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March 27, 2015 standard

Yesterday’s Dropout Nation report on the efforts of the American Federation of Teachers’ to stop systemic reform in Philadelphia touched upon the traditional district’s fiscal woes. As longtime readers know by now, the district’s efforts to address its virtual bankruptcy — including attempting to force teachers to pay a share of their healthcare costs — is one of the key reasons why the union is devoting so much of its resources there in the first place.

Yet for all the sparring between the AFT and the School District of Philadelphia, the two sides agree on what they consider to be culprit for the traditional school system’s ills: The existence of public charter schools, which now serve 30 percent of the City of Brotherly Love’s school-aged children. But as a Dropout Nation analysis of the district’s latest comprehensive annual financial report shows, both the district and the union are engaging in delusional thinking.

The willingness of mayoral candidate Jim Kenney to fight for a moratorium on charter school expansion is one reason why the AFT is backing his candidacy. The district’s Chief Financial Officer, Matthew Stanski, argued as much to the Philadelphia Inquirer when he complained that the district may have to hand over an additional $96 million in subsidies to charters and that the state should be compensating it for those lost dollars.

Of course, the fact that families are fleeing to charters because of the district’s failures to provide high-quality education, a problem exacerbated by the AFT’s defense of failed policies and practices, never comes to the mind of either the union or the district’s bureaucracy. Nor do they keep in mind that the district isn’t even serving those students, and thus, shouldn’t even be receiving those funds in the first place; the dollars should flow directly to the schools themselves. [There’s also the fact that Philly’s enrollment has been on the decline since 1966, long before charters appeared on the scene. But that’s for a different day.]

But all the carping about allowing families to escape the Philly district’s woeful schools cannot cover up for this reality: That the school system is virtually bust. This is clear from the district’s push for an additional $105 million from Philadelphia’s main city government so it can finance its operations for the coming fiscal year. This is double the $57 million the city lent to the district over the past two years so it could continue operating.

But the district’s annual financial results show that even those dollars won’t help it address its long-term woes.

The district still lost $38 million in 2013-2014. The loss is four times lower than the $165 million loss in the previous fiscal year. But the smaller loss didn’t happen because the district generated more money; the district’s $2.8 billion revenue pull in 2013-2014 is just one percent higher than that for the previous year. What helped was a 33 percent decline in administrative support expenses (from $118 million in 2012-2013 to $78.5 million in 2013-2014) and a 16 percent reduction in student support service costs (from $180.3 million to $151.1 million in the same period).

To achieve those reductions, the district laid off 3,800 staffers during the last fiscal year. By the way: The district has reduced the number of bureaucrats, custodians, and other non-instructional staff by 57 percent between 2004-2005 and 2013-2014; they now account for 39 percent of the district’s 17,332 employees on the payroll. [The percentage of teachers on the district’s payroll, on the other hand, declined by a mere 26 percent during that same period.]

The district’s biggest costs are harder to reduce.

Philly paid out $153.4 million in interest on long-term debt during 2013-2014, little changed from the previous year’s levels. It also paid $71.3 million in interest and principle payments on debt it owes to the Keystone State’s Public School Building Authority, a 45 percent increase over 2012-2013. The district (and ultimately, taxpayers) will continue to pay the price for its fiscally feckless decision during the previous decade to float $871 million in variable-rate interest bonds in order to finance its equally-senseless $1.5 billion effort to build 20 new schools and rehab existing ones. Especially given the district’s move two years ago to shut down 24 half-empty schools and its enrollment declines in the past decade, the building spree made even less sense than ever.

The district spent $2.15 billion on teacher compensation and other instructional costs in 2013-2014, just 1.9 percent less than in the previous year. These are costs that are even harder to control. One reason why? The district’s collective bargaining agreement with the AFT’s Philadelphia Federation of Teachers, whose generous terms contributed to a 53 percent increase in teachers’ benefit costs between 2002-2003 and 2011-2012. With AFT having succeeded in its court challenge against the district’s move last October to cancel the long-expired contract (and require teachers to pay a share of their healthcare costs), and with Pennsylvania Gov. Tom Wolf doing all he can to repay the union for supporting his election campaign, Philly has even less room to maneuver on the cost front.

It isn’t as if Philly has shortchanged teachers on the pay and benefits front. Average salaries for teachers working for the district increased 21.4 percent between 2004-2005 and 2013-2014, according to the district’s own data; starting salaries increased by 20.6 percent within the same period. Put bluntly, AFT’s rank-and-file in Philadelphia are doing better than the taxpayers subsidizing the district and forced to deal with failing schools; median household income has been flat during the same period, according to data from the U.S. Census Bureau. Given the reality of Philly’s fiscal woes, it makes perfect sense for the district to cut generous benefits not in line with reality.

Then there are the contributions Philly must make to the Keystone State’s virtually-insolvent Public School Employees Retirement System. The district contributed $165 million to the pension in 2013-2014, a 27.8 percent increase over the previous year; the district’s pension costs increased by 238 percent between 2004-2005 and 2013-2014. Considering PSERS’ woeful financial condition and the increasing number of Baby Boomers in classrooms heading into retirement, the district’s retiree burden will continue to grow.

It could be even worse if the Keystone State finally forces PSERS to accurately account for its insolvency. A preliminary DN analysis of the pension’s comprehensive annual financial report concludes that it is insolvent to the tune of $41.3 billion for 2013-2014, or 27 percent higher than its officially-reported unfunded liability of $33 billion; taxpayers would have to shell out an additional $2.4 billion (based on 17-year amortization of the insolvency) or 82 percent more than the $2.9 billion in contributions made in 2013-2014. Based on those numbers and whether an effort by State Senate Majority Leader Jake Corman and his fellow Republicans controlling the state legislature can force Gov. Tom Wolf into accepting a pension reform plan, Philly’s contributions could increase by 82 percent, or to $300 million, none of which the district can actually pay.

Finally, there’s the fact that families are avoiding Philly’s failure mills in droves. The district passed through $701.2 million to charter schools in 2013-2014, an 18.6 percent increase over the previous fiscal year, thanks in part to a 7.6 percent increase in the number of kids fleeing the district to the privately-operated public schools. With so many families abandoning the district’s dropout factories — only 17 percent of children zoned to attend the notorious Strawberry Mansion High School in North Philly actually did so in 2012-2013 — the school system can’t simply count on a moratorium on charter school expansion to boost enrollment. Even with Gov. Wolf working hard on behalf of the AFT, such a ban on school choice is likely in the foreseeable future.

No matter who becomes Philadelphia mayor or what the AFT manages to convince its bought-and-paid-for ally to do, the district’s financial (as well as academic) woes are systemic, structural, and longstanding. Not one additional dollar of school funding will help it survive for the long haul.

June 28, 2014 standard

Few districts are as mired in financial morass as the School District of Philadelphia. This week, the City of Brotherly Love’s traditional system avoided another round of dire straits when the main city government agreed to lend it $30 million to continue its operations (on top of $27 million lent at the beginning of the last school year just to get the doors open). Pennsylvania state legislators also gave it an assist by increasing state funding by an additional $39 million for next school year.

Yet as a Dropout Nation analysis of the Philly district’s 2013 financial report shows, these emergency bailouts are doing little to address the consequences of Philadelphia’s long-term fiscal and academic fecklessness.

It has long ago been clear that Philadelphia no longer has unqualified status as an academic going concern. A mere 68 percent of the eighth-graders who made up the district’s original Class of 2012 were promoted to their senior year, virtually unchanged from the Promoting Power Rate for its graduating class a decade ago, according to a Dropout Nation analysis of data submitted to the U.S. Department of Education. While the percentage of fourth-graders reading Below Basic declined by four percentage points between 2009 and 2013, as measured on the National Assessment of Educational Progress, three out of every five 10-year-olds were still functionally illiterate. With a mere one percentage point increase (from 15 percent to 16 percent) in the number of eighth-graders reading at Proficient and Advanced levels, Philadelphia is also struggling to prepare kids for success in higher education and life. The consequences of shoddy quality of instruction and curricula on City of Brotherly Love kids explains why the district’s enrollment declined by 24 percent between 2002-2003 and 2011-2012.

The free fall in enrollment, along with the Philadelphia district’s status as a mega-failure mill, has exacerbated financial woes largely of its own making. The district lost $165 million in 2012-2013, more than double the $79 million loss generated in the previous year. Sure, the district’s revenue of $2.8 billion for 2012-2013 was two percent higher than the previous period. But its expenses of $2.9 billion was five percent higher than the earlier period. One reason: An 11 percent increase in interest payments, including on the $871 million in variable-rate interest bonds the district floated last decade to finance its senseless $1.5 billion effort to build 20 new schools and rehab existing buildings. The interest rate swaps, which the district undertook to offset sudden increases in interest rate payments tied to those bonds, is also weighing heavily on its balance sheet. Given that Philly shut down 23 schools this past year, the district’s building boom was a mistake of epic financial proportions.

Then there are the burdens Philadelphia faces as a result of traditional teacher compensation. The district’s instructional costs for 2012-2013 increased by five percent over the previous period thanks to the district’s contract with the American Federation of Teachers’ City of Brotherly Love local and increases in pension contributions. Between 2002-2003 and 2011-2012, Philadelphia’s expenditures for teachers’ benefits increased by 53 percent. Meanwhile Philly’s long-term burdens continue to grow. The district’s unfunded liability for retired teacher and other school employee healthcare costs for 2013 was $388 million, three times greater than the $130 million shortfall in the previous year. If Philadelphia was to liquidated today, its $2.5 billion in assets wouldn’t cover its $4.1 billion in liabilities and long-term debts.

Let’s keep in mind that these numbers don’t include any increases in contributions the district must make to the Keystone State’s Public School Employees’ Retirement System to help address its virtual insolvency. A preliminary DN analysis of the pension concludes that it is insolvent to the tune of $37 billion, or 27 percent higher than its officially-reported unfunded liability of $30 billion; taxpayers having to shell out an additional $2.1 billion a year (based on 17-year amortization) or 90 percent more than the $2.4 billion in contributions made in 2013. Based on those numbers, and on whether Gov. Tom Corbett succeeds in convincing legislators in passing any kind of pension reform plan, Philly’s contributions to the pension could be nearly double the $129 million the district paid last year (or an additional $116 million a year in contributions). In light of the district’s financial woes, and the 78 percent increase in pension contributions it has had to sustain between 2010-2011 and 2012-2013, there’s no way it can sustain itself as an education organization.

Put simply, Philadelphia is virtually bankrupt. This is a problem that an additional $96 million in funding from both the state and the main city government (as requested this week by district Supt. William Hite) cannot fix. It is finally time for reformers and others in Cheesesteak Land to finally let the district wind down its operations, and move toward a model of educational service that actually benefits taxpayers, families, and ultimately, our children.

October 26, 2013 standard

Back in July, Dropout Nation surmised that Los Angeles Unified School District Superintendent John Deasy would likely end up leaving the top job by the end of the school year. With the American Federation of Teachers’ local, United Teachers Los Angeles, effectively winning back control of the district’s board after this year’s election, and with traditionalist (and longtime Deasy foe) Richard Vladovic taking the helm as board president, the superintendent was going to have a tough time pursuing his moderate reform agenda. By the time Dropout Nation reached its conclusions, Vladovic and his allies had already begun doing all they could to frustrate Deasy’s efforts, including pushing for a three-year plan to increase teacher salaries and hire more teachers that favors their AFT patron (and effectively putting the kibosh on Deasy’s effort to move toward weighted student funding approach to budgeting that would hand more dollars to schools serving poor and minority children while allowing principals to manage their own budgets). Since then, Vladovic and company have ratcheted up the pressure on Deasy with moves such as replacing board member (and Deasy ally) Tamar Galatzan as head of the district’s budget committee with Bennett Kayser, whose loyalty is first and foremost to the AFT.

So it isn’t surprising that rumors are now coming out that Deasy may either hand in his resignation by this coming January or end up being sacked by the board as early as Tuesday after his latest performance review. Sure, reformers in the City of Angels and Los Angeles County, along with L.A. Mayor Eric Garcetti, are demanding that the board retain Deasy. But because reformers didn’t win seats during this year’s board elections, they have little leverage that they can use on Deasy’s behalf, either to keep him in the job or help him advance his agenda. The fact AFT local president Warren Fletcher has already issued a call for “new leadership”, along with the district’s troubled roll-out of its ambitious effort to equip all students with Apple iPads in place of textbooks, makes Deasy’s departure all but a certainty.

Given the dysfunction on L.A. Unified’s board and the unwillingness of the board majority to advance systemic reform that will benefit children in its care, it’s unlikely that the district can replace Deasy with a suitable successor. Which is another reason why it is time to break apart L..A. Unified altogether.

Certainly Deasy is not nearly the strong reformer those in the movement, both in L.A. and nationwide, like to think him to be. After all, his tenure at the helm of L.A. Unified has been filled with has weak moves such as striking a deal with the AFT on a teacher evaluation plan that does little to actually measure the performance of teachers based on their success with the students they instruct in classrooms. Given that Deasy has gone from working with a reform-oriented board led by Monica Garcia to one dominated by traditionalists such as Vladovic (and that reformers have struggled with providing strong and consistent advocacy), it is understandable why Deasy has taken a more moderate stance what the district actually needs. But in light of his current predicament, Deasy would have been better off going full bore on advancing reform.

At the same time, he has proven skillful at using what cover he gets from reform advocates to overhaul teacher quality, expand school choice, and undertake other moves that are starting to help L.A.’s children. He deserves praise for working with Parent Power activists and families looking to either take over or push for the overhaul of failing schools in the district such as 24th Street Elementary and Weingard Elementary. And Deasy deserves admiration for his willingness to side step traditionalists on L.A. Unified’s board (with the implicit support of Garcia and other reformers) — including backing the successful lawsuit filed against the district by a group of Southern California families organized by activist Alice Callaghan (with backing from the school reform group EdVoice) over the district’s failure to use student performance data in teacher evaluations as required under the Golden State’s Stull Act.

But it has been clear for a while that Deasy would never get much done so long as he has to work with Vladovic and his allies who now control L.A. Unified’s board — and not just because of the conflict of visions and ideologies. Vladovic’s reputation as a hot-head who abuses both his own staffers and that of Deasy’s has come out in the open over the past few months a a former staffer accused him of episodes of harassment and meddling in operational affairs beyond what is called for in his governance role. Vladovic all but affirmed these and other accusations earlier this month when he apologized for his misbehavior and said that he would seek treatment for his anger issues. But the fact that the board has so far let Vladovic off the hook for his misbehavior (and may not likely approve an effort by rival Galatzan to have him censured) means that he and his allies will likely subject Deasy, his staffers, and the rest of L.A. Unified’s already-dysfunctional bureaucracy to even more grief. Which is likely to be perfectly fine as far as the AFT and other traditionalists looking to stop future reforms are concerned.

Meanwhile Vladovic and his allies have been building a case against Deasy’s continued employment. The superintendent’s performance review this Tuesday comes amid constant sparring over the district’s future direction. Earlier this month, Deasy foe Steve Zimmer fumed at L.A. Unified’s chief financial officer, Megan Riley, after she presented a cost-benefit analysis that showed that the board majority’s feckless spending plans — including the hiring of additional teachers, new rounds of salary increases, and increases in the number of classes that don’t involve helping kids improve their literacy and numeracy — would cost at least $1.2 billion over a three-year period, a burden the district can ill-afford. Deasy’s key staffers, tired of the meddling from the board, are starting to move to greener pastures; this includes Jaime Aquino, who oversees the district’s curricula efforts (including implementation of Common Core reading and math standards), who announced his departure last month. Add in Fletcher’s threats that that the AFT may mount a work stoppage similar to that done last year by its sister local in Chicago if the district doesn’t give in to its demands for salary hikes, and it is clear that Deasy will have to leave on his own in order to avoid being given walking papers.

L.A. Unified Board President Richard Vladovic and his traditionalist allies are making an already-dysfunctional district even more so. Photo courtesy of LA School Report.

Replacing Deasy wouldn’t exactly be an easy task even under the best of circumstances. Unlike New York City, where the traditional district’s status as a department of the main city government controlled by the mayor provides for stability in leadership, L.A. Unified’s board governance structure (one typical for most big-city districts) makes the superintendent’s job inherently unstable. As seen in the case of Deasy, a superintendent chosen by one board can end up immediately falling out of favor with the next.

But the current board’s dysfunction, especially with a intemperate leader such as Vladovic at the helm, makes running the nation’s second-largest district even more unattractive than usual, both for potential candidates of a reform mindset as well as for traditionalist types. The fact that the board majority is unified more by their general disdain for Deasy and his agenda than by any philosophical agreements adds additional uncertainty. Zimmer, a former Teach For America recruit, has a penchant for going his own way that is as frustrating to traditionalists as it is to reformers; this independence streak or indecisiveness (depending on where you sit) is why he garnered no support for his bid last July against Vladovic to become L.A. Unified’s board president. Monica Ratliff, who now occupies the seat once held by reformer (and now L.A. city councilwoman) Nury Martinez, has been as much a critic of the AFT’s defense of seniority-based protections for laggard and criminally-abusive teachers has she has been a defender of the traditionalist thinking in other aspects.

One can imagine the majority splintering into two camps once Deasy hands in his resignation, making it difficult to choose his replacement. It also means that anyone who succeeds Deasy as superintendent would spend more time trying to please each of the players on the board — including Vladovic and his aforementioned anger management issues — than running district operations. This is especially problematic in light of L.A. Unified’s myriad academic woes. While Deasy and immediate predecessor Ramon Cortines helped reduce the percentage of fourth-graders reading Below Basic (as measured on the National Assessment of Educational Progress) by five percentage points between 2009 and 2011,  55 percent of L.A. Unified fourth-graders (now seventh-graders) were functionally illiterate. Meanwhile L.A. Unified is also struggling to provide kids with the college-preparatory curricula they need to do well in higher education, with just 37 percent of the district’s graduating Class of 2012 having taken courses that prepared them to do well in the colleges operated by the University of California and California State University, according to data from the Golden State’s Department of Education.

Meanwhile Deasy’s successor would be expected by Vladovic and company to do the bidding of the AFT local. But given the district’s struggles, along with the overhang of the criminal abuse scandal involving former Miramonte Elementary School teacher Mark Berndt (who was allowed by the district to damage the children he taught), no responsible superintendent can do that. If anything, that person would have to continue Deasy’s efforts to overhaul teacher evaluations and performance management, which the district has long failed to do well; 40 percent of veteran teachers and 70 percent of new hires were evaluated by the district during the 2009-2010 school year, according to the National Council on Teacher Quality. But undertaking such an effort means battling with an AFT local dead set against even the reform-light concepts such as peer review panels that most traditionalists generally support — and whose influence over the district’s board has only become stronger. And that’s before one considers the notorious intransigence of L.A. Unified’s bureaucracy, which has historically quashed anything beyond superficial attempts to improve student achievement.

Beyond the academic and operational woes facing Deasy’s possible successor, there are the financial problems plaguing the district. L.A. Unified struggled this school year to fill a $450 million shortfall; it depended on $202 million in one-time dollars just to make ends meet. It faces a $350 million shortfall for 2014-2015, thanks in part to healthcare deals with the AFT and other unions under which the district bears allthe costs; L.A. Unified expects to spend$780 million on healthcare for the coming year. Add in the $4 billion in unfunded retired school employee healthcare costs that must be paid down in the next 17 to 30 years, and the portion of the state Teachers Retirement System’s $87 billion pension deficit, and the district can be considered on the brink of insolvency. With taxpayers in Los Angeles and the 31 other cities served by L.A. Unified struggling with the pension woes of their city governments (and the woes of the state as a whole), L.A. Unified can’t hope for more help, much less $1.2 billion for the spending spree Vladovic and his cronies want to undertake.

In all honesty, Deasy is as good as L.A. Unified could get to run its operations. Vladovic and his allies won’t find anyone nearly as good willing to take on the dysfunction that plagues the district. It is definitely time for reformers to mount another effort to ditch the traditionalists on the board over the next few years. And it is also time for all to take up Dropout Nation‘s standing advice on what to do with L.A. Unified: Break it up altogether and move away from the traditional district model at the heart of its problems overall.

July 22, 2013 standard

There’s nothing surprising about last week’s news that Detroit’s main city government joined the likes of Vallejo, Calif., and Jefferson County, Ala., in filing bankruptcy. Six decades of fiscal and operational fecklessness by Motor City officials such as the abysmal Coleman Young and notorious (and now-incarcerated) Kwame Kilpatrick have led to mounting fiscal burdens that have rendered the city so insolvent that by May, the Michigan state government took over its finances and handed control of the city to an emergency financial manager. Weighing heaviest on the books are the array of retirement deals between Motown and public sector union locals that have proven to be far costlier than generations of politicians have wanted to admit. This includes pension deficits of $3.1 billion as determined by Moody’s Investors Service in its review of the city’s finances — or $2.1 billion more than the 977 million in pension deficits officially reported by Motown (which as its state-appointed financial manager Kevyn Orr, noted in his analysis released in June is higher than the $644 million the city reports in other financial statements), as well as $5.7 billion in unfunded retired civil servant healthcare costs and $1.43 billion in pension-obligation bonds outstanding. In fact, Detroit’s pensions have paid out $3 billion more in benefits over the past five years than it has generated in investment income and pension contributions.

But soon, Motown and its fellow municipalities won’t be the only ones in bankruptcy courts. The very fiscal fecklessness besetting these municipalities are now hitting traditional districts, forcing them to pay dearly for the high costs of building booms and retirement deals they made with states, and affiliates of the National Education Association and American Federation of Teachers. This, along with the woeful performance of many districts in improving student achievement, is another reminder that the traditional district model, already proven to be ineffective and obsolete in providing high-quality education to children, is even less useful in encouraging fiscal prudence.

As Dropout Nation has reported for the past few years, the full cost of traditional teacher compensation (including defined-benefit pensions, near-lifetime employment, and low-cost healthcare in retirement) have been coming home to roost as some time. The retirement of Baby Boomers in the teaching ranks, along with the current economic malaise, increasing costs of Medicaid driven in part by the Affordable Care Act, and decisions by states, districts and NEA and AFT affiliates to contribute as little as possible to pensions, has led to a perfect storm of sorts. Another decade of deal-making between districts and teachers’ union affiliates has led to generous benefits for teachers, but at a high cost to districts (and ultimately, taxpayers). Districts and states spent $73 billion on benefits in 2011-2012, a 74 percent increase over 2001-2002, according to a Dropout Nation analysis of U.S. Census Bureau data; the average district now spends 34 cents on benefits for every dollar of teacher salary, an increase from the 29 cents per dollar of salary spent a decade earlier.

Exacerbating the problem for states and districts are shoddy pension accounting and actuarial rules that obscure the true levels of the pension and retiree healthcare liabilities on their books. As a result, districts and states are likely understating their pension shortfalls by 35 percent or more. Chicago Public Schools likely faces a pension shortfall of between $11 billion and $15 billion, (depending on the exclusion and exclusion of $3.3 billion in unrealized investment losses), between 36 percent and 96 percent greater than its officially-stated shortfall of $8 billion. The pension deficit, which Chicago exacerbated with the help of Illinois state officials (who have granted the district a pension contribution “holiday” that allows it to pour less into the pension than it should), and the AFT local there (through is control of seats on the pension), is one reason why the district moved last Friday to lay off 2,000 teachers and other staff.

These issues, along with the evidence that traditional teacher compensation is ineffective in improving student achievement and rewarding high-quality teachers for their work, is why school reformers and cost-cutting governors are attempting to overhaul how teachers are compensated — including replacing defined-benefit pensions with hybrid retirement plans that have elements of defined-contribution plans — and sparring with NEA and AFT (both of which derive their influence from their promise to rank-and-file Baby Boomers members in classrooms that they will make sure that teaching is the best-compensated profession in the public sector).

At the same time, busted pensions aren’t the only problem weighing heavily on traditional districts. During the last decade, districts spent little on bolstering information technology infrastructure or developing data systems that would provide the information teachers and school leaders need for improving student achievement. Instead, they spent profligately on new and restorative construction –including high school stadiums and fixing up aging buildings — even when enrollment numbers were in decline. New buses were bought as well even when districts were operating them to full capacity only two-thirds of the time. By 2007-2008 (or at the beginning of the financial meltdown that led to the current economic malaise), districts had spent $53 billion on school construction, 35 percent more than in 2001-2002, according to the U.S. Census Bureau. Construction, along with moves by districts with their own pensions to float bonds in the hope of growing the proceeds (and reducing pension shortfalls) during that era’s bull market, are among the reasons why the nation’s districts had $407 billion in debt outstanding in 2010-2011, a 80 percent increase over the debt levels in 2001-2002, according to an analysis of U.S. Census Bureau data, while having a mere $177 billion in cash and investments on hand, a 46 percent increase in the same period.

Because so many districts floated variable-rate bonds with interest rates that could increase or decline, they used interest rate swaps — investment derivatives — to offset increases in rates on those bonds. Both moves have burned districts, with high levels of debt on the books and swaps they must continue pay for as long as 30 years even as interest rates have declined. These burdens, along with reverse-seniority layoff rules that restrict districts from reducing staff based on teacher performance and the obsolete scale-focused structure inherent within the traditional district model, have made it even harder for districts to deal sensibly with reductions in tax revenues, state dollars, and federal funding. Closing schools, as some big-city districts have done in order to stave off fiscal trouble, won’t be enough to overcome decades of bad decision-making.

Some districts have already gone bust. The Buena Vista district in Michigan near the state capital of Lansing attracted national attention in May when it shut down its operations for two weeks before the state provided emergency aid in order for its graduating class to complete their studies. But the district’s fiscal condition had been in deterioration for some time thanks in part to bad decisions such as striking a three-year contract with the NEA affiliate that required the district to pay all the costs of healthcare instead of requiring teachers to pay 20 percent of the tab. Between 2007-2008 and 2011-2012, Buena Vista’s deficits increased from $395,041 to $948,300, (according to Dropout Nation‘s analysis of Wolverine State financial data for the district. Buena Vista is one of 50 districts in the Wolverine State that are in dire financial conditions. By tonight, Buena Vista and another district, Inkster, may shut down for good if it cannot meet a state mandate to obtain a loan to finance operations for the upcoming school year.

But it isn’t just small districts that could end up filing for bankruptcy or dissolved altogether. There’s Detroit Public Schools, which like the city government, is already under state receivership. The district’s new state-appointed financial czar, Jack Martin, must deal with more than just systemic academic failures and declining enrollment. Detroit is on the hook for part of the Michigan Public School Employees Retirement System’s official pension deficit of $22.4 billion (and more like  $30.4 billion, or 36 percent more than officially reported, according to a Dropout Nation analysis of the pension using a calculation developed by Moody’s) as well as $26 billion in unfunded retired teacher healthcare liabilities. If Michigan adopted more-realistic accounting for the teachers’ pension than it does now, Detroit Public Schools would have to pay $138 million, or 35.6 percent more than it contributed to the pension in 2011-2012, the latest year reported, just to make up its share of the underfunding. Considering that Detroit’s revenue declined by 15 percent — or $187 million — between 2010-2011 and 2011-2012 (from $1.27 billion to $1.07 billion), there’s no way the district could handle any kind of double-digit hike.

But pensions aren’t the only woes weighing on the Motor City district. A successful move by the district four years ago to float $507 million in bonds (with interest rates as high as 7 percent) to fix existing buildings now seems particularly senseless given the shutdown of  91 schools during the tenure of recently-departed financial czar Roy Roberts and his predecessor, Robert Bobb. Even more infamous spending sprees — including the acquisition of 160 BlackBerry smartphones and 11 motorcycles on the taxpayers’ dime, as well as the purchase of five floors in the landmark Fisher Building for $24 million (or $3 million more than its owner had paid for the entire building) — have also been costly. Although a series of bond refinance efforts have helped reduce interest payments, the district still spent $190.2 million –or 18 percent of its revenues — to service $2.2 billion in debt outstanding. Add in the missteps by Roberts during his tenure (including the reversal of staffing reductions predecessor Bobb made during his tenure, as well as striking a new deal with the Motor City’s AFT local that will make it even harder to control payroll costs), and one can see that Detroit Public Schools is virtually insolvent. A bankruptcy filing of its own is likely.

Another big-city district that is a bankruptcy candidate is Philadelphia, whose fiscal woes have been chronicled by Dropout Nation over the past two years. Last month, the financially-strapped district announced that it would lay off 676 teachers and other staff in order to address a $304 million budget shortfall for its upcoming fiscal year. As with Detroit, the City of Brotherly Love district must also bear part of the burden for Pennsylvania’s Public School Employees’ Retirement System, which like the district is virtually insolvent. A Dropout Nation analysis earlier this year determined that  PSERS’ deficit is likely $33.5 billion, or 27 percent higher than it reported for its 2010-2011 fiscal year. Philadelphia would likely have to pay an additional 81 percent in contributions — or an additional $76 million on top of the $93 million in paid out in 2011-2012 — over the next 17 years, a burden it couldn’t sustain given that revenues declined by $201 million (or 7 percent) between 2010-2011 and 2011-2012.

As with so many districts, the woes Philadelphia faces have been years in the making. A string of deals with the AFT’s City of Brotherly Love local, along with increases in pension contributions, led to a 41 percent increase in spending on teachers’ benefits between 2001-2002 and 2010-2011. Philadelphia’s $1.5 billion school construction program, which began in 2004, added 20 new schools (in addition to rehabbing additional buildings) even as enrollment was in decline; the move by the district in March to shut down 23 schools proves how big a mistake the district made in launching a school building program in the first place. Meanwhile Philadelphia’s fiscal mismanagement would wreak havoc on its balance sheet and operations. The district’s decision in 2004 to float $871 million in variable-rate interest bonds led it to strike a series of interest rate swaps to offset any sudden increases in interest rate payments. That decision would ultimately cost the district $72 million by 2011, according to a report by the Pennsylvania Budget and Policy Center. These missteps, along with the more than a decade of bungled school overhaul efforts and a continuing failure to provide children in its care with high-quality education, has led the district to its current state of insolvency.

Detroit and Philadelphia may be the biggest names on the list of bankruptcy candidates. But they won’t be alone. More districts will end up having to face their insolvencies (if not forced into bankruptcy or dissolved altogether) before this decade is over.

July 8, 2013 standard

The countdown may have begun for the end of John Deasy’s tenure. L.A. Unified should see its last days too.

One thing about the future of systemic reform in the Los Angeles Unified School District became clear last week after its board voted five-to-two to name longtime traditionalist Richard Vladovic as its president: It is on life support for at least the next two years. After all, the former L.A. Unified teacher and bureaucrat is a creature of the district’s old-school bureaucracy who has sparred with the reform-minded superintendent, John Deasy, throughout his tenure on the board; that, along with perceptions of Vladovic as a moderate, makes him a better representative for the interests of traditionalists such as the American Federation of Teachers’ City of Angels local (which backed his run for the top board seat) than either Bennett Kayser (who everyone knows is too  deep in the union’s pocket to even be considered independent), or wishy-washy types such as Steve Zimmer (who vainly held out hope that either traditionalists or reformers on the board, who don’t trust him, would nominate him for the top spot). Sure, Vladovic faces accusations of sexual harassment from his former chief of staff as well as a reputation for screaming at district officials. But none of that matters to traditionalists who wholeheartedly oppose reform.

So one can expect the district’s board to make it harder for families of children attending dropout factories and failure mills to leverage California’s Parent Trigger law as families at two schools — 24th Street Elementary and Weingard Elementary — have done within the past five months. The board took steps to do so last month when it approved a measure by Zimmer under which Parent Trigger petitions are “independently” verified (along with other bureaucratic procedures) that will stifle future school takeover attempts. No one should expect L.A. Unified to embark on efforts such as the now-shuttered initiative to spin off 198 schools to charter school operators, families, community groups, and groups of teachers; one may also see the number of new charters approved by the district to decline significantly, especially since the move by the Golden State’s school board this past May to end its authorizing of charters takes away much-needed outside pressure on the district to expand school choice.

What else is clear? That the board majority will spar more frequently with Deasy, who has at least talked the talk on systemically reforming the district (even as he makes rather weak moves as striking a deal with the AFT local on a teacher evaluation plan that does little to actually measure the performance of teachers based on their success with the students they instruct in classrooms). Even before Vladovic stepped in as president, Deasy has done all he could to sidestep traditionalists and moderates on L.A. Unified’s board (with the implicit support of Garcia and other reformers). This included backing the successful lawsuit filed against the district by a group of Southern California families organized by activist Alice Callaghan (with backing from the school reform group EdVoice) over the district’s failure to use student performance data in teacher evaluations as required under the Golden State’s Stull Act. Within the last month, Deasy made clear that he would proceed with his plan to essentially move to a weighted student funding approach to budgeting, handing more dollars to schools serving poor and minority children while allowing principals to manage their own budgets; this partially defies the plan passed by traditionalists on the board to mandate the district to hire more teachers, guidance counselors, and other staff across the board regardless of the needs of the schools and the children they serve. [Zimmer was particularly displeased that allies of Deasy, including the Los Angeles Times‘ editorial page, were calling out those who supported the mandate for their fiscal and educational fecklessness.]

Vladovic and his allies on the board are unlikely to immediately hand Deasy his walking papers. After all, it wouldn’t play well to the public, who thinks highly of Deasy’s work so far, (and would recognize the move as a gift from the majority to the AFT local for its backing of their respective candidacies). Deasy’s immediate firing would also reaffirm L.A. Unified’s longstanding reputation as the district where reform is squashed before it yields fruit, as well as remind families about why they backed the reform coalition cobbled together by now-former Mayor Antonio Villaraigosa that briefly controlled the district. But the majority (which includes new board member and occasional reformer Monica Ratliff) are likely to do as much as they can to make it harder for Deasy to proceed with his reform efforts. More importantly, Vladovic, Kayser, and LaMotte — who form the core of the majority — will start building a case against keeping him on the job beyond June of next year; while Zimmer is a wildcard of sorts (and is mindful of the election challenge he faced from reformers earlier this year over his wishy-washiness), his own issues with Deasy gives the big three a potential ally in their cause.

What will result from the sparring between Deasy and traditionalists on the board is instability within the district’s operations. The best of L.A. Unified’s school leaders, looking for clear direction from the central office, will find themselves looking for new jobs in order to get away from the developing dysfunction. Initiatives launched by Deasy that are already underway will begin to flounder as the new board majority pushes its own priorities. Deasy will be constantly undercut by Vladovic and his allies as they find more reasons to question his efforts to overhaul teacher performance management. The district’s bureaucracy will then backslide into the mediocrity and failure that is one reason why the district failed to evaluate 60 percent of veteran teachers and 30 percent of new hires during the 2009-2010 school year, before Deasy became superintendent.

Certainly Deasy has the advantages of popularity and a bully pulpit of sorts, along with a constituency of reformers on the board and throughout the district; he can rally families and other around his own efforts to tackle the district’s abuse of children in its care (including the abetting of the criminal abuse of students by the likes of former Miramonte Elementary School teacher Mark Berndt). But Deasy can no longer count on Villaraigosa and cannot expect much help from his successor, Eric Garcetti, who must keep in mind his own promises to the AFT local that backed his successful mayoral campaign (and whose own reform-lite approach essentially emphasizes playing nice with traditionalists). And given that reformers didn’t help Deasy with their losses in this year’s board races, the superintendent is in a weaker position than he was at the beginning of the school year.

Children forced to attend L.A. Unified’s schools, along with their families and other taxpayers, are the ones who will pay the price. It isn’t if they can easily escape. Sure, the number of children attending charters increased by 67 percent between 2009-2010 and 2011-2012; but charters still only account for 15 percent of enrollment (as of 2011-2012), according to the National Alliance of Public Charter Schools.

None of what is happen (and will likely play out) is shocking. The average big-city district chief executive stays on the job for a mere four years, according to the Council of the Great City Schools, largely because they lack the political constituency needed to keep their jobs for long tenures. The influence of AFT and National Education Association locals, who are the biggest players in school board elections, means that any reform-minded superintendent who angers the union will soon find himself out of work. Particularly in the case of L.A. Unified, the district’s penchant for forcing out reform-minded school leaders, board members, and even teachers such as the legendary Jaime Escalante makes the likelihood of Deasy remaining in the top job beyond 2014 even less likely than in other districts.

Reformers within the City of Angels have learned all too well that it is difficult to keep together coalitions within a district that sprawls throughout Los Angeles County (including 31 smaller cities as well as the City of Angels itself). There are also no easy alternatives. Mayoral control of the district would be the best approach. But that’s unlikely, especially since Garcetti is even less likely to pursue it than Villaraigosa, who attempted such an effort seven years ago with little success. A more-optimal solution would be for L.A. County’s board of supervisors to play a prominent role in spurring reform and perhaps, attempt a takeover of the district. There’s also building stronger relationships with L.A.’s city council, including players such as Bernard Parks, who realize that they must play stronger roles in overhauling L.A. Unified. But both approaches will take more time than children and their families can afford.

Just as importantly, it is hard to justify keeping L.A. Unified around as is. Legendary hip-hop star Ice Cube is correct in declaring yesterday that City of Angels’ children and adults are victims of the district’s systemic academic failures. Keeping L.A. Unified around is also hard to support from a fiscal perspective. L.A. Unified’s unfunded retired teacher and school employee healthcare costs increased by 26 percent between 2011 and 2012, according to its most-recent annual report; it now has $4 billion in costs that its taxpayers must somehow pay down in the next 17 to 30 years. [None of this, by the way, includes its portion of the state Teachers Retirement System’s $87 billion pension deficit.] Considering that L.A. residents (along with their counterparts in other cities served by L.A. Unified) are struggling with pension shortfalls for their respective city governments, it’s hard to justify L.A. Unified’s existence.

So reformers should start a more-radical reform effort that is essentially geared toward abandoning L.A. Unified’s traditional district model. This starts with rallying more families to use the Golden State’s Parent Trigger law to take over schools that their children attend. Even with the new restrictions put into place, reformers could work with families to navigate the rules in order to advance school takeovers. Working with existing charters such as Green Dot to expand their capacity for serving more children would also help. Reformers should also work with the single-parent households, immigrant families, and others in the grassroots (along with reform-minded teachers and school leaders) to engage in DIY education efforts.

Finally, it is time to break L.A. Unified apart into smaller districts along the boundaries of the 32 cities it serves, then abandon the traditional district model for each of the new districts altogether, putting schools into the hands of an array of charter school operators, community groups, families, and others. L.A. Unified’s bureaucracy has proven long ago that it is impervious to change in its current form. In an age in which scale is far less important than providing children with high-quality teaching and instruction — and after decades of evidence showing that the traditional district model is no longer worth preserving — there’s no reason to keep things as they are. Breaking up L.A. Unified, along with other reforms, would be good for children and families.

May 23, 2013 standard

What Chicago’s children need now is the expansion of high-quality school choices.

As you would expect, the American Federation of Teachers’ Chicago local and other traditionalists are none too pleased by Chicago Public Schools’ decision to formally shut down 49 of its underutilized schools. Karen Lewis, the notoriously bellicose head of the AFT local, the Chicago Teachers Union, declared in a press released earlier this afternoon that the decision has led to a ” day of mourning for the children of Chicago” and promises to follow up on her threat to recruit someone to run against Mayor Rahm Emanuel when he comes up for re-election two years from now. Others such as national AFT President Randi Weingarten and MSNBC commentator Jeff Johnson have embraced the Chicago AFT’s talking point that the Second City district’s school shutdowns will lead to more children being murdered and endangered because some will have to go through more-dangerous neighborhoods in the city just to attend new schools. Meanwhile traditionalists in the Second City continue to grasp upon an analysis by public radio outlet WBEZ-FM that shows that black children account for 88 percent of the schools that were targeted back in March for closure (despite making up two-fifths of enrollment) to declare that the district is essentially engaged in racial bigotry. The Chicago AFT, in particular, attempted to argue this in two federal lawsuits it is financing aimed at stopping the district from closing the schools. [For some inexplicable reason, a hearing on both suits will be held in July.]

Of course, Lewis, Weingarten and others fail to mention a few things. The first? That keeping schools open in itself won’t do anything immediately to address crime and violence outside its doors. The two decade long overhaul of the district undertaken by Mayor Rahm Emanuel and predecessor Richard M. Daley is slowly working to address the dropout crisis that is a long-term culprit in spurring crime in the city; schools can also play a role in economic renewal. But it cannot immediately address problems that are largely due to the Second City’s failures to embrace the Broken Windows approach to fighting crime that has made even New York City a much-safer place to live — a failing for which Emanuel should be held accountable (and one his predecessor never did as much as he could have to address) — and the gang activity fueled by the nation’s longstanding (and failed) prohibition on narcotics and marijuana. [Let’s also keep in mind that even with Emanuel and Daley fils not embracing more-aggressive crime-fighting tactics, the Second City is far less violent than it was two decades ago; the number of reported homicides declined by 53 percent between 1999 and 2010, according to Dropout Nation‘s analysis of U.S. Bureau of Justice Statistics data.]

Meanwhile the argument that children attending soon-to-be closed may end up attending schools in more-violent areas fails to consider this fact: Some of the schools being closed are in some of Chicago’s most-violent neighborhoods, which means that children who attend school there are already endangered before and after they leave school buildings.  Seventy-nine incidents — including battery, assault, and burglary — were reported between May 2012 and May 2013 in the neighborhood home to the soon-to-be shuttered Yale Elementary School on Princeton Avenue and West 70th Street, according to Dropout Nation‘s analysis of crime data provided by the city. Around Attucks Elementary on East 51st and South State Street, there were 37 incidents within the past year — including nine incidents around the school building itself. One would take the arguments of Lewis and others seriously if they were calling upon Emanuel to revamp how the city addresses crime and other quality of life issues — including hiring more police officers to patrol neighborhoods on the South Side of town. But then, such demands from the Chicago AFT would mean that the city would not provide raises to its rank-and-file, which then means less money and influence for the union and its national parent.

As for the matter of race? The inconvenient fact is that black students are the ones most-affected by the shutdowns because they live in neighborhoods that have been contracting for some time. The fact that the district mostly serves black and Latino children, with white children making up just 9 percent of enrollment, doesn’t factor into traditionalist thinking. More importantly, black families — especially those in the middle class — are walking away from Chicago schools. Just 173,173 black children attended Chicago’s schools in 2010-2011, a 26 percent decline over enrollment for black students in 1991-1992, and according to data from the U.S. Department of Education; in fact, that decline — along with a 56 percent increase in the number of Latino kids attending Chicago schools in that same period — means that black children no longer make up the majority of enrollment.

Chicago can’t keep open 50 school buildings if there aren’t enough kids attending them — and it definitely can’t keep 280 additional underutilized buildings open for long. It definitely can’t do so when it also faces a budget deficit of at least $600 million for the current fiscal year, which, along with a looming deficit of $1 billion, is forcing the district to finally take action to shut down half-empty schools. There’s also its defined-benefit pension deficit, which is officially reported as being $8 billion for 2012, but more-likely to be $11 billion, according to Dropout Nation‘s analysis of financial data using a formula developed by Moody’s Investors Service. The Chicago AFT, along with its allies, shares in the blame for these woes. After all, the union continues to embrace an old-school industrial union model that ignores both its consequences to children, younger teachers, and taxpayers alike; since the union also controls seats on the pension, it is also responsible for its fiscal mess.

Meanwhile all the carping over the school closings ignore the fact that Chicago, like its counterparts in Philadelphia and Washington, D.C.,  is struggling with the same problems of overemphasis on scale over quality and choice that is inextricably linked with the traditional district model. Certainly Chicago is a better-performing district academically than it was two decades ago; the percentage of functionally illiterate fourth-graders declined from 60 percent to 52 percent between 2003 and 2011, according to the National Assessment of Educational Progress, while the percentage of students reading at Proficient and Advanced levels increased from 14 percent to 18 percent during that time. But middle class families of all backgrounds are no longer willing to wait for the district to improve further and are willing to leave for suburbia in the hopes of sending their kids to district schools that turn out to be merely mediocre. It is why two out of every five kids born in the city in 2005 did not attend kindergarten in traditional district schools five years later.

For poor and lower middle class families — including those from Latino backgrounds who are increasingly becoming the face of the Second City — the district’s struggles with underutilized buildings and battles with the bellicose Chicago AFT — also makes it difficult for them to access any options, much less those of high quality. The school closings, necessary as they may be, force these families to send their kids to schools outside of their neighborhoods. The district’s Zip Code Education policies — which lead to 37,000 seats in the district’s best-performing schools to go unfilled — are especially galling. Meanwhile last year’s strike by the Chicago AFT was a particularly nasty reminder to them that they are beholden to the union’s antics unless they are one of the few who send their kids to the 119 charter schools in the city (or can access enough money to send their kids to private or parochial schools).The fact that the Chicago AFT has engaged in rank demagoguery against charter school operators meeting the needs of families even as its rank-and-file enthusiastically embraces choice (39 percent of Chicago teachers sent their kids to private schools, according to the Thomas B. Fordham Institute in a 2004 report, a number that has likely increased since then), is especially blood boiling.

What all of Chicago’s families need now is a wide array of high-quality school options both within and outside their neighborhoods. This is where Emanuel must step up on their behalf. He should immediately move to eliminate the district’s school zones, which would open up those 37,000 seats. Emanuel should also build upon predecessor Daley’s Renaissance 2010 initiative to launch new charter schools in the city. This includes teaming with major charter school operators such as KIPP, as well as teaming up with outfits such as the Black Star Project (which already provides tutoring to kids in the city) to launch new charters in the neighborhoods affected by the school closings; the current plan to authorize 17 new charters is not even close to enough, but either for the affected neighborhoods or for those in the city’s North Side, where overcrowded schools (and the district’s inability to meet demand) is the norm.

Chicago should also lease space in the soon-to-be-shuttered district schools, embracing the space sharing approach pioneered by New York City in bringing charters to Harlem and other communities. Enacting a Parent Trigger rule that would allow families to take control of — and overhaul — failing schools that remain open is also an important step to expanding choice within neighborhoods.

Emanuel can go even further by fostering the development of blended learning by outfits such as Rocketship Education, and DIY education efforts by families, churches, and community groups in the city. The latter, in particular, would help Emanuel build bridges with those who legitimately feel that the city hasn’t fully considered the impact of the shutdowns on their neighborhoods. It would also put the Chicago AFT on the defensive; after all, it will be harder for Lewis to claim that her union is engaged in social change when the union opposed the expansion of school operations by the very people she claims she cares about.

The time is now for Chicago to move beyond school shutdowns — and away from the traditional district model. It is the only way all of our kids in the Second City will have the good and great schools they deserve.