ANN ARBOR, Mich. – Ann Arbor businessman Ted Annis believes his local public school district is teetering on disaster, and he’s intent on doing something about it.

Annis, a self-made technology entrepreneur, sent a letter last month to Michigan State Treasurer R. Kevin Clinton and Gov. Rick Snyder to request an emergency financial manager to take over Ann Arbor Public Schools (AAPS), citing the school board’s inability to control runaway spending.

Clinton replied that any request for an emergency financial manager – which have powers under Michigan law to void union contracts and make other unilateral changes without union bargaining – must come from the school board itself.

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Annis probably knew that much, but he was trying to make a point.

Days later, Annis received an email from a “reliable, involved” individual who serves on an advisory committee in the Ann Arbor district:

“My understanding of the strategy of the AAPS Board of Trustees, based on discussion with current and past BOE trustees, is that they are purposefully provoking a financial crisis and cutting high profile hot button programs to rile the parents up, so that they can get the taxpayers to approve additional millage funding …”

That information made the businessman’s blood boil even more.

In 2009, Annis rallied a broad coalition of parents and concerned taxpayers to defeat a county-wide millage that would have provided extra funding for local schools. The focus of Citizens for Responsible School Spending, the anti-millage group, was to force district officials to address chronic budget problems, including unnecessary labor spending, that have plagued AAPS for years.

They correctly reasoned that more revenue would not help the school board until it learned to budget properly.

Five years later, Ann Arbor schools remain in a state of perpetual financial crisis brought on by a lethal combination of escalating labor costs and fiscal irresponsibility, a reality that’s likely compounding a persistent achievement gap between white and minority students.

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Annis and other like-minded citizens are sounding the alarm, in the hope that other reasonable taxpayers will wake up and demand change after a decade or more of dysfunction. If that doesn’t occur, money will continue to be wasted and students will continue to fail to reach their potential.

“I call it a game of brinksmanship,” Annis said.

“I have some people on the inside who send me information from time to time,” he said, adding that AAPS finances are approaching “a zero or negative fund balance.”

“The treasurer and chairman of the board evidently have stated … what they want to do is ‘crash’ the finances to wake up the voters and vote in more money,” Annis said. “My thought was to ask for the emergency financial manager before … this brinksmanship disaster the chairman and treasurer are trying to bring about (actually occurs).”

AAPS’ house of cards

Declining student enrollment has left many of the Ann Arbor district’s schools well below their intended capacity, and expenses tied to the district’s contract with the Ann Arbor Education Association (the teachers union) – such as health care and retirement costs, as well as special employment perks –  continue to escalate each year. Yet the district’s pro-union board has largely ignored those systemic budget problems.

“In last year’s budget cycle, AAPS officials failed to make major decisions to solve the under-enrolled building issue in the district – which meant staff and program cuts were in a piecemeal fashion,” Mlive.com reports. “Thrust into budget deliberations while searching for a new superintendent, the district delayed solving its bigger problems and instead issued 233 layoff notices for teachers.”

Instead of facing reality and making the necessary budget adjustments, AAPS officials are hoping to generate revenue by recruiting students from other schools, along with their per-pupil state funding.

With that goal in mind, AAPS plans to spend $51,546.44 on an ambitious advertising campaign based on billboards, print, the Internet and radio, in hopes of filling 750 available student transfer spots for 2014-15. District officials told Mlive.com they think the plan will bring in $5.6 million.

“We need to spend money to attract students,” district spokeswoman Liz Margolis told the news site.

One very involved AAPS parent and a member of Annis’ group said the district’s current course of action worsens or perpetuates several of the district’s biggest problems.

“Instead of trying to have a reasonable budget, and possibly consolidate some schools, they are on this big plan to bring in school of choice students,” said the parent, who requested anonymity. “I don’t think they’re being realistic and are just delaying the inevitable.

“In real broad terms, they haven’t (addressed) the structural issues (with the school budget) and they continue to spend down the fund equity to the tune of about $5 million per year.”

The runaway spending is tied directly to the district’s contract with the Ann Arbor Education Association, which helped to elect many of the current school board members.

Annis’ group believes it’s the union’s collective bargaining agreement, and the AAEA’s influence on board members and district operations, that is poisoning Ann Arbor schools.

“I feel like the district is basically operated by the teachers union,” the parent said. “They do what’s in the union’s best interests, not necessarily what’s best for students.”

‘There’s no management of resources’

In June 2010, AAPS board members entered into an agreement with the teachers union that extended the 2009-11 collective bargaining agreement and most of its provisions until the district’s fund equity exceeds 10 percent, in exchange for a series of minor financial concessions from the union.

That means AAPS is locked into many expensive provisions of that contract until the district’s bank account hits about $18 million (the 10 percent mark), according to a local education official with close ties to the district, who also requested anonymity.

“The board is really Democratic and in bed with the union,” the official said. “There’s no management of resources, it just goes from crisis to crisis.

“It’s never going to get to $18 million, and the contract is never going to change. That means teachers can’t be laid off by performance, only by seniority.”

It also means Ann Arbor taxpayers will remain on the hook to pay for a lot of pricey extras written into the union contract.

Here are a few examples:

“When class sizes in any elementary classroom, including special area classrooms, exceeds these maxima by up to two (2) additional students, an overage payment of $300 per student per semester shall be made to the teacher. Kindergarten teachers shall receive an overage payment of $150 per half-day student per semester. These amounts shall be increasing beginning in 2004-05 and thereafter by the same percentage increase applied to the salary schedule.”

“The Board shall release the President of the Association (teachers union) from his/her normally assigned duties without loss of pay or other benefits. The Association shall reimburse the Board for one-half of the President’s salary.”

“The Board shall grant the Association (various union officials who are also teachers) up to thirty days of leave of absence each year without loss of pay or benefits for use at the discretion of the Association, provided that the administrators affected are notified at least two days in advance, except in case of emergency, and provided further that substitutes can be secured.”

“The Board shall provide a MESSA-PAK plan of fringe benefits for all teachers working no less than .40 F.T.E.”

FTE refers to a “full time equivalent” position. In other words, any employee working at least 40 percent of a full-time job receives an expensive benefit package through MESSA, a union-owned insurance company, paid for by taxpayers.

Then there’s “terminal leave pay”, which sounds really expensive:

“Terminal leave pay shall be granted to any teacher who is hired and commences work with the board on or before June 13, 2003, or to his/her estate, when he/she retires from employment with the Board or dies during employment with the Board.

“Pay shall be at the rate of one percent of the highest regular contractual salary and all other earnings that are provided for the Master Agreement earned by that teacher in the twelve month period that immediately precedes the retirement, or in a twelve month period with higher earnings … times the number of full-time equivalent years that teacher has been employed …”

The list of extra payments and special perks goes on and on.

“Department chairs, for example, are given a premium to manage a department,” the local education official said. “But as I understand it, the instrumental music department at one of the high schools is one person … so he gets a bonus for being his own department chair.”

‘We can grow or we can die’

While AAPS officials hope to court new students in the district by touting its academic achievement and innovative new programs, not all Ann Arbor students enjoy the same public school experience.

The district’s minority students, especially the low-income students, are so far behind their white classmates, it’s almost like they attend a totally different school district, according to several sources. They said much of the problem are union contract rules that put employee rights ahead of student needs.

First there is the contractually-stipulated layoff process, which is based largely on seniority, even if teachers with less time served are more effective in the classroom.

Then there is the lengthy and expensive process necessary to terminate a sub-par teacher outlined in the union contract. Because of the difficulty involved in firing teachers, many are transferred within the district and end up in schools with low-income minority students, which perpetuates an achievement gap that has persisted for years.

“What ends up happening is the lower income students are the ones that suffer the most from this dysfunction,” the involved parent said. “I just don’t see where the administration has the capacity to learn. It’s the same problems they keep addressing year after year.”

“The achievement gap in the AAPS is such a stubborn and pernicious problem that Ann Arbor has been written up in Time magazine as Ground Zero insofar as achievement gaps are concerned,” according to an A2Indy.com editorial. “It is a problem that has only gotten worse with time, despite the best efforts of a parade of superintendents who drafted plans of action and implemented those plans with the best of intentions.”

“At Mitchell Elementary, 201 of the school’s 279 students qualify for (meal) subsidies. At Pittsfield Elementary, 122 of the school’s 245 students qualify. At Northside Elementary, 100 of that school’s 212 enrolled students qualify,” according to the editorial.

“In all of these schools, fewer than 10 percent of the fifth graders demonstrated advanced mastery of reading, science and/or mathematics. At Mitchell, the inability of more than 10 percent of that school’s fifth graders to demonstrate advanced mastery of reading, science and mathematics on the MEAP has been an annual event since 2008.”

Despite the district’s structural budget problems, and ongoing performance issues with low-income minority students, there seems to be little hope for change on the horizon.

“The culture with the principals and the teachers is to keep their head down and not cause any trouble,” the involved parent said.

The new superintendent doesn’t seem to be helping the situation very much. Instead of focusing on resolving the financial problems tied to the teachers union contract, or the work rules that keep ineffective educators employed, Dr. Jeanice Swift seems focused on complaining about the impact of charter schools on district finances and promoting the board’s more-money philosophy.

“It’s hard. It’s hard on everybody,” Swift told MLive of competition for students. “And yet, it’s where we are. It’s a challenge.”

“Our state law – in lifting the cap on charters – has placed us all in this shared environment. As far as I’m concerned, we can grow or we can die.”

The way things are going, a slow death seems the more likely scenario.