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

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:

''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.

If you're going to sell your house in San Jose to someone who has kids, I think the local housing sales for a year or two are going to take a beating. There are just so many negatives. I'm saying that the school systems of the nation and the states can't afford to have many.

What can a local school system do in such a crisis?

I understand some people have been replaced in San Jose.

There is nothing in any constitution that says that schools are a local responsibility. There's nothing in the US Constitution that says that schools are a federal responsibility. There is in the California state constitution, and in 49 other state constitutions, explicit language saying the state shall provide an education for young children.

There's different language. Sometimes it says a thorough and efficient system of education. Every constitution has its variations on that theme. But the state establishes local school districts and an educational code or a statute book, and provides for the selection or election and appointment of a school board.

This was a bad year to go bankrupt in California. The new governor isn't inclined to do anything for local schools, because he's facing a billion-dollar deficit - a billion sounds very spectacular, but they have something like a $32 billion budget, so it's 3 percent. That puts it in a little perspective. Gee, a billion dollars in Massachusetts - that would be 16 percent.

In some states, I'm thinking of New York, the state superintendent of education has a strong mandate to get involved if necessary.

He really does. In effect, he can send his man in. There are two or three cases when he sent a school business administrator to some of those Long Island communities that were going belly up, and said, ''Straighten it out.'' And the guy reports in a few months and says, ''It'll take two years.'' But it's done. The New York Board of Regents and the New York commissioner of education have quasi-judicial power. It's awesome. The creation of the New York State Board of Regents goes back before the US Constitution.

What are the strengths and weaknesses of such strong state control?

Let's take an international perspective.

Most of the countries of the world have a minister of education who sets the rules, curriculum, format. Frequently they have local advisory committees of some kind. Maybe these committees have a role in adopting policies. Education generally is a national, country-level function. New York State is set up more like a country, and of course it's the size of one - bigger than half the nations in the world - and it's just set up that way. That's the normal way.

What the United States does is abnormal, which is to have states nominally have the responsibility, but then share most of the responsibility for the fund raising down to the local level - keeping it on the local property tax, which means that any three cities are going to have tremendously different tax bases and tax breaks.

Is there a federal role in any of this?

Well, if the federal government wasn't $1 trillion in debt, . . . there might be. There is the potential of using the Federal Financing Bank, which is an offshoot of the US Treasury. . . . But it is probably an inappropriate role for the federal government. If they're going to borrow money to bail out school districts, then why can't states, which have the constitutional responsibility, do it? It is more appropriate, much more appropriate, for California to devise a structure and a set of solutions than it is for the federal government.

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