Mo. Governor Signs ‘Bankruptcy’ Bill To Allow State To Force Consolidations

By Peter West — April 29, 1992 2 min read

The state of Missouri will have the authority to annex “financially stressed’’ school districts to head off bankruptcy and to take steps to transfer students from bankrupt districts into fiscally solvent adjacent ones, under legislation enacted this month.

Under emergency provisions, the measure went into effect immediately upon being signed by Gov. John Ashcroft.

Although the swiftness of the action took some educators by surprise, the measure was seen as a needed response to the increasingly severe fiscal pressures facing many districts in the state.

“This bill was on the fast track,’' said Joel D. Denney, the deputy commissioner of the state Department of Elementary and Secondary Education. “But we were very pleased with the expeditiousness with which the [legislature] dealt with the bill and the quick signing.’'

The measure allows the education department to unilaterally reassign children from insolvent districts or to force consolidation, which previously could be ordered only by local county commissioners.

The old process was harmful to students, Mr. Denney said, because it might take as long as 60 days to make alternative arrangements.

While the bankruptcy measure focuses on remedial and preventive fiscal measures, it also contains an important provision aimed at streamlining policymaking.

The legislation allows all six-member school boards, which constitute the vast majority of the state’s boards, to add a seventh member during elections next spring.

Previous law had provided that a 3-to-3 tie vote be broken by the presiding county commissioner, who may be unfamiliar with education policy.

Districts on the Edge

The bankruptcy bill requires the state department to determine by October of each year which districts are “financially stressed’’ by using a three-part test of fiscal soundness.

The new law also includes a list of nine indicators of financial risk, for example heavy borrowing by a district in anticipation of tax revenues.

The state education department has argued for some time that large numbers of districts are on the verge of financial problems and that many are averting bankruptcy only by dipping illegally into reserve and contingency funds.

That perception is supported by local superintendents and teachers'-union officials, who argue that the only long-term solution to the fiscal crisis will come from reform of the state’s school-finance formula.

“It’s a Band-Aid that we need, but it doesn’t address the underlying cause of the bankruptcy,’' said Bruce Moe, a spokesman for the Missouri State Teachers Association. “We have tried to make it clear [to legislators] that we’d rather that they’d fix the source of the problem.’'

Lawmakers currently are considering a number of bills making changes in the state’s foundation formula.

One, sponsored by Representative Annette N. Morgan, the chairman of the House elementary and secondary education committee, would essentially maintain the existing formula. It would make several small changes aimed at making the formula more equitable, while also establishing a “hold harmless’’ provision to protect districts from year-to-year state-aid cuts.

A similar measure, without the hold-harmless provision, has been introduced by Senator Harold L. Caskey, the chairman of the Senate Education Committee.

But observers said that many lawmakers appear to favor taking no action until school-finance lawsuits pending in the courts are decided.

A version of this article appeared in the April 29, 1992 edition of Education Week as Mo. Governor Signs ‘Bankruptcy’ Bill To Allow State To Force Consolidations