Michigan’s Pontiac school district in critical financial condition, and the teachers union shows no mercy

Mar 21, 2013 by

PONTIAC, Mich. – Another school district is headed for the Intensive Care Unit, courtesy of organized labor.

The Pontiac school district is the latest in a string of districts that are facing serious financial issues, due in large measure to irresponsible labor contracts given to teacher unions by their big-spending friends on the school board.

The Pontiac district is in such shaky financial condition that it’s having trouble affording toilet paper and other basic supplies for its schools.

The Michigan Education Association – the state’s largest teachers union – blames Pontiac schools’ financial crisis on “the massive underfunding of public education.”

The facts say otherwise.

While Michigan lawmakers have made reductions in per-pupil aid to schools over the past two years, they are not the cause of Pontiac’s financial problems, which extend back at least a decade.

The school district has been hemorrhaging students since 2005. Over a seven-year span, the district lost 45 percent of its students.

But during the last four years of that mass exodus, Pontiac’s average teacher salary ballooned by 34.68 percent, according to the Mackinac Center for Public Policy.

In a 2011 state-mandated deficit reduction plan, Pontiac’s school leaders acknowledged giving wage and benefit increases that “exceed(ed) revenue increases.” They also admitted there had been “no substantial reduction in staffing” to reflect the dramatic drop in student enrollment, reports the Mackinac Center.

Excessive health insurance costs also contributed to Pontiac schools’ financial trauma. That’s completely the fault of the union.

For years, the Pontiac Education Association – a local affiliate of the MEA – has used the collective bargaining process to demand that the Pontiac school board provide union members with health coverage through an insurance company owned by the MEA.

The MEA’s insurance arm – known as the Michigan Education Special Services Association (MESSA) – offers what is known as the “Cadillac” of health coverage for school employees. The company’s typically high premium rates reinforce that reputation.

MESSA’s rates have proven unaffordable for the Pontiac School District. From November of 2011 to January 2013, the district was not able to pay its MESSA health insurance bill.

Did MESSA take pity on the struggling district and forgive some of the debt, or offer a premium holiday in the future? It certainly could have, considering that in 2011 the company had reported reserves of more than $391 million.

Hardly. MESSA officials took the district to court and recently won a $7.8 million judgment.

Pontiac school officials sought permission to spread the retroactive payments out in order to avoid causing hardship to taxpayers, but MESSA refused that request and the judge agreed, reports the Oakland Press.

Largely as result of the MESSA ruling, Pontiac residents could see their property tax bills “more than double” this summer, the Oakland Press reports.

“This is a lot of tax to heap on a poor community,” Pontiac Finance Director John Naglick told the Press. “All it will accomplish is to drive up our delinquency rate and heap more work on the county treasurer’s office (to initiate foreclosures).”

And what has the MEA done to alleviate the suffering it has caused the Pontiac School District?

The union didn’t direct MESSA officials to lower Pontiac’s health insurance premiums.

Nor did the union encourage Pontiac teachers to shop around for a less expensive health insurance plan.

Instead, the MEA raised $12,000 in cash and gift cards for the beleaguered district, and then issued a self-congratulatory press release to highlight its “heartwarming” deed.

Union-made disaster in San Diego

Union-made financial disasters can be found in school districts all across the U.S.

In 2010, the San Diego Unified School District lopped off five student instruction days from the school calendar – which allowed the district to reduce teachers’ pay proportionately – in order to avoid financial calamity.

The district’s persistent money woes are partly caused by the no-cost health insurance it provides to teachers. VocieofSanDiego.org reported last year that the district “spends about $12 million per month on healthcare costs. That’s about $148 million each year that the district can ill afford to spend when it’s also running an estimated $122 million budget deficit.”

The situation continues to be bleak in San Diego. Earlier this year, the news site reported that the district resorted to selling property as “a one-time budget solution that patches over the district’s deficit in the short-term but leaves the district a few properties poorer forever.”

School board member Scott Barnett opposed the sale, calling it “bad policy.”

“We have a $50 million shortfall because the school board agreed to raises without having the money to pay for it. Selling valuable real estate assets, to pay for ongoing expenditures, is bad policy,” Barnett told VoiceofSanDiego.org.

City of Brotherly Love’s union problem

Some 2,300 miles away, Philadelphia school leaders recently voted to close about 10 percent of their schools, in response to the district’s pending financial doom.

Philly.com reports, “The Philadelphia school system is broke, with 53,000 empty seats and a huge stable of buildings it cannot afford to maintain.”

There is a direct correlation between the district’s woeful financial condition and its labor contract with the Philadelphia Federation of Teachers.

Last year, EAGnews issued a report highlighting the contract’s most wasteful provisions that drain millions from the Philadelphia school budget. The most eye-opening example also involved health insurance costs.

During the 2010-11 fiscal year, the Philadelphia district paid out $165 million in health insurance premiums for teacher union members, while employees contributed a combined total of $270,550, less than one percent of the cost.

It’s a small wonder that Superintendent William Hite Jr. recently said the district is in a full financial “crisis.”

“We’re talking about being in a place where we can’t pay people or we can’t open next fall,” Hite said.

Chicago schools’ $1 billion deficit

Chicago Public Schools – the nation’s third-largest school district – is facing similar problems.

The Chicago Tribune reports that CPS is considering closing dozens of schools in an effort to deal with next year’s projected $1 billion deficit.

“The system is in a deep economic hole,” the Tribune writes. “The number of students it educates has declined. The system can’t afford to operate scores of half-empty buildings. The future of Chicago’s public schools — of 400,000 kids — is at stake.”

Despite that existential threat, CPS officials recently gave teachers an average pay raise of 17.6 percent over four years, in response to the Chicago Teachers Union’s seven-day strike last fall.

The Tribune reports that the raises will cost taxpayers “an extra $74 million a year.”

Chicago, Philadelphia and San Diego schools are among the biggest examples of union-made disasters, but every week brings new examples. Many school districts across the U.S. are forced to either lay off teachers, trim academic and extracurricular programs for students, or raise taxes to accommodate the wage and benefit increases demanded by their unions.

The Pontiac School District is only the latest to reach its breaking point under pressure from America’s school employee unions.

But it certainly won’t be the last.

Michigan’s Pontiac school district in critical financial condition, and the teachers union shows no mercy – EAGnews.org :: Education Research, Reporting, Analysis and Commentary.

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