Reasons for Hope
Ann Arbor's public schools face the same problems as last year. But this year, they have a plan.
by James Leonard
From the June, 2014 issue
"By law we have to pass a balanced budget by our last meeting in June," says Ann Arbor school board trustee Glenn Nelson. "This year that's June 25."
To get there, the board will have to close a projected $10.7 million deficit in what's expected to be a $185-$190 million budget. And they'll have to do it without tapping their savings account: the district's fund balance, a robust $40 million in 2003, is projected to be just $5.3 million when the AAPS fiscal year ends this month--so low that the district's credit rating was downgraded in April.
But after cutting 350 jobs in the past three years, this year the schools have a new plan: enroll more students. And it's working.
In January, the district announced that it would accept as many as 750 new students. By mid-May, 704 kids had expressed interest: 314 from outside the district who've signed up for the Schools of Choice program; 129 district residents currently in charter, private, or home schools; 116 whose families are moving out of the district but who are staying in district schools; 115 in a new "young fives" kindergarten; and thirty children of district employees who live elsewhere.
Typically, only seven out of ten students who express interest in the spring show up for classes in the fall. This year the district hopes to do better than that--but even if it doesn't, it will gain nearly 500 students. They'll bring with them $3-$4 million in state funding, which will go a long way toward filling the budget gap.
The new kids are needed. Enrollment rose steadily from 16,432 students four years ago to 16,682 students in 2012-13, but declined this past school year to 16,518. Because enrollment determines state funding, board vice president Christine Stead says the AAPS lost $2.2 million in its total allowance, including $800,000 that went to the Washtenaw Intermediate School District Consortium Program.
And the deficit could get even bigger. "The board hasn't seen the winter utility
bills yet," warns Nelson, "and we may get a bad surprise in a month or two." With the winter of 2013-14 the snowiest and one of the coldest on record, that's nearly certain. Even so, Nelson expects that the board "will start the budgeting process with almost exactly the beginning fund balance that we assumed we would have ten months ago--which is good news. I'm satisfied."
School board president Deb Mexicotte is more than satisfied; she's optimistic. She acknowledges the big deficit but believes they'll cover it. And she's aware of the tiny fund balance but says that's why "we need to add to it. We hope to do it in this budget cycle, so that we have $8 million in the fund balance at the end of the next budget cycle."
The board is putting its hopes in its new superintendent, Jeanice Swift. In sharp contrast to predecessor Pat Green's bunker mentality, Swift visited all the schools in what she called a "listen and learn" tour this fall. And she apparently not only listened and learned; she was heard.
"Since Dr. Swift's arrival, confidence on the board and in the community has risen--and precisely because of Dr. Swift," says Mexicotte. "Cutting is not the strategy any longer, and besides, we've cut everything we can [without compromising] the level of quality Ann Arbor's students and their families expect. The focus now is on revenue, primarily because of Dr. Swift, and most if not all her initiatives are grounded in what she heard from the community."
"We have to find a way forward," says the poised and passionate Swift. "We can't do that by reducing our fund balance. Fifty school districts in Michigan are in deficit right now, and we can't be the fifty-first.
"We have to grow," Swift continues, "and so we have invited students to the district, most especially students in Ann Arbor. Fifteen hundred students in the district are going to charter schools. We have to reverse that trend."
To attract them, Swift says, the district added "many of the programs that parents have requested, for example the K-8 STEAM [science, technology, engineering, art, math] program at Northside School, and the International Baccalaureate program at Mitchell, Scarlett, and Huron. We've also added more world languages like Arabic and Chinese, and we've widened enrollment for young fives so we can have students for fourteen years instead of thirteen."
In addition to winning back district residents, "through the Schools of Choice, parents who live outside Ann Arbor can send their kids to Ann Arbor Public Schools," says board vice president Stead. "Whatever foundation allowance they have goes to Ann Arbor Public Schools. It's always less than what we get for our own students, but it helps."
"Other districts get between $7,000 and $7,500 for each student," explains the district's new chief financial officer, Marios Demetriou. "Ours is $9,050." The difference comes from Ann Arbor's higher tax base and millage rate. So far next year's biggest donor district is shaping up to be Ypsilanti, with 180 students expressing interest, with Lincoln's sixty-eight students a distant second.
Schools of Choice wasn't Swift's idea: the district initiated the program before Green resigned last spring. "We opened 170 slots and filled 140," Swift reports.
"We did OK this year, but we didn't do what we hoped we'd do," admits longtime board member Susan Baskett. "But this year there's more excitement and a different vibe to the district because of Dr. Swift. We were very ambitious when we set a goal of 750, but I think we'll hit it."
They may. Though the signup period for students coming from other districts has closed, Swift noted in mid-May that "the in-district window is open through June 2."
The additional students won't add much to the district's costs. "We're just filling in capacity," Swift explains. "If a class had twenty students and now it has twenty-three students, what did it cost us to add students? Not very much: the same teacher cost, the same heating cost, the same custodial costs. We will probably add sections of kindergarten, so we're looking at hiring teachers, maybe fifteen teachers more district-wide.
"But," she adds, "it's important to note that class-size targets are not increasing."
The district has other reasons for hope. Though the trustees took out a $10 million line of credit last year, they didn't have to tap it.
"We knew it would be close," says Mexicotte. "We had the credit line for seamless operation because we weren't sure where the bottom was. We now know where the bottom is, and that's why we're committed to raising the fund balance."
"We got really lucky," says Stead. "We were three days away from using it in December. It was all about the timing of the property tax check from the city and the austerity measures we put in place."
"We didn't fill some positions [in administration]," says Swift. "[Deputy Superintendent for Instructional Services] Alesia Flye was not replaced after she left last year."
The district expected no help from the state legislature, which has controlled school funding since the passage of Proposal A in 1994, and it got none.
"We're funded at about the 2002 level," says Mexicotte. "Everything you'll hear this year about more money to the schools is election-year puffery. Lansing raised what we actually get to keep $5 [per student] last year, and they're raising it $2 this year. They can say they're raising us $55, but we have to give [$53] back six days later" in increased pension contributions.
The board is hoping for help from the teachers' union in the form of concessions. Whether they'll get it is an open question.
"With the teachers we negotiated a $3 million concession last year," says treasurer Nelson, "and on July 1 of this year their pay increases by $3 million. That gets them back to the previous year, but we could ask for another year of giving up $3 million."
"We're talking to our bargaining unit either about a continuation of the current concessions or other ways," says Mexicotte. "People are 85 percent of our expenses because we're in the people business. But, believe me, there is no bloat in the Ann Arbor schools."
"We know they'll be upset," says Baskett. "The state's already mandated they work more, and we're asking them to not ask for more money."
Teachers' union president Linda Carter is making no promises. "This year's concession meant a minus 3 percent in our paychecks," she says, "and it was a one-time-only concession." Will the union agree to new concessions again for the coming year? "We will sit down and have constructive conversation," Carter says. "But we have taken a lot of concessions over the years, and it's been painful."
The board also hopes to regain some revenue for special ed. "We worked with the county intermediary school district to increase the amount we're reimbursed through the special education millage," Mexicotte explains. "When I first came on the board [in 2003] we were reimbursed 72 percent [of special ed costs]. When we redid the millage during the recession, property values were low, and we got a 60 percent reimbursement. But property values have since rebounded, raising the reimbursement rate, so it's probably in the low seventies now. That'll be worth between $1 to 2 million a year."
Then there's the building on Textile Rd. currently occupied by the Roberto Clemente Student Development Center. The board decided to combine Roberto Clemente with Ann Arbor Technical High School next year to become one school with a new name: the Pathways to Success Academic Campus, located in A2 Tech's building on Stone School Road.
"We'll use the former Roberto Clemente location as a lease agreement, or maybe we'll just sell the property," says Stead. "But we will not sell to a competitor who might take our students. We could get $300,000 a year as a lease or sell it outright for a couple of million." Demetriou points out that "it could be rehabbed as a community center or a church."
"When you look at the list of ways we have to fill the deficit, it's important to recognize what's not on the list," says Swift. "There're no reductions in services to students, no massive layoffs of teachers, no increase in class-size targets, no reductions to seventh period, no additional charges to athletics."
"We don't want to cut programs," says Demetriou. "Our solutions are more positive this year. We need to grow the district. It won't be easy, but we need to do it."
The only alternative, he says, is more of the same. "School funding in Michigan has been very difficult," says Demetriou, who was deputy superintendent for the Muskegon Area Intermediate School District before joining the Ann Arbor schools in April. "This is the tenth year of doing the same thing in the spring: cutting the budget to fill a deficit."
Though Swift says, "I don't want this to be the new normal," Mexicotte suspects it already is.
"There've been $10 million deficits every year for the last ten," the school board president points out. "So yes, this is the new normal--at least until we adjust Proposition A. But acknowledging that it's the new normal doesn't mean it's right. It's not right! No, no, no, no, no! It's not what it needs to be. That's why we're aggressively focused on revenue, on being positive, and on being more successful through our own efforts."
But even if all the hoped-for revenue comes through, it will only prevent further losses. "All the things we cut are gone," Mexicotte says. "The middle school pools are gone without new funding, and transportation as we know it is in danger for the foreseeable future. And no matter how successful we are, we may still have to cut something in the future unless funding philosophy changes in Lansing.
"Are we in better shape this year?" she asks rhetorically. "Yes. We're in a much better position financially, morale is much better, and we're on the move. We are not expecting change in Lansing or education reform any time soon, but we're sick and tired of being sick and tired, so we're going to make our own new, better future."
Are the schools really in better shape financially if their credit rating's been downgraded? "Standard & Poor downgraded us because of our fund balance, so that we're an A minus plus now," Mexicotte replies. "Not too bad. And remember it only affects us if we try to borrow money--which we're trying not to do."
"Prop A needs to change to allow communities to self-fund like we used to," says Stead. "We're not trying to ignore inequality, which is what Prop A was created to address. We want them to allow Ann Arbor to raise our own millage and have part of it go to surrounding communities."
But Stead knows that's unlikely to happen, because "the political will is not there ... The schools are completely subject to partisan politics now, and we have to play that game too."
Who Is (and Isn't) Running?
Four school board members are up for election this year. Of the four, Christine Stead is the only one to say, "I am running again."
Glenn Nelson and Irene Patalan are both stepping down. "I still enjoy doing it but it's time to move on," says Nelson. Patalan notes that since she first ran in 2005, she's gained six grandchildren, and her business, Collected Works, has doubled in size. "I also think that ten years on the school board is a good run."
Susan Baskett, who's been on the board since 2003, says: "I haven't decided yet. But it's been a long time, and I wonder is this the best time to bring in new blood, or the best time to maintain stability?"
Nelson says he has "no successor" in mind, but that doesn't mean he won't "take a keen interest" in who runs. "I announced early because I care about who gets elected. I hope people will just appear, but if that doesn't happen I'll go out and look for people."
"No one has come forward to me," says Deb Mexicotte, whose term runs till 2016. "But it's still a little early. We'll hold a candidates meeting in June, and usually around then we find out who's running."
What about the parents who attempted a recall last year when the board passed over Clemente principal Ben Edmonson for the superintendent's job? After their petition was rejected for lack of clarity, they talked about running their candidates this year.
So far, there's no sign of that happening. Jody Huhn, who spoke for the group last year, didn't return repeated calls and emails asking about the group's plans.
[Originally published in June, 2014.]
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