Should Communities Be Able To Leave Failing School Districts? -Action Economics

In Michigan there is a process for property owners to leave a school district and join another, however this process is extraordinarily burdensome and needs to be made more friendly to taxpayers and property owners.

School District Property Taxes:

A School district automatically gets an 18 mill tax on all non homesteaded property in the district boundaries. This includes rental properties, 2nd homes, and businesses. In addition to the 18 mill tax the school district can also hold millage ballot requests at any time it wants to that need only a majority vote to pass. On a home valued at $200,000 an 18 mill tax in Michigan costs $1,800 per year.

The Process For Leaving A School District:

In order to leave a school district, the group of properties in question must border an adjacent school district and the a petition must be signed by 2/3 of all homesteaded property owners. An additional requirement is that the area in question must also contain less than 10% of the total taxable value of the district. The law also clearly states that the 2/3 requirement includes ALL home owners listed on the property, so a husband and wife who own the same parcel both need to sign for a parcel for it to count as 100%. Furthermore IF the area to be detached does contain more than 10% of the taxable value of the district, THEN the school board of the district being left would have to vote in favor of it. Of course there would be ZERO incentive for them to do so. This law exists solely to make it impossible for people to leave a failing district.

What is really interesting about this process is the 2/3 requirement AND only allowing owner occupant property owners to have a say. I would like to see this same threshold applied to the millage elections. Only homesteaded property owners can vote and requiring a 2/3 majority. There are more regulations that govern the process for leaving a school district. It gets really complicated, so I have linked to it here for further reading.

It is likely easier to change the state law regarding areas moving school districts than to successfully complete the current process.

The Unique Situation For Benton Harbor Area Schools In Michigan:

Benton Harbor Area Schools as it exists today was first formed in 1965 with the consolidation of roughly 15 separate school districts. At the time BHAS had around 12,000 students. Between demographic changes, school of choice, private schools, and charter schools the enrollment in 2026 is down to 1,221 total students, yet the district covers the same geographic area that it did following the 1965 consolidation. Furthermore the children who are actually being educated by the school district are not evenly dispersed throughout the district and there are wide swaths of the district with no children being educated by the district.

Why should these areas pay taxes to this district if none of the kids who live in the area are being education by the district?

The district SHOULD have ceased to exist in 2020, however it was bailed out by both the Federal and State governments with COVID funding. The district which had significant debt and was running massive deficits was given close to $100 million between the Federal and State governments, effectively extending its life for another decade. There is a process for shutting down failing school systems. After two years of insolvency (Deficits with a negative fund balance) AND a drop of student population of 10% in a single year, THEN the state has the ability to shut the district down. This would have occurred without the bailouts. This would have dissolved the district and moved all the property in the district to adjoining districts.

BHAS as of the initial budget for 2025-26 was projecting a deficit of $7.4 million and an ending fund balance of around $19 million. At this rate they can sustain through 2026-27 and 2027-28, entering a deficit in 2028-29. The district would run a deficit again in 2029-30 and in 2030-31 they would need to have a 10% drop.

The Map:

I will give BHAS credit for its transparency on its bussing system. Without the published documents showing the number of students at which stop, by which grade I would not have had the data needed to test my hypothesis.

Of the 1,221 students BHAS has, 1,035 are on bus routes, this is 84.7% of the student population. I took this data and mapped it by grade group, which is shared below. The vast majority of the 15% not on bus routes are the students who live within half a mile of their school building who are expected to walk to school.

BHAS covers approx. 37,643 acres with 1,221 total students. There are 3,460 students who live in the district and attend other schools.

There are 0 Students in the South Eastern portion of the district aligned with Yore Ave to the West and Highland to the North. This area consists of 14,700 Acres with 0 Students who attend BHAS. 39% of the total area of the district with ZERO students.

Including ALL of the district to the East of I-94 there are a total of 12 students attending BHAS in this area consisting of 20,500 acres. 1% of the student body is from this 54% of the district area.

There are 4 students in the land North of Enterprise Rd consisting of 4,260 acres.

There are 14 students East of Colfax and South of Seneca, consisting of 1,000 acres.

If less than 1% of the students live in over half the area, that is a good reason for that area to no longer be in the jurisdiction of the school district!

Looking at adjacent school districts, using school of choice the following number of students attend these adjacent schools:

St Joseph: 411
Eau Claire: 252
Coloma: 246
Watervliet: 95

Although I don’t have the map data for Coloma and Eau Claire I am fairly certain that there are more children West of I94 in the BHAS district that attend these schools than attend BHAS.

Further Complications:

BHAS has been extremely fortunate with the COVID bailouts and its tax base. BHAS includes both headquarters of the Whirlpool Corporation, 5 miles of Lake Michigan Shoreline (primarily 2nd homes), A city that has only 36% home ownership meaning the district receives the 18 mill tax on all those rental units, and or course large areas where they receive taxes from but do not need to educate the students. With all of these advantages despite spending money recklessly BHAS is able to have a lower property tax rate than nearby Coloma schools, which would be the main school district to absorb some of the area.

For taxpayers that are unhappy with how BHAS spends money it would be easy to sign a petition to leave the district if they would save money or break even, however for areas that would be joining Coloma they would end up with a property tax increase, this makes getting the petition signatures much more difficult.

The Ideal Situation:

In an ideal situation a representative minority of the district could submit petition language to the Intermediate school board to allow the defined area to have a vote on leaving the district. This may not be possible for an entire area like “land West of I-94”, but it should be possible for governmental areas like Townships. Something like 10% of the signatures of the number of votes received in the same voting area in the last gubernatorial election.

At a minimum these 4 Townships should be able to vote on removing themselves from BHAS:

Bainbridge: 5,016 Acres: 0 Students in BHAS. Bainbridge should be able to leave BHAS and join either Coloma, Watervliet, or Eau Claire.
Hagar: 1,609 Acres: 1 Student in BHAS. Hagar Township should be able to join the Coloma school district.
Sodus: 8,029 Acres: 4 students in BHAS. Sodus should be able to join the Eau Claire school district.
St. Joseph: 1,123 Acres: 14-32 Students (32 includes stops that are on the boarder) in BHAS. St. Joseph Township should be able to join the St. Joseph school district.

These municipalities make up 42% of the district land area with 1.5% to 3% of the student population of BHAS.

What Action Should Be Taken?

Option 1: Let it die on its own, wait another 5 years for BHAS’s fiscal irresponsibility to kill it.

Option 2: Attempt multiple petition gathering campaigns aimed at areas that compose 9% of BHAS’s area

Option 3: Petition the state government to change its regulations over property owners and municipalities leaving failing school districts.