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'There's a better way than bankruptcy,' says schools expert

By Jim BencivengaStaff writer of The Christian Science Monitor / August 9, 1983


The San Jose, Calif., school bankruptcy announced in June is not likely to be the first of many, in the view of a national expert on education financing. Joseph M. Cronin, president of the Massachusetts Higher Education Assistance Corporation, puts it this way:

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''When people really understand what it means in terms of a governmental structure serving little children, they realize that it does not serve the state well to have any of the other schools even considering bankruptcy. A function of government is stability.''

Mr. Cronin was formerly Illinois state superintendent of education and Massachusetts secretary of educational affairs.

Cronin says a school district is not like a corporation, which, under free-enterprise economics, ''goes under'' if it is inefficient.

''In a school system,'' he says, ''the urgency is the constant stream of children who present themselves for educational services. There is no option to go out of business.''

As he sees it, there's a better plan already in place in Ohio. In a lengthy interview, he explained it.

Ohio already has in place a state program to help a school district, city or rural, avoid bankruptcy. Why is it different?

It's hard to explain why Ohio came to a better solution. They didn't reach as fast for New York bankers, I suppose.

Ohio already had an excruciatingly tough rule, which is: When you run out of dough, you close school. You don't keep the school. That was an educational embarrassment, because the rule was so tough. It forced them to think about their schools, which is very good. The news would go around the country every year or two that some big system like Co-lumbus or Cleveland or Dayton was closing down 90 days early. Gee, what a terrible state. Isn't that awful for the kids? They're not going to learn. They're going to fall behind, they won't get into college.

So the educators had a little lead time to say, ''Listen, this is very humiliating and embarrassing. It also hurts the kids. Can't we learn from New York and learn from Chicago, that we ought to have a kind of emergency education finance bank?'' So the board of education set one up. They'll advance money to a local school system in serious trouble. But then with it, they set provisions that they will come in and demand a retrenchment program and fiscal responsibility, and that the local school district will pay back the money in 18 , 24 months.

How transferable is the Ohio plan?

I think very. I think other states could do it.

It does not require emergency infusions of private money to rescue a public body. The whole process is more orderly.

It's a request from the school district in financial trouble to the state education department. Then the state deliberates and considers what it must do and sends in its team, looks at the books, works out a loan and a schedule of repayment with the ways to retrench costs. It's better than having bankers do it , since it continues to fix authority in a single city education board, where people really know the schools best, rather than proliferate boards, as was done in Chicago and New York City.

There are a lot of pieces to pick up after a bankruptcy. What are some of them?

The San Jose thing is going to have very disastrous effects. If you're a school vendor - you sell school buses or school supplies - you're going to think twice about entering any contracts with the San Jose school district for the next two or three years. If you're a teacher looking for a job, you're going to be very queasy about it. If you're already a teacher and there's an opportunity to teach elsewhere, you're going to leap at it.