How Will The Muskegon Heights Charter School Academy System Pay Off District Debt?

Andrew Trzaska | May 30, 2012

[Read about the rationale for the Muskegon Heights charter plan here]

[Read about the process by which the Muskegon Heights charter plan will be implemented]

[View documentation from Wednesday’s community presentation here]

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Emergency financial manager Dr. Donald Weatherspoon used Wednesday’s community forum at Muskegon Heights High School to better explain how the district would reduce the $12 million in debt that Muskegon Heights Public Schools owes to vendors and the state.

According to Weatherspoon’s presentation, Muskegon Heights Public Schools operates at a loss of $18,000 each day it stays open.  It currently owes over $8 million to the state and another $4.3 million to other vendors and associations, including teacher health insurance, utilities, Xerox and the district’s privatized food service company.

With the proposed Muskegon Heights Charter School Academy System under the control of a new charter board, Weatherspoon as emergency financial manager would shift his sole focus to restructuring and repaying debt for Muskegon Heights Public Schools.

Key to the plan is a request to continue the current tax assessed on the residents of Muskegon Heights to pay for the building of the high school over a decade ago.  This tax expires in 2013, but Weatherspoon will propose to continue it beyond that date.  Those funds would go toward paying down the district’s debt.

As Weatherspoon explained it, taxes would not decrease after 2013, but they would not go up:

“I would hope that the community will understand that if you value your jewel [Muskegon Heights Public Schools] that you would continue to pay for it… as a community neighborhood school.”

Any increases in student enrollment would generate more state revenue for the district, which could further accelerate the reduction of the district’s debt.

Muskegon Heights currently receives the most state aid per pupil in the county at $8,296 per student.

However, the district has seen many factors eat into the actual per-pupil allotment because did not reduce its costs fast enough to match the declining enrollment.

The district has lost 506 students from the start of the 2007-2008 school year (1,906) to end of the 2011-2012 school year (1,400). This is a loss of approximately 26.5% of the student body.

There has also been a decrease in taxable value of the property in the district of about 12% from 2006 to 2011.

Muskegon Heights remains the only district in the count currently with a state general fund balance deficit. This fund deficit stands at $8,472,543.

The district currently carries $4.3 million in operating debt, a majority of which spreads across 7 vendors/numbers: MPSERS, MESSA health insurance, MEBS (Insurance), Priority Health, Xerox, Chartwells (food service), DTE energy.

Weatherspoon said definitively on Wednesday that Muskegon Heights Public Schools would remain in existence while the charter system ran the district. It has to from a financial standpoint.  Since the district is receiving funding through enrollment of students, it cannot declare bankruptcy.  The debt therefore cannot be erased; it must be paid down.

“The district will remain dormant as long as the debt exists. And as Emergency Manager I will be here until the debt is gone.”

On a similar note, there is still the possibility that once the district’s debt is eliminated, it can regain control of operation of the district.  The charter board will have the option to terminate the contract with the private charter company once the debt is eliminated.