take.”

Image by augatti.