LITTLE ROCK — The Little Rock School Board is holding off a response to the state's settlement offer in the long-running desegregation lawsuit until it can calculate the impact on the school district's long-term finances and its school-choice programs.
Arkansas Attorney GeneralDustin McDaniel last week proposed a plan to phase out $69 million a year in state desegregation aid to the three Pulaski County school districts over seven years.
Board members discussed the settlement offer Thursday night.
Chris Heller, an attorney for the school system, told the LittleRock board that he and the district staff are assessing the effect that the state's settlement proposal would have on the district's magnet schools, the majority-to-minority interdistrict student transfer program and the district's ability to remain solvent.
"We want to know what will it take for us financially to beable to say yes to this offer or to even be able make an informed counteroffer based on some hard look at the financial impact of reducing money over time like this," Heller said.
"I'm hoping over the next week or 10 days I can present a written report to you," he said, adding that he would like for the board to be able to decide on aresponse to the state when the board holds its next meeting on Sept. 10.
Also factored into any district response to the state's offer, Heller said, will be the state-approved but independently run charter schools that draw students from Pulaski County's traditional public schools - par-ticularly the magnet schools that are intended to promote racial desegregation in the three districts.
Charter schools and magnet schools are popular with parents and students.
Last month Heller proposed that the district legally challenge the state to limit charter school operations in the county. The board took no action on that proposal Thursday although it was on the board's agenda.
Board member Baker Kurrus suggested that the talk of suing would likely have a "chilling effect" on settlement negotiations.
Heller told the board he believed that the state would be open to negotiating a date for any settlement to take effect to avoid any negative impact on students. Also subject to further discussions, he said, should be a way to allow students to continue to travel across school district lines in Pulaski County to attend schools of their choice.
Board member Mike Daugherty questioned the justification for allowing the state aid payments to be phased out. He compared the state aid to a doctor putting in a stent in a heart patient and then taking the stent out once the patient's heart pains cease.
Board members Jody Carreiro and Kurrus said they can't fully evaluate the attorney general's settlement proposal until they know whether the Little Rock district and the neighboring North Little Rock and Pulaski County Special school districts want to continue to cooperatively participate in schoolchoice programs such as magnet schools.
In an Aug. 18 letter to attorneys for the three school districts, McDaniel proposed paying $68,824,186, the state desegregation aid to the districts this school year. That is the same as the amount distributed in the just-ended 2008-09 school year. The Little Rock district's share of that money last year was about $38.7 million.
In the second through fourth years of the McDaniel plan, the state payments would be reduced by $4 million each year. In the final three years, the state payments would be reduced by $4.25 million each year.
The cost of the state's proposal over the seven years would be about $396 million, which represents a savings of more than $24.8 million if the desegregation funds were paid at the current rate of $68.8 million a year. The Little Rock district in January had proposed a plan to phase out the desegregation money that would cost the state $459 million over sevenyears.
If the state's settlement proposal is enacted, the state payment to the three districts in the last year of the agreement would be about $44 million.
The proposed settlement includes no provisions for restricting or putting any limits on charter schools in Pulaski County.
"I do not place much value in the district's threats to expand the issues in this ancient litigation to include charter schools," McDaniel wrote last week.
McDaniel told the attorneys then that he believes the proposal is generous.
"My office has been reviewing other desegregation cases in which state funding was phased out, and we do not find a case where a court has ordered a phase out that is more favorable (in raw dollars and years) than what the State of Arkansasis now offering to these three districts."
McDaniel conditioned the phaseout offer on the receipt of financial plans from the districts that show how the districts would support their academic programs in light of reduced state revenue.
"Our clients know that LRSD is at significant risk of falling into fiscal distress when this extra money stops; which it eventually will," McDaniel wrote. "Because of this, accountability from the district as to how it intends to survive its exit from litigation is a key issue to any settlement of this case."
McDaniel told a legislative committee earlier this week that his office will hire an accountant to evaluate the districts' finances.
McDaniel's offer was in response to a Little Rock district's settlement proposal - its second - made last December.
In that proposal, the Little Rock district would receive decreasing amounts annually from the state ranging from 100 percent of the funding in 2009-10 down to 90 percent by the final year of the seven-year phaseout.
The district would use some of the money each year to offset expenses but would put a portion of the special funding from the state into reserve so that the district would ease the loss of the state aid over a total of 14 years.
Ann Elfrink, the district's chief financial officer at that time, calculated that the district would have to make budget cuts annually in amounts ranging from $1.8 million to as much as $3.9 million until at least 2023.
Other provisions in the district's settlement proposal to the state included a moratorium on new or expanded charter schools in Pulaski County without Little Rock district approval and exemption from being found by the state to be in fiscal or academic distress and, as a result, subject to state sanctions.
Desegregation funds weren't the only money matter under consideration Thursday night.
The board approved a plan for spending $23 million infederal stimulus money. That two-year plan, now subject to review by the state Department of Education, includes money for classroom technology purchases, roof and ventilation system repairs and some personnel costs for literacy and math coaches.
Arkansas, Pages 11, 20 on 08/28/2009