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HB 1307 - State Takeover of Fiscally Distressed Schools

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In May, the Senate Education Committee voted out HB 1307 which set forth procedures for the Department of Education to develop and implement parameters for declaring school districts financially distressed and putting in place provisions that would put the state in charge of making decisions about the operations of the school district.  This power would allow the state to override local control and school board decisions, and allow unilateral changes to contracts that have been executed, including changes that would affect classroom conditions, such as increasing class size or making schedule changes that affect whether or not teachers have time to plan lessons.

The bill includes the following proposals:

  • A school district would enter “financial recovery status” if they are declared:
    • A “moderate financial recovery school district” by having an average daily membership greater than 7,500 and receives an advance of its basic education subsidy at any time, OR
    • A “severe financial recovery school district” by receiving an advance of its basic education subsidy at any time and is either under a declaration of financial distress under section 691 of the School Code or is engaged in litigation against the Commonwealth seeking financial assistance (i.e. a state could take over any district that enters into litigation against the state).
  • Financial recovery status allows the Secretary of Education to appoint a chief recovery officer (CRO) for the school district who is tasked with developing and implementing a financial recovery plan which includes benchmarks for returning the school district to financial stability.

  • The CRO will have the ability to reopen the budget, convert school buildings to charters by a majority vote of the school board, implement school closures, and renegotiate contracts and collective bargaining agreements.

  • There will be a 5 year transition period after the termination of financial recovery status.

  • If the school board does not comply with the directives of the CRO or fails to achieve the criteria set forth, they will be subject to the appointment of a “Receiver”.  The Receiver will assume all powers and duties of the board of school directors except the power to levy and raise taxes, which would remain a power of the elected board.  The elected board is REQUIRED to levy and raise taxes if directed to do so by the Receiver.

  • It creates a Financial Recovery Transition Loan Program, which would provide assistance to school districts that meet the requirements of the legislation in the form of a long-term, interest-free loan, in an amount accessible over a term and repayable according to a schedule set forth in the financial recovery plan. This means that the school will be taking on more debt and have an obligation to repay money, even if the crisis resulted from not having enough money in the first place. 

Concerns with the bill:

  • This bill puts in place a state takeover approach that overrides local control and input.
  • The bill creates a process to determine which school districts are declared financially distressed, which has no public input.
  • This bill gives one non-elected individual who is not accountable to the public the power to void contracts and override collective bargaining agreements, which often help set school conditions, such as class size, length of school day and ensuring that teachers have time to prepare lessons and review student work.
  • Currently there is no revenue attached to this bill.  This bill includes a loan program to provide assistance to school districts, but there is no guarantee there will be money for a loan program in the FY 2012-2013 budget.  With no additional basic ed funding or “loan program” provided, this bill provides little hope to struggling schools districts. Creating a loan program with no money to loan allows legislators to claim they are taking action to help schools, when no meaningful support was put into place.  Without providing additional basic education funding, it is unrealistic to think that school districts will be able to pay their debt and pay off a “transition loan”.