The purposes of this annual report, coded as Reorganization Series I,
are to chronicle reorganization activities for future reference, analyze the current
conditions, and provide some direction for subsequent years. The major topic of the 1993
document is about a type of thinking that is emerging as school boards enter into
whole-grade sharing contracts and eventually move their districts toward reorganization.
The boards are negotiating business contracts--government business. They are perceiving
their schools as government business units that are subject to the same natural conditions
that relate to the private enterprise services provided in their communities.
Two special Series I reports were written regarding the large number of reorganizations
this year and an update of superintendent sharing. Both reports were sent to all school
districts and are available at the Bureau of School Administration and Accreditation.
Current Reorganization
Activities
The 1993-94 school year will begin with 21 less school districts. On July 1, 1993, 41
districts will merge into 20 new school corporations. This reduces the number of districts
from 418 to 397. This period of change began with 438 school districts in 1985.
Beginning July 1, 1993, 358 school districts will be operating their own high schools
within their boundaries. The difference between 397 total districts and 358 with high
schools, which is 39, is the number of whole-grade sharing districts that are sending
their high school students to other districts. In 1992- 93 there were 362 districts
operating their own high schools. The drop from 362 to 358 is the least amount of change
since 1985.
One of the whole-grade sharing agreements to begin in 1993-94 is the first of its kind.
Lincoln Central is sending all students in grades K-12 to Estherville. This move came
after a failed attempt last year to reorganize, which was then followed by a large scale
exodus by open enrollment.
As of the date this publication is being written, four districts have reorganized with
July 1, 1994, effective dates, four more have reorganization petitions filed with their
area education agencies, and this consultant is aware of several more reorganization
petitions being developed. November 30, 1993, is the final election date for July 1, 1994,
reorganizations.
Two new whole-grade sharing agreements have already been signed for 1994-95. This
consultant has information about one more whole-grade sharing agreement that is past the
public announcement stage, and about several more whole-grade sharing plans that are in
the earlier phases of development. February 1, 1994, is the final date for signing a
contract to begin in 1994- 95.
For several years the prediction has been for a 10 year period of school reorganization
change. This projection was based in part upon the fact that the two prior school
consolidation eras were both approximately 10 years in duration. Also, the rate of high
school reduction, close to 10 per year, seemed to fit the 10 year pattern. In addition,
the legislative school finance model appears to be a plan to equalize funding and
spending, and the smaller districts tend to spend more per pupil.
It now seems that the cycle of merging could extend a few more years beyond 1995.
Legislation to prolong the adjustment for guarantee (a form of funding beyond the set per
pupil amount for some districts) through 1995-96 may be giving added life to some
districts, as will the legislated easing of some of the minimum standards. However, the
natural conditions that are causing the movement are still grinding away. The demographic
and economic changes have not abated. If we are looking for school organization stability
to establish itself again--maybe 1998, or a little later?
Reorganization studies are indicators of continuing and future change. Since 1980, this
consultant has conducted studies involving more than 250 school districts. The pace of
activity, which dramatically increased in 1987, has since then continued at a very high
rate. The number of districts involved in studies each year has ranged from 50 to 75.
A notable change in the studies is the increasing interest in more detail. During 1992-93
boards and other school officials working with this consultant have been requesting much
more factual information. Some of the recent studies have included 30 to 50 or more pages
of data tables.
Another mark of change in the studies is the increase in the request for combination
financial studies. More than one-half of the studies this past year were those that
predict tax rates, calculate combined assets, and combine numerous other financial
features of districts that are planning whole-grade sharing or reorganization. A few of
the studies were for districts that have passed their reorganization elections and need
more financial combination assistance. This trend seems to indicate that finance is
becoming more of an important factor as districts plan mergers.
Reorganization
Legislation--1993
The Legislature enacted several bills that directly affect whole- grade sharing and
reorganization situations. Senate Files 141, 191, and 425 (in part) address optional
levies after reorganization, reorganization tax breaks, and whole-grade sharing
supplemental weighting issues. The provisions of the bills are fairly narrow in scope and
apply to a few districts that seemed to "slip through the cracks" as they
entered into new consolidation partnerships.
House File 496, a more comprehensive reorganization bill, also dealt with one of the
corrective issues. The first section more clearly defines the counting of supplemental
weighting for a maximum of five years, with an additional counting of five more years
after reorganization.
House File 496 then proceeds to confront some reorganization procedural issues. For
example, the procedures for the division of assets and liabilities after a reorganization
are brought into line with a court case on the topic that was settled in the early 1980s.
Also, the precise stipulations for formulating the initial board of a reorganized district
are eased to allow for more local control.
The only provision of House File 496 that tends to address a more substantive issue is the
requirement for the area education agency board, when it is establishing boundary lines,
to abide by the principle that, "The exclusion of territory shall represent a balance
between the rights of the objectors and the welfare of the reorganized district."
This measure was enacted in order to encourage more of the weight in the boundary drawing
decisions to be given to the individual citizens. The practice in many instances has been
to favor the reorganizing districts if they did not want territory to be excluded. This
has resulted in complaints from citizens to legislators and to the Department of
Education.
A Government Business Deal
During this era of school structure change, the number of districts maintaining high
schools and the total number of districts is being reduced dramatically. The conditions
and activities are similar to those of the previous period of high school merger that took
place from 1952 through 1962, but there is one very important difference. The earlier
generation of consolidation involved mainly the reorganization process, which is largely a
political procedure. With very few exceptions, the mergers that have now taken place since
1985, first consist of whole-grade contracts negotiated by the boards of directors of the
local school districts. These contracts, which do not require voter approval, have in all
cases united the high schools. In most instances other grades were also combined. The
strong tendency is then, after a period of a few years of whole- grade sharing, for a
voted reorganization to follow.
This portion of the annual report examines some of the elements of the government business
deals (whole-grade sharing contracts) that are being negotiated by school boards. How is
the process different than reorganization?
Reorganization and Whole-Grade
Sharing
Reorganization is a legal process that has been in the Code of Iowa for many years. It
requires a petition signed by electors, an objection mechanism, a public hearing conducted
by the area education agency, decisions made by the area education agency board of
directors, and elections passed by a 50 percent majority in each of the districts
involved.
State law requires only a few components to be included in the petition. They are the name
of the new district, the legal description of the new district, the number of members on
the initial board, and the method of election of the new board. Two common optional
elements of the petition are the usage of the alternative method of selecting the initial
board and provisions for the division of assets and liabilities. Virtually all other
arrangements for the combining of the districts are within the authorities of the board of
the new district. Very little can be negotiated between the boards of the original
existing districts.
In the final analyses, the voters approve or reject the petition to reorganize. This is a
political process, like all other elections. There are factions on all sides of the issue,
they vote accordingly, and try to persuade others to vote in a similar manner.
Reorganization elections are usually emotional events that have very few trappings of a
business deal, unless the districts have been first whole-grade sharing. If whole- grade
sharing began the merger process, the boards negotiated and had been operating the schools
under a sharing contract. The parents and citizens have had the opportunity to see what
this type of consolidation of program has done for them. Then when the reorganization
issue is presented on a ballot, the electors are generally endorsing what they have seen
through whole-grade sharing and finalizing the arrangement.
Whole-grade sharing does have political elements in it, and it is an emotional process.
However, boards almost always approach the task of developing a contract by emphasizing
the factual and business components and minimizing the political, emotional, and personal
preference influences.
Most school boards have gone to the limit to collect information and conduct studies.
Citizens' committees are formed, and outside consultants are used. Many districts have had
outside consultants conduct two, three, and sometimes more studies before they make
decisions to whole- grade share. Districts cannot be accused of rushing into whole-grade
sharing without adequate planning and study.
Before signing contracts, boards have generally been conducting numerous meetings between
the boards involved. These meetings seem to involve the stages of getting acquainted, the
development of the larger elements of the contract, such as who gets the high school, and
the hammering out of the details. Boards cannot be charged with lack of adequate contract
negotiation.
Another important part of the contract development is public involvement--both for input
and information purposes. All boards are required to have a legal hearing prior to
approval of a whole-grade sharing contract, and almost all, if not all of them, conduct
information meetings at various stages along the way. This consultant has attended and
presented information at more than 200 board meetings--some of them with up to 500 people
in the audience. Boards have made heroic efforts to bring their actions to the public.
As can be seen, reorganization is basically a brief consolidation plan that is approved by
the voters. It is often a very emotional issue, and has the characteristics of other
elections that use all means possible to sway the minds of the uncommitted.
Whole-grade sharing, in contrast, is the planning, negotiation, and operation of
government business entities through a cooperative contract. The situation may have
political overtones, but the boards of education of Iowa's local school districts have
risen above the factional circumstances that are more likely to control reorganization.
Whole-Grade Sharing Contract
Features
The whole-grade sharing agreement is a business contract, like those in the private
sector. It binds parties, it has time limits, it sets financial conditions, etc. These are
complicated documents, and this consultant strongly urges districts to use the services of
attorneys in order to develop them.
The early contracts from the mid 1980s were each unique; however, since then, most
agreements have used existing documents as samples. Therefore, there are many similarities
among the contracts, but most of them still have individual features. This part of the
report notes a few of the more common contract components.
All contracts include articles about the services provided. This is the key part of the
agreement that specifies where the high school program will be located, where the junior
high or middle school will be, etc. Usually the locations are obvious because of the sizes
of the districts or the types of buildings. However, in some of the situations where
districts are equal in size, this is a heavily negotiated issue. Often more grade levels
are brought into the whole- grade sharing plan in order to even out the gain and loss of
students.
All contracts specify the duration. The most common length seems to be three years. There
are various types of extension clauses and methods for terminating the contracts.
All contracts list the financial terms. In one-way agreements, there is a dollar amount
that is in effect a tuition. The tuition amounts range from one-half of a district's
regular program per pupil cost to one hundred percent of the per pupil cost. There are
many variations between the two extremes. Two-way contracts have a variety of negotiated
features. The only finance restriction imposed by state law is that in a one-way
agreement, the cost shall be no less than one- half of the per pupil cost.
Beyond the three basic contract provisions noted above, the "sky is the limit."
The districts are able to negotiate and include in the agreements almost anything that
they could have done for themselves.
Most whole-grade sharing districts use common board policies, administrative rules, and
common practices for mutual purposes. In other words, the districts have mechanisms for
developing features of the program combinations without going to the extreme of including
everything in the contract.
The important points are that over 150 boards of directors have successfully negotiated
whole-grade sharing contracts, and their agreements have included a wide latitude of
provisions, just as do contracts among any group of businesses. The state has only three
basic restraints:
Similarities
to Private Sector Contracts and Conditions.
The contract features listed above are similar to almost anything done in the private
sector. The contractual agreements have time limits and they are enforceable. They provide
something of value to all parties. There are individuals and groups that are authorized to
make the agreements. Usually the advice and assistance provided by attorneys are no
different than that given to non- governmental clients.
When a board studies its situation and plans for whole-grade sharing, it often views its
district as one of the many service entities in the area. In other words, it looks at the
various service industries within the economic community. For example, the purchase of new
automobiles may extend the economic community across several counties. Citizens may not
have nearby dealerships, and may be forced to travel for the purpose of buying a car. A
county may have seven towns, and four of them may have banks or branch banks. These are
smaller economic service areas than those for buying cars. A county may have only one
full-scale grocery store, and this in turn specifies the shopping area.
An examination of the past may reveal that in 1950 there were several car dealerships in
the county, all towns had banks, all communities had grocery stores, and some had more
than one grocery. Times have clearly changed for rural Iowa.
Schools have not escaped the forces that have caused the changes in the private sector. In
1933 there were 937 school districts operating high schools. In 1993 there are now only
358. The regions for school attendance have become larger. This current movement that
started in 1985 is another period of expansion of school district boundary lines.
The similarities of the school situations to the private sector are abundant. Communities
that at one time had grocery stores, hardware stores, drug stores, banks, etc. are now
existing with very few or none of these within their borders. These towns also had K-12
school districts. They are now faced with the business situation that they can no longer
provide the services expected for a full K-12 school district or be able to pay for it at
an economical and efficient level. The whole-grade sharing movement is merely local
government doing now what it would have done as private enterprise several years ago.
Generally, as schools whole-grade share and reorganize, they are redefining their
boundaries and bringing together a larger volume of business. There seems to be a level of
business that needs to be achieved. Three significant benchmarks that appear to be
governing the number of students are:
The above analysis does not purport to indicate that any size is better
in all situations than any other. It merely reflects upon the characteristics of the
increasing volumes of business that school districts are achieving by whole- grade
sharing. Just as car dealerships have gone away from being low volume businesses with
minimal inventories, to far fewer dealerships with large inventories, schools are moving
to larger enrollments.
Another business factor that impinges upon school operation in a manner comparable to
private enterprise is the availability of capital. Businesses need to have financial
backing, and so do schools.
Schools, for example, need taxable valuation in order to construct buildings. Districts
are limited to bonding themselves for no more than they can pay off in 20 years at a
maximum property tax rate of $2.70 per thousand assessed valuation. If the bond referendum
includes a separate question, the maximum tax can be raised to $4.05.
Some smaller districts, particularly those with lower assessed valuation amounts, may find
it very difficult to replace old school buildings. For example, in a recent study, a small
school district with only 22 million in assessed valuation was estimated to have a
construction limit of $650,000. The maximum, with the $4.05 rate, was $970,000. These
amounts are hardly enough to replace the existing structures. Another business related
concern is whether voters will have enough confidence in the future of the district in
order to bond their properties for 20 years.
The nature of the capital necessary to farm has changed significantly during this century.
Farming has gone from a labor intensive industry to one that requires large amounts of
capital. Schools have not experienced anywhere near as dramatic a change in capital
requirements, but it is clear that the common 1920 vintage buildings were comparatively
much less costly than those being erected in the 1990s. Discounting 60 years of inflation,
it is much more difficult now for a small district to build a school large enough to house
the entire K-12 program.
As boards wrestle with the whole-grade sharing and reorganization issues, they frequently
think of what private enterprise would have done in similar situations. Schools are not
profit motivated, and they are required to more equally serve their entire constituencies,
but they still respond to the same pressures that change business. (Written by Guy Ghan,
Retired DE Consultant)
Feedback:
Periodic Reports Comments