Pontiac School District’s Financial Crisis Due to Poor Management, not Lack of Money

A review team has declared a financial emergency for the Pontiac School District, citing a quadrupling of debt to $37.7 million since 2009 and a possible violation of state law regarding payroll funding, among other issues.

The local affiliate of the Michigan Education Association, the state's largest teachers' union, blamed the problems partially on what it claims are funding cuts.

"Students and school employees in Pontiac are innocent victims of Governor Snyder's massive cuts to school funding and gross financial mismanagement by officials at the local level," Pontiac Education Association President Aimee McKeever told MIRS. "It's time our elected leaders take the issue of education funding seriously and provide our local schools with the resources they need so our children can get the education they deserve."

In fact, the problems in Pontiac seem to be solely an issue of local mismanagement and bad union bargaining agreements.

The district spends among the most in the state at $16,400 per pupil. While students fled the district, there was a 35 percent increase in average teacher salaries from $56,781 to $76,449 between 2008 and 2011, before dropping to $67,702 in 2011-12. Despite the claim there were cuts, the district received $14,125 per pupil in 2010-11, up from $13,488 in 2007-08.

Blaming the state doesn't hold water. Pontiac received $14.9 million in 2008-09 (for 6,687 students); $12.8 million in 2009-10 (for 5,491 students); and $16.3 million in 2010-11 (for 5,408 students).

And in April 2012, the interim superintendent was pleading with the union to try to avoid emergency fiscal management. Walter L. Burt wrote:

I have communicated to this community and employee groups on numerous occasions that we can no longer operate the District where expenditures exceed revenues. To this end, I met with the presidents of all of the employees groups in January, 2012 to seek their cooperation in working with administration to find ways to reduce the District's deficit. There were no proposals, or concessions, made to me about how we can begin addressing this overwhelmingly growing deficit. In each case, my plea to the union groups was rejected.

Consequently, I had no other alternative but to begin the process of "right-sizing" the district by laying off staff in administrative, secretarial, maintenance and operations and other support staff. During the initial reductions, I took every step possible to stay away from employees that provided direct instructional services to children, namely teachers.

As the year ensued, I was still optimistic that I would receive concessions from the PEA, the largest of our employee groups. Unfortunately, these concessions did not occur and I was left with no other alternative but to begin the process of laying off teachers. Let me make this perfectly clear, had employees groups agreed to concessions earlier, we could have minimized the number of positions eliminated.

On May 11 of this year, the Pontiac Education Association finally agreed to some concessions. Teachers took a 6 percent salary reduction and step increases were frozen. Previously, the district paid 100 percent of health care premiums; employees now pay any amount over the state hard cap of $5,692.50 for single person coverage, $11,385.00 for individual and spouse coverage and $15,525.00 for family coverage. The deductible for employees has risen to $200/$400 (previously the district covered that as well).

But it is way too little and way too late — the district is nearly bankrupt.

An ongoing problem with the discussion over education funding and problems for local school districts is ignoring the fact that the real issue is local mismanagement of funds. In almost every notable case, districts were continually receiving more per pupil and still overspending.

In two other districts in the news recently, a similar story emerged. Buena Vista, which was recently dissolved, was handing out 6.8 percent raises and paying 100 percent of health care premiums for teachers while shedding students. In Albion, which closed its high school, the district was receiving more funding than ever but paying employees more while losing 34 percent of its students.

For a decade, the state of Michigan was losing jobs, wealth and population, and taxpayers made big cuts in their budgets to deal with financial realty. Shouldn't government entities, funded by those taxpayers, do the same?

Editor's Note: The article originally said that the district pays 100 percent of health care premiums; that is incorrect. Previously, the district paid the full premiums, but a recent law enforces a "hard cap" and the teachers pay any amount above that. The "hard cap" is: $5,692.50 for single person coverage, $11,385.00 for individual and spouse coverage and $15,525.00 for family coverage.