Manufactured Crisis

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“What we have here is a failure to communicate”, as the line goes from the movie Cool Hand Luke. But what Memphis has seen since Monday is not a failure of communication, but an unwillingness to communicate in any venue other than in front of the cameras.

What started on Monday as a demand for $9m or else, ballooned into $55m “100 yard pass”, as characterized by Board member Kenneth Whalum.

Whalum suggested “we throw a 100-yard pass and force them to catch it. I suggest we not open school until we get everything we need, every duck lined up in a row. … Every day these children are at home with their parents” will put pressure on the City Council.(Source)

And that, ladies and gentlemen, pretty well sums up the strategy for this whole “crisis”, put pressure on the City government, at the beginning of the campaign season, and whip up the emotions of the people in order to pressure the City into giving what they haven’t got.

By the time it all came down, the city government was befuddled. In Executive Session on Tuesday, the Mayor and several Council members expressed shock and dismay at what was being put before them…that they pay the majority of their annual contribution to the schools up front.

Parents came down to the Council angry. Teachers, who saw many of their colleagues let go just a week before, began to fear for their livelihood, and parents, most of whom are regular working folks, were left wondering what they would do to arrange childcare for their children. In short, emotions were stirred, and people got scared, and that was by design.

By Wednesday morning, members of the School Board had taken to the national airwaves to try their case before the court of public opinion. Language ranging from mild to down right incendiary was used to make their case. “Deadbeat Dads”, an oft-used phrase of Board member Kenneth Whalum, was the quote of the day. But in reality, something very different was going on here. This was a hostage negotiation, and the kids, and employees of Memphis City Schools were, no doubt, the hostages, but it was the Administration of the School system, and the School Board itself that was holding them hostage, not the City administration or the City Council. Despite this, a whole host of people got collective Stockholm Syndrome and turned against the City government for withholding funds.

Never before has the City fronted the school board money, yet now, in the midst of two court cases, one in State and one in Federal, the City Schools wants their money up front. Even though, for the past two years, in the midst of one of the worse financial crisis’ this nation has faced since the Great Depression, the city has appropriated and disbursed the majority of the City Schools’ money (minus collections that are in arrears), the City Schools wants it all now.

On Tuesday, I got my City property tax bill. It’s not due until August 31st, which means that at best, the city will have collected the largest chunk of its revenue for the year by then. Property taxes make up over 40% of annual revenue. As that money comes in, it will be sent to the appropriate places, including the schools. But the City School Board, knowing full well that the city, who just went through a contentious budget year that saw cuts to services and employee pay, will not see the bulk of their funding for the year until August 31, demands 10% of the annual budget for that city before August 8th? That’s not good faith, that’s a power play.

Does the City owe some $13m from FY 2009 and 2010? Yes, but that’s due to delinquent property tax collections, not some kind of willful withholding of funds. Yesterday, the City released $3m to the City Schools, ahead of schedule, that had been collected from delinquent property taxes. As I sat at the Election Commission earlier this afternoon with several potential candidates waiting for the filing deadline, a deal came across that would give the City Schools an additional $10m from the City’s reserves, in hopes of satisfying the School Board and putting the start date of the schools back on track.

Will it work? Who knows? But it sets a dangerous precedent for two entities whose relations have been strained since the 2008 vote to defund the city’s maintenance of effort funds to the school system.

Let me be perfectly clear. I want the schools to be fully funded so the students and the teachers can start their work on time. I want the City to pay what it appropriates to the schools in a timely fashion. But more than that, I want both entities to deal with each other in a fair, and above board manner, and the way the School Board has acted in the past week is neither fair nor above board. They saw the political lay of the land, and took advantage of it in a brazen and cynical attempt at manipulating parents, teachers, and the public at large to put pressure on the City to do something they’ve already said they’re going to do.

Will the School District accept this offer? Who knows, but the events of the past several days leave a lot of questions on the table that need to be answered. Here are a few:

1. How can the City Schools claim to be owed $151m when $57.5m of that is in litigation, and has been ordered off the table until said litigation, that the City Schools has had no interest in expediting, is ruled upon?

2. In what scenario does any entity give another funds that it hasn’t collected yet? This is not Cash America y’all.

3. What dangers, if any, are exposed by making this deal, and what is this money for? Does it cover the back taxes, is it for FY 2012? I’m pretty sure these details will come out in the coming hours.

In the end, the people who lose are all of us, not the School Board or anyone else. We’ve lost faith, which is something that was in short supply to begin with here in Memphis. The school board chose to put that faith on the line rather than picking up the phone, to use as a political chit, and they should be called to account for that action.

No one may want to acknowledge it, but this crisis was manufactured on Avery, not Main St. The folks that started it should be called to account for their actions.

9 thoughts

  1. Actually, the MCC created this crisis in 2008, when they voted to withold $57 million from MCS. They did this in spite of protests from many MCS parents (I was one of them) and educators. They did not set the $57 million aside in case the courts ruled against them, as they ultimately did. Rather, they gave a citywide pay raise of almost 5%, handed out an 18 cent tax cut, and authorized Herenton to make a bunch of hires. In other words, the MCC imposed a $40 million-plus tax hike on the taxpayers of Memphis and disguised it as a tax cut with some accounting slight-of-hand.

    Though it has been many months since the courts ruled that the MCC has to pay MCS, MCC has been dragging its feet. This creates chaos for MCS and its employees and students. I don’t blame the MCS board for saying enough is enough. In fact, I think it was the right thing to do.

    The council needs to pay what it owes and put this behind us. Every day this is in the paper is a bad day for Memphis.

    1. Eric,

      Thanks for the comment.

      I understand your perspective and agree with much of what you say, especially in the first paragraph. However, I would take exception to some things.

      1. What happened today was not directly about the $57.5m. Today was a demand for $55m to be paid immediately or else the schools don’t open. While this demand may be related, you’ll notice, they didn’t actually ask for the $57.5m from years ago, something I’ll get into in more detail later. What’s curious about this demand for $55m is that has only recently been set aside for schools in the city budget process. MCS, knowing that their budget hasn’t been heard by the City Council, is suddenly willing to settle for $15m up front and monthly payments having won the media war, and gained some time in the national spotlight. Clearly they were more committed to making a splash in the media than collecting the $55m that was supposedly the only way the schools could open.

      2. Yes, the MCC did vote to challenge the Maintenance of Effort to try and end the double taxation of City residents who pay the same tax rates for schools in County taxes as County residents. This was an effort to start single source funding and distribute the burden across the entire county, which is not uncommon in the other 94 counties in Tennessee. Had this effort been successful, tax rates for Memphians, who have also subsidized county sprawl and a host of other things that are destructive to our city, would have gone down.

      3. You’re right, the City lost its case on the $57.5m. However, MCS abandoned its claim to garnish the accounts of the City of Memphis, and hold the City in contempt (originally filed on March 10, 2011 (link). Further, the City has a counter-claim for $160m against MCS regarding bond monies that have been on the City’s books, and, are as such, a liability to the city. Both sides agreed to negotiate in good faith on the $57.5m until the counter-claim is heard. In fact, when I google searched “Wharton Negotiates MCS” if got this which details the agreement to cool off and begin the negotiation period.

      4. However, since that agreement, there have been several proposals put forward. Many of these have been reported in the media. In fact, so many that I won’t even try to link to all of them. Each one has been batted down by various means in an act of bad faith. If you need more proof of this, I suggest you read this series of letters – here. While those letters are from the same time period as the Wharton link before it, they illustrate both that this has been going on for some time, and that MCS has acted in bad faith despite these negotiations.

      5. MCS has consistently aired its complaints or counter-demands in the media (ala, this week), despite agreeing that any monies to be recovered as the result of the judgement against the city be held, or negotiated until the city’s counter-claim be heard. This again is an act of bad faith, and something that poisons the environment for an equitable resolution to the problem, which is the thrust of this post. By choosing to try this in the court of public opinion, rather than negotiating and potentially settling both the money their owed, and potentially, the City’s counter-claim, MCS has demonstrated that they have little real interest in resolving the issue.

      Which brings us back to today, another “agreement” in principle, that will have to be voted on by both bodies, and executed. While both parties are to be commended for coming to some kind of resolution, there is some question as to whether MCS will choose to continue the more substantive negotiations on the larger judgement for $57.5m and the $160m counter-claim. MCS has the power to expedite a hearing on this counter-claim, and potentially win. it has not chosen to do this which leads one to believe that the City has a good case. If MCS were to lose this claim, the City Council will have been vindicated, and it will be MCS that owes the City money. This will, no doubt, be devastating for the district in both the short and long term.

      In today’s meeting, MCS Board President Martavius Jones noted that MCS has spent some $90m of its reserves in the past 3 FY. Yet the City only owes, by MCS’s accounting, about $73m. This indicates that regardless of the situation, MCS is operating at a loss. Everyone should ask where this additional $20m dollars was spent. Further, MCS has been consistently reluctant to open its books and detail much of its actual expenditures. While they are required by law to present a budget detailing appropriations to their funding sources, the actual expenditures, and the detail on those expenditures are the real question in my mind.

      Finally, as the child of two retired public school teachers I can say that this is something I am very passionate about. In fact, nearly all of my aunts and uncles are or were involved in public education. I graduated from public schools in 1990. I believe in public schools. My child will attend MCS, or whatever becomes of MCS after Judge Mays rules on the consolidation issue. I am invested in this issue. I am also invested in ensuring that there be equity in our county which has continually sought to maintain a haves and haves not division between the county and the City. This inequity is a large part of the problem in our county, and something that we all must participate in stopping to help all the children of our community, 25% of whom grow up in abject poverty. If we do not work to address this inequity, we will continue the downward spiral that has been going on here in Memphis for over 30 years. Sure, I’ve only lived here for 7, but I’ve lived in the area for the majority of my life, and as the child of educators, have watched all of it with keen interest.

      My point is this is not as simple as you characterize it, and the players are not playing on the same field. Until they do, and both find the value of coming to a resolution, this problem will persist. Based on the actions of MCS, it seems to me that they are the ones stalling this, which is also why I wrote what I wrote today.

      I apologize for the long comment, but I hope it has been helpful. Thanks again for reading.

  2. Steve,

    I don’t understand your response in (1). How are you saying that the $55M was only recently set aside for the schools in the budget process? The Council heard the first round of MCS budget today…it seems that settling for the $15M (if they do) is actually more good faith than just wanting to win the media war or even less likely get national media attention.

    In (4) you say that each proposal has been batted down in bad faith…you don’t say MCS was the one acting in bad faith, but it’s implied. Part of the challenge in your interpretation here is that there are several parties involved that you don’t detail. You just talk about Wharton and link to letters between MCS and Morris (city attorney). There also have been proposals and challenges put forth from various City Council members in addition to the Council attorney’s actions that are independent of the city attorney. Some of the proposals haven’t even started from a good faith intent, so to just place blame on MCS is not fair.

    1. Cardell,

      MCS said they wanted $55m from this years appropriations. Settling for $15m is the closest thing to good faith they’ve showed all week, and an indication of just how serious their demand for $55m was. In the process they scared the hell out of thousands of people, using them as pawns in a negotiation.

      As to part 2, you’re right, there have been all kinds of proposals from all kinds of people. Most involving the Council never make it past the, “I have an idea” stage. I’m talking more specifically about the negotiations between the City administration and the schools. No one has been above board all the time, but this post is about this particular tactic at this time, not the entirety of everything. We’re getting to that in the comments, and somewhat in the post because people should understand it’s not as simple as it’s portrayed in the media.

      I was no fan of the 2008 action that started the whole MOE action. In fact, as a general statement I’ve been more supportive of the District on this thing. The case was rejected by the SCOTN in 8/10 and this administration, now in their second year, has been trying to work with the district, all while the district has been filing this and that on the 57.5 but nothing on the counterclaim. However the on again off again negotiations, the threats, and all of this, including some of the implicit threats from members of the City Council poison the environment. MCS has also been actively engaged in this, knowing that Wharton pledged to try and end the standoff when he came into office.

      Sure, there’s plenty of bad faith to go around, but the City administration in particular, has chosen not to air their grievances in public, except in response to demands from the district made in public. If all involved are truly serious about resolving this issue, they will take this off the front page and to the negotiating table. In fact, I believe Strickland passed a resolution calling for an independent mediator to help in the negotiations. This would be a good first step in rebuilding good faith, and resolving the issue in a manner that will ultimately benefit the children of this city, who are way more important than the political outcomes of anyone.

  3. Hi Steve,

    Thanks for your reply. It’s clear you’ve given this matter a lot of thought and attention. That’s a good thing; we need more people to do the same.

    I’ll reply to your points as best I can.

    1. The main issue here is that in 2008, the city decided to play hardball with MCS, and have been doing so ever since. The situation has become quite complicated, with the pending merger and lawsuits. It’s like a big tangle of string. You can’t pull at one without pulling the others. So, whether it’s about the original money or not is beside the point, IMO. It’s about the city’s reticence to make good on its obligations, which is shameful, again IMO.

    2. I favor tax equity, but the way the MCC went about it was reckless and irresponsible. The MCC is responsible for the difficult predicament they are in, not MCS.

    3. Your first link appears not to work. I was not aware that MCS had abandoned the effort to garnish the accounts. It sounds like this was part of the cooling-off period mentioned in your second link. The bond-related counter-claim really sticks in my craw. As I stated earlier, it was a non-issue until the MCC lost, then all of a sudden it gets brought up out of the blue, even though the money was given way back in the ’80’s. It seems a disingenuous effort to delay and complicate the matter in the hopes of postponing payment or negotiating a smaller one. Alan Wade, who gets paid by the hour, has a personal incentive to drag this out as long as possible.

    4. and 5. You seem to suggest that MCS has acted in bad faith, in part by playing this out in the media. I see it a little differently. The city is the one that has the power to pay what is owed. MCS has no authority to make them do so, except to litigate and to take the battle to the public. They are doing both, and I applaud them for doing so, especially since they have been successful on both fronts. The city’s repeated failure to pay what is owed is, to me, an act of bad faith on their part.

    Regarding your subsequent comments, I’m not a lawer, so I don’t know why MCS would not expedite the counter-suit. Perhaps they feel that it would weaken their case, and out of an abundance of caution, they want to make sure they get full consideration. I don’t think it necessarily means that the city’s case is strong.

    I agree that MCS has a bad record when it comes to spending. It needs to close underenrolled schools and control waste. It must be more transparent. MCS can and must do better. That’s a separate issue from this one, however.

    I agree with you that the city/county separation is harmful for our community and must be addressed. I’ll add that we need to be careful about how we do it. Recall that we arrived at the present separated situation in part due to busing, a well-intentioned effort to resolve similar divisions.

    Best,

    Eric

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