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School Daze

The Memphis school board goes nuclear, putting the school year in jeopardy. The city responds. What's next?

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MCS Jolts the System Again

-- Jackson Baker

Say this about the Memphis City Schools board. For a body which voted to dissolve itself just last December, whose continued existence is problematic and could end by judicial fiat at any time, it sure can rattle chains.

Virtually no one foresaw the latest dramatic decision taken by the board, the 8-1 vote it took on Tuesday, July 19th, to demand forthwith some $55 million from the city of Memphis, without which it professed itself prepared to postpone indefinitely the imminent 2011-12 school year. As board member Kenneth Whalum Jr., previously considered an isolated firebrand among his colleagues and now emerging as a spokesperson of sorts, put it during debate on the issue, "We might be talking about giving up the whole school year, y'all — if we're serious."

And indeed, in one sense of the word, MCS has proved itself dead serious. If last year it proclaimed its own end, and this year was prepared to oversee at least a temporary end to public education in Memphis, there seemed no place else to go save maybe the apocalypse.

Not only was there an immediate public convulsion in Memphis itself following the school board's vote, the nation's media was instantly diverted by this unexpected sideshow to the ongoing debt-limit showdown in Washington. CNN, MSNBC, The New York Times, The Wall Street Journal, et al. — they all weighed in.

Perhaps somewhat disingenuously, MCS superintendent Kriner Cash proclaimed, "This is not a good situation for our schools, our children to be in. We're on the national landscape for what we're doing here in Memphis in many, many ways. Now, we're unfortunately in the national papers as well for what we just did here."

The media barrage, in fact, contributed to the image of a school system left in the lurch and became part of the mounting pressure on the city council and the administration of Mayor A C Wharton.

Cash himself, of course, was complicit in what the MCS board "just did," and, in providing the Reuters News Service with a background for events, explained that he had been forced to cut funding year by year since the council made an ill-fated decision back in 2008 to hold back $57 million of what had become its annual allotment to Memphis City Schools.

"This is the year where I can't do it anymore [cut funding] and still run a quality school system," Cash lamented to the nation at large.

The council and the city had a logical rejoinder, the impact of which may have been lost in the chorus of media reaction. Both Wharton and council chairman Myron Lowery pointed out that the total MCS budget amounted to well over $1 billion annually and that it was highly unlikely — "ridiculous," Lowery said — that the inability of MCS to immediately lay its hands on the total city obligation of $78.5 million, or even the lion's share figure of $55 million being demanded, could prevent the school year getting started.

Moreover, as Wharton pointed out, the city had never made over its annual contribution to MCS in one sizable chunk up front — rather, in installments as Memphis property owners digested their tax bills and began making payments to the city through the late summer and fall.

As Wharton put it last Saturday, during a conversation with reporters after the opening of his reelection campaign at his Union Avenue headquarters: "I don't think anybody had any reasonable expectation that we'd have a $55 million check. Even by their [the MCS board's] calculations, that has never occurred. ... People don't pay their taxes at that time." The city would pay as it always had, Wharton said, by stages. "We're going to send that money over. ... The money will be in their hands according to that schedule."

It had to do, he said, with the difference between a budget and an accounting. "Accounting is the money I have. The budget is the money I'm going to spend when we get it."  

As for being able to find $55 million before the tax proceeds began to come in in earnest, Wharton said, "The only place we have it is in reserves, and if we take $55 million out of reserves, taking it down to $21 million, our credit rating would drop like a rock."

A parenthesis about those reserves, which may say something about the immediate background of the current crisis: Talk about the reserves had most recently figured in a developing sentiment among some members of the city council to rethink a 4.6 percent pay cut for city employees that, along with a reduction in benefits, had just been voted in as part of the city's 2011-12 budget.

Earlier in July, 13 local unions representing city employees had filed suit seeking a restoration of their lost pay and benefits on grounds that the reductions voted by the council were in violation of a memorandum of understanding reached between the unions and the city under established impasse procedures.

Given that the memorandum of understanding had been with the Wharton administration and the budget had been the responsibility of the council, the suit was in danger of running afoul of an apples-and-oranges distinction. That fact, coupled with talk on the council of dipping into the reserves on the employees' behalf and suspicions by at least one councilman that an "unallocated" sum of $10 million existed, was generating pressure on the council.

It was against that background that the school board met on Monday night, July 18th, and took its dramatic action.

The past weekend was clouded with a measure of uncertainty after a surprise statement from Cash on Friday morning announcing the postponement of a board meeting scheduled for that afternoon to ratify a tentative agreement apparently reached the night before between the council and the school board.

But the current week began with a sense that the agreement would indeed be ratified this week, once the board's attorneys had signed off on it. The board meeting was rescheduled for Tuesday night, and, if all went well, the council would conclude its end of the bargain by voting at its August 2nd meeting to approve the MCS operating budget of $884,738,673. (For the record, the great majority of that sum from state, federal, and other sources independent of the city's obligation.)

In essence, the council, Wharton, and the MCS figures who attended the July 19th meeting of the council's education committee had reached a compromise. The city would make over the brunt of its maintenance-of-effort (M.O.E.) money in monthly stages beginning with $15 million by mid-August. (Some $3 million of that had already been delivered mid-week.) By the end of October, MCS would have received a sum presumably equal to the $55 million it had demanded and perhaps more.

For their part, MCS board chairman Martavius Jones and board attorney Dorsey Hopson conceded a drop in school enrollment which, when pro-rated against the annual M.O.E. figure of $78.5 million, would allow the city the "option" of reducing its annual payment this year to $68.5 million.

There was a measure of bated breath concerning the closure of the deal, though. At least one MCS board member was calling around this past Monday night to council members expressing his resistance to the idea of granting the payment option.

However things might work out this week, and even should the school year begin on its scheduled start date of August 8th, there remains a good deal of unfinished business. The current crisis had its origin in a series of complex, interlocking long-term circumstances. The most immediate issue was the resolution, pending in the court of U.S. district judge Hardy Mays, of litigation concerning the whens and hows of what is still, presumably, destined to be the merger of Memphis City Schools with Shelby County Schools.

One of the root issues is whether dissolution of MCS is relatively immediate or bound to the formula of the Norris-Todd bill, enacted by the 2011 Tennessee General Assembly and requiring a two-and-a-half-year phase-out of MCS, ending in August 2013.

At the July 19th meeting, MCS attorney Hopson and council attorney Allan Wade owned up to reciprocal uncertainties — Hopson accusing the city of going slow on this year's M.O.E. payments in hopes that Mays might terminate MCS and take the city off the financial hook and Wade expressing a fear that a premature commitment of funds could end up unfairly obligating the city to a perpetual maintenance-of-effort obligation to Shelby County Schools as a successor organization to MCS. (In the absence of individual agreements like that between MCS and the city of Memphis, state law mandates county governments as the sole funding authorities for public schools.)

It had almost been forgotten in the heat of the moment that there is a common background to the current imbroglio between city and school board, as to the circumstances of the MCS board's decision last December to surrender its charter and merge with SCS and as to the ill-fated decision of a recalcitrant city council in 2008 to hold back $57 million of its M.O.E. obligation to MCS, thereby creating a still unresolved debtor-creditor relationship that led ultimately to the current standoff.

And that background is spelled m-o-n-e-y. All of the foregoing circumstances relate in some way to what in recent years has been a desperate search by all local public entities, both governmental and educational, for an elusive entity called single-source funding.


That's Why They Call It Risk

- John Branston

Seven months ago, the Memphis City Schools board was willing to risk the relatively small amount of funding it gets from the city of Memphis in exchange for future security about the relatively large amount of funding it gets from Shelby County.

Last week, the school board and Superintendent Kriner Cash decided to jeopardize the opening of schools and the already tattered reputation of Memphis over not just the city's payment but the timing of the payment.

It was a stunning reversal that had Mayor A C Wharton and members of the Memphis City Council fighting mad and likely to come out on top of this game of chicken involving the daily lives of 100,000 students and their parents.

Here's why:

The school system's $884 million proposed 2012 operating budget is part of its overall $1.2 billion budget, which includes capital improvements and nutrition programs. (The city's operating budget is $661 million.) The $55 million at issue is about 5 percent of that. Until this month, the payment schedule was not an issue in a year that has seen MCS get more public attention than any time in its recent history.

To the contrary, when the school board, by a 5-4 margin, voted to take a leap into the unknown and surrender its charter last December, it was with the understanding that city funding might go away. The primary concern was the possible loss of suburban taxpayer funding if Shelby County schools became a special school district.

Quoting from the "whereas" clauses in justification of the surrender resolution, that outcome "would result in an increased tax burden for residents of Memphis because one half of the residential appraised property of the county ... would no longer be available for children that live in the city limits of Memphis. ... The loss of one-half of the resident appraised property for funding would cause irreparable harm, threaten the existence of Memphis City Schools and its ability to continue as a going concern."

In the referendum in March, Memphians hoping to end their double taxation and the "us" and "them" separation of the school systems voted two-to-one in favor of transferring administration of MCS to the Shelby County school system.

It is not all that surprising that the MCS board is having seller's remorse. For one thing, its membership has changed with the addition of anti-surrender Sara Lewis and the subtraction of pro-surrender Sharon Webb. Cash, who never had any use for school consolidation in the first place, now has majority support.

The second thing is that MCS is losing enrollment, and that means its funding is going down. Enrollment has always been a mystery, with recent "official" numbers ranging from 103,500 to 116,000. Last week, MCS admitted to the city council, at a time and place where it mattered, that it has lost 2,508 students. Under state law, public funding can be reduced if enrollment declines, but, in Memphis, that has never happened because of something called "maintenance of effort."

This is how it works. If you overpay the IRS, they check your return and send you a refund. If you overpay MCS, they keep it and use it as the baseline below which future payments cannot fall. The city says it has paid MCS over $171 million in operating funds since July 2008.

Maintenance of effort and accurate enrollment counts are at the heart of the showdown. The 2,508 student decline, according to MCS, translates to about $9 million in annual city funding. School administrators told the council it could pay the schools either $78 million or $69 million. MCS would prefer to have $78 million. The council, needless to say, will opt for the lower figure. Moreover, members including Councilman Bill Boyd were emboldened to wonder if Memphis has been overpaying for years as MCS loses students to Shelby County, DeSoto County, and charter schools.

Maintenance of effort is the reason the council voted to raise property taxes 18 cents for the local portion of school funding but put the money aside with the court until the lawsuit over consolidation is resolved. Depending on how federal Judge Samuel H. Mays rules, Memphis may or may not have a funding obligation now that MCS has surrendered its charter.

As Wanda Halbert, chairman of the city council's education committee and a former school board member said to MCS administrators and board members last week, "Actions have consequences."

Since last fall, the school board and superintendent have cried wolf about the county school board and Chairman David Pickler, the Republican-controlled General Assembly and Senator Mark Norris, and now the Memphis City Council and Wharton. The fragile consensus of black and white Memphians, the idealism, and the can-do spirit that drove the consolidation vote to victory have been squandered, and the opening day of school in Memphis remains uncertain.

Chronology

• December 20, 2010: Against the wishes of the superintendents of the Memphis and Shelby County school systems, the Memphis school board votes 5-4 to surrender its charter and force a merger with the Shelby County schools, subject to a referendum of Memphis voters.

• January 18, 2011: Memphis City Council votes unanimously for a resolution "accepting and approving the dissolution and surrender of the Memphis City Schools charter."

• February 11, 2011: Governor Bill Haslam signs into law the Norris-Todd bill providing for an "orderly planning process" for merging the school systems in 2013.

• March 8, 2011: Memphis voters, by a vote of 47,912 to 23,612, approve the transfer of authority of Memphis City Schools to Shelby County Schools.

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