Benton Harbor schools in danger of not making payroll, state reopens financial review | Michigan Radio

Benton Harbor schools in danger of not making payroll, state reopens financial review

Apr 23, 2014

Benton Harbor High School (file photo)
Credit Lindsey Smith / Michigan Radio

Benton Harbor Area Schools has been running a deficit since 2007. A review in 2011 found financial stress, but the district was in the middle of making changes to save money. No emergency manager was appointed under a previous version of the law.

But State Superintendent Mike Flanagan says BHAS isn’t making enough progress on the deficit.

The deficit is $14.7 million. For perspective, its revenues this year were $31.8 million.

This week Flangan turned over a report to a division of the Michigan Treasury Department. It’s a step in the process of the state’s emergency manager law. A special board will hold a hearing to determine if it should recommend the governor appoint a financial review team to determine if the district is in financial stress. That hearing hasn’t been scheduled yet.

“It is clear that financial stress is evident,” Benton Harbor Area Schools Superintendent Leonard Seawood wrote in a letter to Flanagan. 

Seawood says cash-flow problems will impact the district’s “ability to stay current with payroll and vendors.” Seawood goes on to say the issue “will need immediate attention before the final review process is complete.”

Seawood did not respond to requests for comment.

“I’m not so sure that (the immediate cash flow problems) are going to expedite the process, but it is a serious issue,” Michigan Department of Education spokesman Bill DiSessa said.  

The state already gave Benton Harbor schools a total of $4 million in emergency loans in the last two years.

“Flanagan wants those teachers paid, but doesn’t want to continue to use these loans – advances just to make payroll,” DiSessa said.

Flanagan wrote in his report:

“Based on discussions with the District, the shortfall will be addressed by managing accounts payable to get through the year. This will result in significant vendor payment issues which could affect services provided to the District and its students.”

The district has already made big changes to cuts costs. Since 2010, Seawood says it has closed and sold buildings, cut benefits and pay, laid off staff, and privatized all non-instruction services. Still, he says it’ll take another 14 years to resolve the deficit.

Student enrollment has fallen from nearly 4,000 in the 2006-07 school year to 2,668 this school year.