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 State
Supt. of Public Instruction, Tom Watkins, on ISDs
Michigan State Superintendent of Public Instruction
Tom Watkins testified today before the House Education
Subcommittee on Intermediate School Districts.
Michigan Department of Education, February 12, 2004
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Tom Watkins, State Superintendent of Public Instruction,
presentation to the House Education Committee – ISD Review
Subcommittee on Thursday, February 12, 2004, Room 326 House
Office Building, 11:00 a.m. or after session.
Representative Johnson, members of the Intermediate School
District (ISD) Review Subcommittee, thank you for the
opportunity to share a few thoughts regarding Michigan’s
Intermediate School District accountability.
I believe in fiscal stewardship that demands accountability for
every taxpayer dollar. Abuses that have been widely reported are
egregious, at best.
Let me be very clear, Governor Granholm, the Department of
Education, and the State Board of Education stand behind strong
accountability measures for all of Michigan schools, be they
traditional schools, charter schools or ISDs.
Representative Johnson, I thank you for your pursuit of the
issues of accountability and efforts to make sure every dollar
that is available benefits our children. Educators throughout
Michigan share that passion. Many of these educators receive
excellent professional development from their Intermediate
School Districts.
One of the great joys that I have in the role of State
Superintendent of Public Instruction is to travel the state,
visit classrooms and actually see the education investment come
alive as Michigan’s 100,000 teachers, our unsung heroes, touch
our future – our children. These children – who will be our
future scientists, mathematicians, engineers, artists, lawyers,
state legislators, governors and presidents – are sitting in our
classrooms today. It is their imaginations being sparked and
their creative juices being tapped by our great teachers.
Your committee, while focusing on fixing the “problems” at the
Oakland Schools also should take the time to celebrate the
heroes at the agency that risked their career to put children
first. So as this process moves forward, let’s spend an equal
amount of time celebrating what is right about the nursery of
our democracy, our neighborhood public schools and intermediate
school districts, as we go about fixing what went awry at
Oakland Schools.
President Clinton, at his first Inaugural address stated: “There
is nothing so wrong with America that cannot be fixed by what is
right about America.”
Things went terribly wrong at Oakland Schools. Under the
leadership of interim Superintendent Bill Keane and the watchful
eye of a more engaged public, the problems appear to be on the
road to being fixed.
So, to paraphrase President Clinton: “There is nothing so wrong
with our system of public education which cannot be fixed by
what is right about public education.”
Regarding what’s right about ISDs, let’s remember all the good
services they provide to our communities. Among the myriad
services and programs delivered by the IDSs are:
~ Completion of pupil counts used for accurate distribution of over
$11 billion in state aid
~ Provision of centralized vocational education and special education
~ Reduction of costs through economies of scale by using cooperative
purchasing and the provision of cooperative services
~ Provision of professional development opportunities for teachers,
administrators, paraprofessionals and support staff
~ Provision of technical support to local districts and public school
academies for mandated electronic reporting
In the context of budget and staff reductions in the Department
of Education, we have increasingly called upon ISDs to perform
work and operate programs that we have not had the capacity or
staff to manage with the resources at hand. ISDs are an
essential partner in delivering education services to our
children.
Some specific examples where ISDs have provided collaborative
and cooperative service for their local school districts
include:
~ Wayne Regional Educational Service Agency (RESA) implemented bulk
purchasing of school supplies and instructional media that
realizes a 50% cost savings as compared to list prices. (The
majority of local school districts participate in bulk
purchasing programs.)
~ Washtenaw and Kent ISDs operate an adaptive technology-on-loan program
for special education students that eliminates the need for the
local school districts to purchase items that may be used only
for a limited time.
~ The Van Buren ISD provides each local school district with access to an
online compliance program to meet the requirements of the Blood
Borne Pathogens, Hazard Communication and to state and federal
law update information.
~ Eaton, Ingham, Clinton, Shiawassee, and Livingston ISDs collaborate to
operate a Summer Technology Academy offering over 200 courses
for teachers in the area of integrating technology into the
classroom.
~ Many ISDs provide conference facilities to their local districts.
Madame Chair, one of the questions you asked is what tools the
Michigan Department of Education and the State Board of
Education have to ensure ISD accountability.
The state provides oversight and monitoring to assure compliance
with state and federal guidelines. We do not have the same
statutory authority over local millage dollars. ISDs receive
most of their operating funding from local millages. Our
oversight has been in the area of reviewing federal and state
grant programs managed by ISDs and through review of audit
recommendations made by auditors. To put this in perspective,
this year Oakland Schools will receive about $50 million in
state and federal funds and nearly $180 million of their total
revenues of $230 million from local millage funds.
Our Office of Audits receives and reviews financial audits of
federal funds flowing through ISDs. Currently, two federally
funded auditors review local, independent CPA audits of local
districts and ISDs. The quality of work by the CPA firms, as
well as recommendations or “footnotes” are reviewed. If issues
of concern are identified, the ISDs are required to develop a
Corrective Action Plan for implementation. ISDs are required to
correct items of noncompliance or risk having funds withheld.
Local millage funds are under the purview of a local ISD and its
board.
In 2001, Oakland Schools’ financial audit included a “related
party” transaction footnote. Such a footnote is not uncommon in
our reviews. The Department’s goal in regards to a “related
party” transaction footnote is to determine that the required
conflict of interest disclosures were made and that the
transactions were made at fair market values. In a May 2002
letter, the President of the Board of Education of Oakland
Schools indicated that the Oakland Schools Board was indeed
aware of the “related party” transaction. In this case the issue
was the disclosure that Oakland Schools Superintendent Redmond
was also the Board Chairman for the MINDS institute.
State School Aid, which is estimated at over $11 billion for FY
04, is allocated to school districts in the form of general aid
and categorical aid. The amount of general aid allocated to each
district is based on the number of full-time pupils counted by
the district on the count dates. The local district pupil counts
are audited by the Intermediate School Districts.
The Department is responsible for providing guidance to the ISD
auditors and overseeing the quality of these audits. State
budget cuts have curtailed much of this activity. However, ISDs
and their auditors are exceedingly effective in this work. Their
work has become a significant part of the control system over
the accuracy of pupil counts.
Oakland Schools has been a leader in improving the quality of
pupil accounting audits. They have provided training at
statewide conferences and have assisted the Department in
updating our Pupil Auditing Manual.
The Department of Education monitors Intermediate School
District’s federal special education funds. The Department
disburses about $270 million per year in federal funds for
special education. Currently, ISDs submit applications to the
department for use of these federal special education funds. We
require the ISD to enter into an agreement with the state
regarding program responsibilities. If the local ISD does not
follow its agreement, the Department will withhold federal and
state funds. Funding will be continued when the ISD takes
corrective action on the particular item of concern. Attached is
a five-year review of federal funds that the Department has
withheld.
The $1.7 million issue itemized in the attachment regarding
Oakland Schools in 2000 stands out. In this case, we found that
Oakland Schools was not performing appropriate oversight of
special education dollars within a specific school district. The
Department required Oakland Schools to return federal special
education dollars. Oakland Schools complied and funding was
continued.
When data or information is received regarding an intermediate
school district, charter school or a local district and criminal
activity is alleged or suspected, the information is forwarded
to local law enforcement authorities, the State Police and/or
the Attorney General’s office for review. Here is a case in
point regarding Oakland Schools. I received a letter from an
Oakland Schools employee who requested anonymity concerning
misdeeds. The letter was forwarded to the Attorney General’s
Office for review and action.
Accountability comes in other forms as well. For example:
•I choose to sit on the Detroit School Reform Board to be close
to our largest school district. It gives me a monthly
opportunity to see the strengths and the struggles of the
Detroit Public Schools and to discern ways the state can be of
assistance.
•Another example is the “bankruptcy” of Inkster Public Schools.
The school system informed us they were irreparably insolvent.
The Department stepped in using the Financial Distressed City
Act (PA 72) and made this tool work to benefit students. After
listening to the citizens and after due process hearings, an
emergency financial manager was appointed and the local board of
education was neutralized. The once distressed district has
reported a balanced budget and is making slow, but steady
progress in addressing the needs of their students.
Representative Johnson, you also inquired about how we can
create more accountability and what type of legislation might be
needed regarding ISD accountability.
As you have publicly stated, the vast majority of ISDs do an
outstanding job of delivering services and providing necessary
and appropriate assistance to their school districts. In fact,
if ISDs did not exist, I would suggest creating them to assist
in the efficient and effective delivery of services and programs
to our local districts.
As the committee moves forward to address the Oakland Schools
accountability issue, I caution you to use a scalpel and not an
axe to correct the problems. Consider the delicate balance
between appropriate oversight and Michigan’s tradition of local
control. Please be careful in passing an “expectation” law
without providing the appropriations necessary to make the law a
reality. Expecting MDOT to pave all of Michigan’s roads without
providing the resources is setting up false expectations and
contributes toward the public cynicism of government.
It is important for the subcommittee to appreciate that the
Department of Education has been decimated by budget and staff
cuts over the past decade. The Department had a staff of 2000
FTEs in 1990. By 1998, the Department had 443 FTEs. Today we
have approximately 300. Sixty-five people were lost to the 2002
early retirement offer and replacements were allowed on only a
one in five basis.
In 1998, our General Fund appropriation was $24.2 million. Today
our General Fund appropriation is $6.8 million – a 73% cut in
general fund dollars. The Department of Education staff is
second to none in working tirelessly to serve the public. Yet,
realistically we cannot take more responsibility without the
compensatory resources necessary to carry out our jobs.
I believe the first step is to preserve local control. One of
the bills in your package, HB 4338, provides for a recall of ISD
board members by the local school boards. Of all the options, I
like this the best. If an ISD is misappropriating funds or
otherwise demonstrating poor judgment, then let the people who
created the ISD board and who are closest to the issue make the
decision regarding any changes in the board. Obviously, as a
believer in Open Meetings, I have no trouble supporting the Open
Meeting provision of HB 4947.
I am looking forward to reviewing and understanding your
complete package of legislation, especially the substitute bills
that are being worked on. Until that task is completed, I will
not comment on the ideas you may be contemplating.
The Department of Education has two specific recommendations:
The Department would like to augment each of the existing
activities described above. As we have faced budget cuts and
early retirements, each of these programs have been affected. If
the Department received increased General Fund monies, we could
do more.
The Department has many priorities to address including: No
Child Left Behind implementation, responsive and accurate MEAP
testing, providing required assistance to schools that fail to
meet NCLB requirements, assisting with NCLB teacher
certification, teacher professional training and so much more.
Additional resources could be directed after the State’s
structural budget deficit is addressed.
With new funding, the state could develop a program to provide
additional ISD oversight; under this recommendation we would add
two FTE staff to our Audit Office. These staff would review nine
ISDs per year, assuring that all ISDs would be reviewed in a
three-year cycle. This review would include looking at existing
activities and include reviewing the extent to which ISD
programs are serving local schools.
In conclusion, our challenges are great and our resources are
limited. I would prefer to tell you that providing state
oversight by the Department will solve all future ISD issues --
but that would be improbable. Considering that the vast majority
of ISDs do a great job, I strongly encourage you to allow local
officials to make the wisest decisions for their communities.
When additional General Fund dollars become available the
Department of Education will review opportunities to strengthen
oversight and enhance technical assistance and other support to
local districts, charter schools, and to intermediate school
districts.
Rest assured that the State Board of Education, the Governor,
and the Department of Education will work with you to forge
appropriate oversight and accountability. Thank you.
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