School districts across the land are contending with rising education costs and constrained revenues. Yet state policies for assisting school districts in financial trouble are uneven and complex. Interventions are often haphazard, occur arbitrarily, and routinely place politics over sound economics.
This brief presents a menu of sensible state responses when districts are insolvent or nearly so, arranged into a tiered sequence of interventions.
1. Collaborative Supports
District leaders receive low-impact assistance in managing their finances. Supports might include convening a budget review committee to identify unnecessary expenditures or assisting district finance officers to develop more accurate projections of future revenue. The goal is to work with leaders to recognize and rectify the causes of distress.
2. Financial Management
At this stage, experts are no longer advisory; they now oversee and manage a district’s financial matters. The goal is immediately to improve district finances so as to avert costly bailouts down the line, while building the capacity of district leaders to manage once the experts leave.
3. Administrative Control
Otherwise known as a “state takeover.” Outside experts manage the entire...