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Developing an Early Warning System for Michigan's Schools

The development of a system that alerts school districts of potential fiscal distress and assists those approaching fiscal distress is essential in the current context in which an increasing number of Michigan schools in this position. On March 11, 2015, State Representatives Earl Poleski, Al Pscholka, Lisa Lyons, Patrick Somerville, and Tim Kelly introduced House Bills 4325, 4326, 4327, 4328, 4329, and 4330, which contribute to the development of an early warning system. After some of the bills were amended on April 23, 2015, the House of Representatives passed this package of bills. The bills now sit in the Michigan Senate awaiting a hearing and potentially a vote. To in fact provide early warning of imminent fiscal distress, an early warning system must incorporate strong predictors of fiscal distress. Unfortunately, the currently proposed system may not. In fact, using three of the quantitative indicators of fiscal distress in the proposed system, less than a third of districts that are in deficit would be identified. Moreover, these indicators of fiscal distress will quite likely inaccurately identify many schools as approaching fiscal distress that will then be subject to additional administrative and oversight requirements.