News Story

Financial Incompetence, Not State Penny-Pinching, Bedevils Pontiac Schools

Misuse of funds ‘was a deliberate, volitional act’

In 2013, just months before the start of a state review that would portray officials of Pontiac School District as incompetent financial stewards, they approved the district’s annual budget.

District officials overestimated their revenues by $9.4 million, or 14 percent. They underestimated their spending by $16.8 million, or 31 percent. And that’s how a purported budget surplus of $13.8 million turned out to be instead overspending by $12.4 million.

Pontiac’s accounting disaster is pertinent today as the state’s largest teachers union tries to paint what happened in that Oakland County school district as a symptom of underfunding by the state.

Michigan Education Association President Paula Herbart wrote a Dec. 19 column in The Detroit News and mentioned Pontiac School District.

Herbart wrote: “One such example is in the Pontiac School District, where employees have endured more challenges in the last few years than most districts experience in a generation: severe underfunding creating large deficits. …”

The MEA has a history of spinning reality in the media into its own erroneous vision in which the problem with public schools is underfunding.

This is yet another example of it, as state data and the state’s official review of Pontiac’s financial stewardship paint incompetent school officials incapable of solving their financial crisis despite receiving more money per pupil through the years, not less.

According to the Michigan Department of Education, Pontiac School District received $2,696 per pupil from the state in 2016-17. That is money solely from the state. It doesn’t include the local and federal money the district received and is different than a blend of local and state tax dollars known as the school foundation allowance.

In 2010-11, Gov. Jennifer Granholm’s final budget, Pontiac School District received $2,192 per pupil from the state. That 2010-11 per pupil figure is $2,378 per pupil in 2017 dollars.

And the district has been getting more money per pupil from the state under Gov. Rick Snyder, not less.

A state review team released its report on the troubled school district in August 2013.

It details how Pontiac school officials knowingly broke the law rather than cut back on spending as its deficit increased from $8.5 million in June 2009 to $37.7 million by June 2012.

And that deficit would have been even more if the district had been paying its bills. Outside of the deficit, the school district skipped a $2.7 million payment to the school employees’ retirement system, known as MPSERS. It also owed the Michigan Education Special Services Association $7.8 million for health insurance in January 2013.

The district also defaulted on a $1.4 million debt service payment on a 2006 energy bond in May 2013, and by June 2013, the district had racked up $33 million in unpaid bills to various vendors.

The report also claimed that the school officials violated state law by pooling financial resources so they could make payroll obligations: They used debt retirement funds to pay for employee salaries, which violates state law.

The report stated, “this misuse of debt retirement funds was a deliberate, volitional act which was undertaken with the knowledge, cooperation, and assistance of staff from the certified public accounting firm that has contracted with the School District to operate its Business Office.”

The report states that the district was chronically overestimating its revenues while at the same time underestimating it expenses.

In 2013, district leaders predicted $68.8 million in revenues and $55.0 million in expenditures.

The reality? They spent $71.9 million and had $59.5 million in revenues.

The district has lost 20 percent of its students since the state review in 2013. Pontiac School District had 5,215 students in 2012-13 and that has dropped to 4,154 in 2016-17. The district had 7,046 students in 2008-09.

The MEA didn't respond to an email seeking comment.