Before School Districts Go Broke: A Proposal for Federal Reform

Source: Kristi L. Bowman, MSU Legal Studies Research Paper No. 08-21, 2010

From the abstract:
School districts across the country continue to face falling revenues and are scrambling to cut their budgets and adjust to leaner times. But districts have never had to make such drastic adjustments – and some of them are nearing a point of fiscal crisis. In fact, in summer 2011, we will see school districts hit what education law and policy experts call the “funding cliff”: revenue from state and local sources will not have rebounded, and the federal stimulus funding approved in August 2010 will nearly have run out. A nation-wide solution is needed, and this Article proposes just that. First, the Article defines the problem, looking beyond the recession to examine the systemic and situational challenges in school finance that the recession has illuminated. Second, the Article searches federal and state statutes and regulations for legal mechanisms that are sufficient to deal with school districts’ current and future fiscal crises and finds a substantial gap: in 19 states, not one legal mechanism is available to school districts in fiscal crisis (including federal municipal bankruptcy), and in the remaining 31 states, there is considerable variation in the utility of the authorized legal mechanisms. Third, the Article proposes that when Congress reauthorizes No Child Left Behind, which it is expected to do in 2011, it should include fiscal accountability provisions that require states to (1) help districts create immediate, additional cost savings, (2) publicly monitor districts’ fiscal health and create a plan for escalating involvement when a district nears and reaches fiscal crisis, and (3) assist in stabilizing districts’ revenues long-term.

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