Many people don’t realize that their property taxes support two school districts — the one that neighborhood kids attend, plus one of 57 Intermediate School Districts (ISDs) in Michigan. As the name suggests, ISDs are an intermediate level of bureaucracy between regular school districts and the state Department of Education.
Neither do most taxpayers realize that Proposal A’s prohibition on new school operating fund millages contains a big loophole: ISDs. Unlike regular school districts, which can only request new millages for buildings and other capital improvement projects, ISDs can go to the voters for more taxes to pay for day-to-day operations — the very practice that led to the taxpayer revolt which brought about Proposal A.
Recently, taxpayers within the Oakland Intermediate School District (OISD) found out why this isn’t a good idea.
On Sept. 25, 2001, they had “approved” special and vocational education millage increases. The Oakland Press later referred to this vote as a “stealth election,” because less than 8 percent of registered voters participated. The cost just to run the special election was approximately $300,000. Had a larger number of Oakland County voters understood that passage of the new millage would mean that the owner of a home worth $150,000 would end up paying an additional $52.44 in new taxes each year, it is doubtful the millage would have passed.
Within weeks of the vote, OISD announced what it would do with much of this money. It would build a new $29 million headquarters to house its nearly 600 administrators. Of the $29 million, $18 million came from the new taxes, which were supposed to pay for special and vocational education.
This abuse of the public trust was partly responsible for the ouster of James Redmond, the OISD superintendent at the time. When he was fired Redmond was collecting $270,000 a year in salary and “stipends.” He was reimbursed for his Social Security taxes and had an unrestricted expense account, on which he racked up $133,588 in 2002 alone.
State Rep. Ruth Johnson, R-Holly, who represents the area covered by the district, chairs a House subcommittee that has discovered more than 20 OISD employees with annual salaries of $100,000 or more. Johnson has uncovered many other abuses, including boatloads of outrageous travel and entertainment expenses paid for by taxpayers. She reports that the district has apparently gone to great lengths to hide evidence of these expenses.
The OISD scandal is only the most egregious example of the lack of accountability that is characteristic of ISDs. No one has dug into the financial records of other ISDs to the degree that Rep. Johnson has in Oakland County, but it would be surprising if OISD turns out to be much different from the rest. The Genesee ISD, for example, is also wrapped up in a financial controversy, this one over some $245,000 in travel expenses.
Because of the potential for abuses, a host of reforms have been introduced in the Michigan Legislature, most by Rep. Johnson. Among the proposed reforms are plans to make direct election of ISD boards mandatory; to consolidate elections so millages can’t be secreted through to passage; and to allow voters to recall ISD board members or set up a “reform board” in cases of malfeasance.
Though well-intentioned, these reforms don’t go far enough. The fact is that ISDs are no longer necessary. They began in the 1950s as part of an effort to reduce the number of Michigan school districts, which then numbered in the thousands. ISDs then became facilitators of state aid to local school districts, a mission that disappeared with the passage of Proposal A in 1994. Since then, ISDs have become bureaucracies in search of a mission — funded to the tune of $878 million per year in property taxes statewide — with abuses such as those at OISD the result.
To the extent that local school districts can realize economies of scale in jointly providing special education, vocational training, or other programs, nothing prevents them from doing so on a case-by-case basis. They could do this and skip the overhead expense imposed by a permanent additional layer of bureaucracy.
Intermediate school districts should be eliminated altogether.
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(Jack McHugh is legislative analyst for the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich., and editor of MichiganVotes.org. Brennan Brown is former director of operations and advancement for the Michigan School Board Leaders Association and holds a Masters of Business Administration degree from Central Michigan University. More information is available at www.mackinac.org. Permission to reprint in whole or in part is hereby granted, provide the authors and their affiliations are cited.)