Michigan City Outsources All of Its Schools
By Stephanie Banchero and Matthew Dolan
The public school district in this hard-luck city has come up with a radical answer for its troubled education system: It is outsourcing all of it.
Highland Park School District, one of the state’s lowest-performing academically, says it will turn over its three schools and nearly 1,000 students to a private, for-profit charter school company—the second district in Michigan to take such a drastic step to avert financial collapse.
The abrupt news last week sparked concern—and in some cases, relief— from parents and other residents who packed a Wednesday night meeting in the faded industrial city, which is nearly surrounded by Detroit.
The parents came to hear from the charter company, Leona Group LLC, which promises to improve the learning environment and boost student performance in a district where only 22% of third graders passed state reading exams last school year and just 10% passed math. The results were even worse for high-schoolers: About 10% were proficient in reading, and none in math.
“I have a lot of questions, but I’m hopeful that it will turn out for the best,” Cynthia Gresham, a school volunteer and parent of an incoming senior at Highland Park Community High School, said at the meeting.
Districts nationwide are trying radical approaches to shake up financially and academically troubled schools, including dismissing the entire staff or turning several schools over to outside groups to run.
A few districts in Georgia have converted into charter districts in an effort to get out from under state class-size and teacher-salary schedules. In those cases, the district administration generally remains in place and oversees schools, but each school creates a council of teachers and parents that make hiring and budget decisions. New Orleans has taken one of the most extreme approaches by converting most of its schools to charters and allowing students to use state-funded vouchers to attend private schools.
Charter schools—public schools run by outside entities using taxpayer funds—are free from many administrative constraints, including union contracts, and typically spend less than traditional schools per student.
Proponents say the move could offer a lifeline to other school districts in crisis. In 2011, 48 of Michigan’s 793 districts ran deficits that totaled $429 million, compared with 18 districts with $59 million in combined deficits in 2004-2005, according to the most recent state data.
“This could be the new model for public education,” said Jeanne Allen, president of the Center for Education Reform, a national research and advocacy group that supports school choice. “It stands to be a lab of innovation where people can see that thinking outside the box is not so scary.”
But opponents say the plan is designed to kill off unions and lacks the public’s input. “Where’s the accountability to the community?” asked Katrina Henry, president of American Federation of Teachers union Local 684, which represents the district’s teachers.
Highland Park decided to privatize its schools after years of enrollment decline, poor fiscal stewardship and allegations that a board member stole more than $125,000 by submitting false invoices; the charges against the member are pending.
During the 2010-2011 school year, the district spent $16,508 per student. By comparison, Michigan districts on average spent $9,202 per pupil that year. In the process, Highland Park ran up an $11.3 million deficit over its $18.9 million school budget.
The district got itself into financial trouble, in part, because it didn’t cut staff as fast as its enrollment declined along with the city’s population, leaving it with higher per-pupil expenditures, said Joyce Parker, who, under a controversial state law, was appointed district emergency manager in May by Republican Gov. Rick Snyder.
“The financial problems were immense and we had to look at nontraditional ways to get the district back on track,” said Ms. Parker, who has full control of the district and made the decision to convert to a charter after ruling out a merger with a neighboring district.
Under the plan, the district will be hived off into an education arm with a separate, three-member board appointed by Ms. Parker to oversee the contract with Leona Group, the charter-school company.
The district will remain as an entity run by Ms. Parker to pay off its debt of about $5 million, using local property taxes that currently go to run the schools.
Phoenix-based Leona will receive $7,110 per pupil in state funding, plus an as-yet-undetermined amount of federal funds for low-income and special education students. In addition, the Highland Park district will pay Leona a $780,000 annual management fee.
Unions have been sidelined after the district’s entire professional staff was laid off, as allowed by the state emergency law, but teachers can apply for jobs with Leona. Leona has budgeted about $36,000 a year for Highland Park teachers on average, the company said—compared with almost $65,000 a year the teachers received in the 2010-11 school year.
In a typical school it takes over, Leona has hired back about 70% of the teachers, the company said. Leona also will lease the Highland Park district’s buildings.
Under the five-year contract with Leona, the new city charter board will monitor the company’s progress in improving student performance.
Leona runs 54 schools in five states. Students in almost half of them fail state academic benchmarks. But of its 22 Michigan schools, 19 meet the mark, Leona officials said.
Leona Chief Executive William Coats said the company had no incentive to cut corners in Highland Park. “As we build equity, we give that back to the schools,” he said during Wednesday’s meeting when an audience member raised doubts about the for-profit approach. “We’re trying to manage this so you [the district] stay in business.”
Highland Park is where Henry Ford opened his first assembly line and Chrysler Corp. built its original headquarters. It has suffered the same ills as Detroit, its larger neighbor: an exodus of auto jobs, depressed housing stock and a surge in crime.
The city, which spreads across three square miles, lost nearly 30% of its population from 2000 to 2010, according to the latest U.S. Census. Nearly half of the 11,776 residents live below the poverty line.
Students and parents complain of dirty classrooms, exposed wiring in the schools, rationed textbook and swimming pools—once used by powerhouse swim teams—that now sit drained of water.
John Holloway, the school board president, said the problems became a “runaway train that we could not stop.”
As the situation worsened, the state gave the district a $4 million loan in July 2011 and advanced it $450,000 more earlier this year just to meet its payroll.
A union-backed initiative that could go to voters statewide in November seeks to repeal the emergency-manager law under which Ms. Parker was appointed to run the district. The law had been strengthened in 2011 by the governor.
Glenda McDonald, a Highland Park resident and laid-off teacher, said that the problem was not entirely the fault of the community. “The disinvestment in our communities led to the disinvestment in our schools, and that’s why people left,” she said. “We had nothing to offer them.”
