School Merger: Pros, Cons, & The Legal Background

Steve MulroyShelby County Commission

University of Memphis School of Law

Funding SourcesFunding Sources

Source(103,593 students) (47,342 students)

State of Tennessee $428M (49.5%)

$174M (50.7%)

Shelby County Property Taxes(paid by all county residents – Memphian and non-Memphian)

$255M (29.5%)

$115M (33.5%)

Shelby County Sales Taxes $89M (10.3%)

$43M (12.6%)

City of Memphis Property Taxes (paid only by Memphians)

$84M (9.8%)

N/A

Other $8M (1.0%)

$10M (3.0%)

County School District County School District v.v.

Special School District Special School District • State law: COUNTY is the default funder of public

education for all children in county TCA 49-2-101

• In the 1800s, Memphis voluntarily decided to create its own school district with permission of state legislature. This created Memphis City Schools (MCS) as a “special school district” (SSD).

• This left non-Memphis left as the default Shelby County Schools (SCS)

• There are 14 SSDs in TN. All but Memphis has taxing authority (i.e., it sets a property tax rate which is then approved by the state legislature)

SCS Conversion to SCS Conversion to Special School DistrictSpecial School District

• Changes if SCS Converted to Special School District• Frozen Boundaries• Veto Power Over Merger with Other School Systems• Independent Taxing Authority (via state legislature)• {SCS had sought taxing authority annually for

many years; in face of charter surrender, has now disclaimed interest in it (at least for now)}

• To Create a Special School District:• Lift Statewide Ban [TCA 49-2-501(a)(1), (b)(3)]• State Legislative Creation of New Special School

District

Effect Of Shelby County Schools Effect Of Shelby County Schools Converting To SSD StatusConverting To SSD Status

If SSD had taxing authority, might lead to SCS taxing If SSD had taxing authority, might lead to SCS taxing {non-Memphis only} for SCS funds, and City taxing {non-Memphis only} for SCS funds, and City taxing {Memphis only} for MCS funds.{Memphis only} for MCS funds. County Atty Opinion says this likely wouldn’t happen, County Atty Opinion says this likely wouldn’t happen,

but concedes uncertain.but concedes uncertain. Moreover, TCA 49-2-501(b)(2)(C) says if Moreover, TCA 49-2-501(b)(2)(C) says if all K-12 all K-12

students covered by city and special school systemsstudents covered by city and special school systems, , county no longer req’d to fund a county school system.county no longer req’d to fund a county school system.

This statute upheld and applied in This statute upheld and applied in City of Humboldt v. City of Humboldt v. McKnightMcKnight (Tenn. Ct. App. 2006) (Tenn. Ct. App. 2006)

As a result, in Gibson County, there are 5 municipal or As a result, in Gibson County, there are 5 municipal or special school districts, each funding itself from taxes special school districts, each funding itself from taxes levied only within each’s borders. levied only within each’s borders.

Indeed, everywhere else in TN, SSDs fund Indeed, everywhere else in TN, SSDs fund themselves.themselves.

If that happened here, Memphis would have to pay If that happened here, Memphis would have to pay all MCS costs, funding 70% of county students with all MCS costs, funding 70% of county students with 60% of county property value. (Source: 2008 U of M 60% of county property value. (Source: 2008 U of M Study)Study)

Quantifying The EffectQuantifying The Effect

Memphis taxes would have to rise Memphis taxes would have to rise significantly to make up the lost revenue significantly to make up the lost revenue (2008 U of M Study)(2008 U of M Study)

It would result in a net increase of 30 cents It would result in a net increase of 30 cents on the property tax rate Memphians pay on the property tax rate Memphians pay toward schools, about a 15% increase. (toward schools, about a 15% increase. (IdId.) .)

(Using more recent funding figures, MCS (Using more recent funding figures, MCS School Board member has calculated a net School Board member has calculated a net Memphis property tax rate rise of approx. Memphis property tax rate rise of approx. 46 cents, about a 25% rise.) 46 cents, about a 25% rise.)

MCS Response: Surrender MCS Response: Surrender CharterCharter

Next Step: Citywide Referendum (Mar. 8, 2011)

First Step: MCS Board Votes to Surrender Charter (Dec. 20, 2010)

Who Votes, and When? Who Votes, and When?

Only Memphis voters get to vote. Op. Atty. Only Memphis voters get to vote. Op. Atty. Gen. Tenn. No. 11-5 (1/10/11), construing Gen. Tenn. No. 11-5 (1/10/11), construing TCA 49-2-502. TCA 49-2-502.

Vote will take place on Tuesday March 8.Vote will take place on Tuesday March 8. Early voting will begin Feb. 16. Early voting will begin Feb. 16.

If the Referendum If the Referendum Succeeds…Succeeds…

• Shelby County Schools responsible for education of ALL students in the county (Memphian and non-Memphian)

• Single-Source Local Funding – Shelby County Government will fund system with county property taxes

• Transition Period to Hammer Out Details (for example, uniforms, staffing, textbooks, structure, etc.)

• Reconstituted Shelby County School Board representing all of Shelby County

If Referendum Succeeds If Referendum Succeeds (Cont’d)(Cont’d)

ADA “3 to 1” funding requirement goes away. ADA “3 to 1” funding requirement goes away. Op. Tenn. Atty. Gen. No. 10-58 (4/28/10)Op. Tenn. Atty. Gen. No. 10-58 (4/28/10)

County school system can contract with private County school system can contract with private schools or other school districts to run schools schools or other school districts to run schools during interim transition period. TCA 49-2-109. during interim transition period. TCA 49-2-109.

Gates Foundation money will NOT be affected. Gates Foundation money will NOT be affected. (12/21 Letter From Chris Williams of Gates (12/21 Letter From Chris Williams of Gates Foundation)Foundation)

Federal “Race To The Top” money will NOT be Federal “Race To The Top” money will NOT be affected; it is based on stats of indiv students at affected; it is based on stats of indiv students at indiv schools, not based on school systems. indiv schools, not based on school systems.

Teacher salaries, pensions, other benefits, etc. Teacher salaries, pensions, other benefits, etc. are protected by state law. TCA 49-5-203. are protected by state law. TCA 49-5-203.

If Referendum Succeeds If Referendum Succeeds (Cont’d)(Cont’d)

SCS plans to continue MCS status quo at least SCS plans to continue MCS status quo at least through end of this academic year (public through end of this academic year (public statements of SCS Pres David Pickler), so no statements of SCS Pres David Pickler), so no major changes till September 2011.major changes till September 2011.

By September 2011, it is likely that Memphis By September 2011, it is likely that Memphis will have representation on a Unified School will have representation on a Unified School Board. See 1/9/11 County Atty Opinion, 1/7/11 Board. See 1/9/11 County Atty Opinion, 1/7/11 Letter From Baker Donelson Law Firm Letter From Baker Donelson Law Firm County Comm’n will draw district lines for County Comm’n will draw district lines for

countywide Unified School Board. TCA 5-1-111.countywide Unified School Board. TCA 5-1-111. Such redistricting will create a “vacancy” in a Such redistricting will create a “vacancy” in a

county office, which could be filled by county office, which could be filled by appointment. appointment. Marion County v. Elec Comm’nMarion County v. Elec Comm’n (Tenn. Sup. Ct. 1980) (Tenn. Sup. Ct. 1980)

County Comm’n would appoint interim members to County Comm’n would appoint interim members to fill any vacancy. Tenn. Const. Art. VII, Sec 2; TCA fill any vacancy. Tenn. Const. Art. VII, Sec 2; TCA 49-2-20149-2-201

If the Referendum Fails…If the Referendum Fails…

• Maintenance of Status Quo in funding and governance

• Shelby County Schools free to continue pursuit of Special School District status in state legislature

• Memphis City Schools free to consider other agreements to ensure sustainable funding

Pros & Cons: A Pros & Cons: A DialogueDialoguePROPONENTS SAY… OPPONENTS SAY…

Educational opportunity equal for City v. County

SCS gets As now; don’t ruin a good thing…

…SCS gets 55/100 (an “A” on state report card) compared to MCS 45/100 (an “F”), & only b/c of better SES demography

SCS has better strategies

…then why not share those strategies w/ Memphis?

End double taxation for Memphians

Risk losing $78 mill in educ funding

…$78 million only about 7% of total MCS budget

End rigid ADA “3 to 1 split” funding requirement

3-1 split protected Memphis; helped with alleged $500 million in deferred MCS maintenance

…Unified School Board w/ Memphis representation will protect Memphis

Pros & Cons: A Dialogue Pros & Cons: A Dialogue (Cont’d) (Cont’d) Proponents Say…. Opponents Say…

More efficient spending, end duplication

Studies have shown no savings, costs go up

…2001 Pohlman Study, 2005 TACIR Study: Some savings in administration, but higher spending on teachers. (But isn’t a transfer of $ from administration to teachers a good thing?) There are examples of successes & failures.

Gets away from “us versus them” mentality

Triggers suburban white flight to private schools or other counties

…Private schools are expensive, and neighboring counties are not better than SCS; this is NOT like 1970s---no one will be bused

Cons & Pros: A Dialogue Cons & Pros: A Dialogue Opponents Say…. Proponents Say….

There is no transition plan: chaos!

County can maintain status quo in Memphis schools for the 12-18 months opponents say it takes to effect transition. In the meantime, transition planning can take place.

Too many uncertainties re: curricula, transportation, differences in school policies, etc.

Knoxville surrendered its charter in a similar way, and these issues were worked out

During transition, SCS can harm MCS by abolishing optional schools, charter schools, etc.

Memphis representation on a Unified School Board will protect programs popular among Memphians

During transition, SCS can harm non-teacher employees by firing them, cutting salaries, etc.

Memphis representation on a Unified School Board will prevent rash actions opposed by Memphians

The decision is rushed and premature; best to wait 1-3 years for a comprehensive plan

Waiting will allow state legislature to impose SSD status on SCS by fiat, and/or make it difficult or impossible for MCS to decide to surrender its charter

Cons & Pros: A Dialogue Cons & Pros: A Dialogue (Cont’d) (Cont’d) OPPONENTS SAY… PROPONENTS SAY…

Merger will threaten hundreds of millions of dollars in state and federal funding, which is based on school system-wide percentages of poverty

Federal funding is based on student poverty and will not go away; at most, it will be shifted from less needy areas in the county to needier areas in the inner city

Since SCS spends about $8000 per student and MCS $10,000 per student, merging the two will lower the rate to SCS level, reducing overall education spending by hundreds of millions of dollars

Again, spending levels vary because of poverty levels of student population. Most of the $2000/student difference is federal funding, which will not change. The rest ($750/student) is based on the City’s contribution, much of which will be made up by the County Comm’n spread out over a wider, fairer tax base.

Unified school system will be too big (150,000 students)

“Chancellor” model used in NYC can break system up into 4-5 subdists., ea. run by a superintend. & local advisory bd. w/ relative academic autonomy, all overseen re: non-academics by a Unified Bd. & Chancellor

Legal IssuesLegal Issues Q: Can Nashville take away the vote?Q: Can Nashville take away the vote? A: Likely not. Pursuant to a 1961 Private Act applying to MCS A: Likely not. Pursuant to a 1961 Private Act applying to MCS

only, the charter can be surrendered WITHOUT a referendum if only, the charter can be surrendered WITHOUT a referendum if the City Council approves MCS’s surrender. The Council has the City Council approves MCS’s surrender. The Council has passed a resolution approving the surrender effective Mar. 21, if passed a resolution approving the surrender effective Mar. 21, if no referendum is passed by that time.no referendum is passed by that time.

Q: Can Nashville challenge the City Council resolution?Q: Can Nashville challenge the City Council resolution? A: They can try to have the Private Act invalidated as imporper A: They can try to have the Private Act invalidated as imporper

“special legilation” without a “rational basis” under the TN “special legilation” without a “rational basis” under the TN Const. Const.

Q: If they succeed, is there any other way to protect Memphians’ Q: If they succeed, is there any other way to protect Memphians’ right to vote? right to vote?

A: Yes. Legislation targeting Memphis would likely be similarly A: Yes. Legislation targeting Memphis would likely be similarly challengeable as invalid “special legislation” under TN Const. challengeable as invalid “special legislation” under TN Const. And general legis purporting to change or cancel the ongoing And general legis purporting to change or cancel the ongoing election process would likely be invalid under TN Const as election process would likely be invalid under TN Const as “retroactive” legislation.“retroactive” legislation.

Q: Can Nashville give county voters a say? Q: Can Nashville give county voters a say? A: Likely not. In addition to the problems above, this would A: Likely not. In addition to the problems above, this would

raise serious issues under “one person one vote” as well as raise serious issues under “one person one vote” as well as minority vote dilution under the Voting Rights Act. See minority vote dilution under the Voting Rights Act. See Shelby Shelby County v. BursonCounty v. Burson (6 (6thth Cir. 1997) Cir. 1997)

More InformationMore Information Www.VoteForUnity.com http://memphisschoolreferendum.blogspot.c

om/p/future-of-education-in-shelby-county.html

Steve Mulroy Steve Mulroy smulroy@memphis.edu; ; mulroys@gmail.com ; 678-4494 ; 678-4494

www.stevemulroy.com