CHICAGO -- Facing a spike in the number of deficit-ridden school districts, Michigan Gov. Rick Snyder Tuesday signed into law a pair of bills broadening state power over small districts, appointed a review team to investigate the Pontiac School District.

“We must be prepared to act quickly if a district isn’t able to open in the fall or won’t be able to operate for a full school year,” Snyder said in a statement. “The overwhelming majority of Michigan’s school districts are well managed but a handful aren’t.”

Snyder also announced the formation of a new working group to develop an “early warning system” for troubled school districts.

Snyder Wednesday formally appointed the review team to investigate Pontiac’s books, a move that comes after the district defaulted on a May 1 debt service payment. In early June, a preliminary review announced a finding of “probable financial stress” in the district’s finances. The report said the district’s 2012 deficit totaled 52% of its general fund.

The six-member review team includes financial advisor John Axe of Axe and Ecklund PC; treasury official John Barton; budget official Doug Ringler; deputy state superintendent Carol Wolenberg; former business consultant Max Chiddister; and Frederick Headen, a legal advisor to the treasury department.

The appointment of a review team is a step toward declaration of financial emergency and a possible state takeover.

Pontiac was one of two districts in May to default on a debt payment.

The other district, Buena Vista, is a small district that saw a dramatic closure in May after running out of cash entirely. The district had to close for two weeks because it was unable to pay its teachers until the state released previously withheld aid.

The Buena Vista incident sparked the new legislation that Snyder signed into law Tuesday. Top education officials told state lawmakers that the problems plaguing local districts are at a near-record high, and that the state needs more tools to handle the problem.

The measures, House Bills 4813 and 4815, will allow the state to dissolve small school districts that are close to running out of cash and force a merger with a nearby district.

The state could dissolve districts that have no deficit elimination plan, lack the money to operate for a full year, and lost 10% of enrollment within the preceding two years. The debt issued for a dissolved school district would remain with the original municipality until it’s paid off.

Another bill provides for transition funding for students heading to new districts.

The law applies only to districts with 2,400 students or less, which include Buena Vista and the Inkster School District, which also faces a large deficit. The law does not however, apply to Pontiac, which has 5,000 students.

The new 20-member working group will be headed by Craig Ruff, the governor’s special advisor for education, Snyder said at the press conference where he signed the bills. It will start meeting in mid-July and make recommendations by Sept. 3. Other members of school groups and educational organizations will make up the Advisory Work Group on Financial Accountability for Schools.

Detroit Public Schools, Highland Park school district, and Muskegon Heights are the three school districts currently under state control.

Michigan had 49 school districts with general fund deficits at the end of June 2012. The state has 549 regular school districts, another 260 charter districts, and 56 county-based districts.

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