Status of Schools Critical Issue in Bankruptcy ; CENTRAL FALLS

Article excerpt

Teachers union argues city's receiver cannot unilaterally impose contract conditions because schools are state agency

PROVIDENCE -- Is the Central Falls School Department, financed by state money and run by a state-appointed board, in effect, a state agency and therefore not part of city government or the city's pending bankruptcy proceeding, as the school district's teachers union argues?

Or is it, as state-appointed Receiver Robert G. Flanders Jr. has claimed, a component of city government that has just been receiving a lot of financial and managerial assistance from the state.

The difference is significant, because if special federal Bankruptcy Court Judge Frank J. Bailey rules that the schools are part of the city's bankruptcy filing, Flanders could get the power to impose new contract terms on the teachers and non-teaching employees unions to cut school spending.

But if Bailey rules the schools have become part of the state, any changes in those union contracts would have to be agreed to by both sides, not imposed by one.

Flanders, in a bankruptcy court filing, said Bailey needs to decide the question because a new state education aid formula expected to take effect next year will cost the city about $1.6 million annually in lost aid, and that means he has to cover that loss by finding enough savings in the school budget to present the court with a viable financial reorganization plan. The receiver said he wants to negotiate concessions with the unions, but if those talks fail, he said he needs the authority of the bankruptcy court to impose new conditions.

The union, in a filing with the court Friday, disputed Flanders' claim that the city's August bankruptcy filing would let him impose new contracts. The union said federal bankruptcy courts are required to follow state law when it applies; and in Rhode Island, state law says when school systems and their unions reach impasses they must go to arbitration. If the two sides can't reach a deal, the union asserted in a brief prepared by Rhode Island lawyer Marc Gursky and Curtis C. Mechling of Stroock, Stroock and Lavan LLP of New York, Flanders couldn't impose new conditions, he would have to seek arbitration to settle the differences.

The union also said Flanders can't use the city's bankruptcy filing to assert that authority because the filing only covers city government and the school system hasn't been part of city government since the state took over management of the schools in 1991.

Education in Rhode Island is considered a state function, the union argued, one that the state has designated school committees in each municipality to fulfill. Central Falls is different, it claimed, because in that city the state took the power back.

In response to a 1991 city budget crisis in Central Falls, the state assumed managerial and financial control of educational programs in the city. A state-appointed administrator was named to run the district. In 2002, the General Assembly replaced the administrator with a Board of Trustees whose members are nominated by the education commissioner and approved by the state Board of Regents.

"Thus, the parties involved in setting the school district's budget, the Board of Regents, the commissioner and the superintendent, are all state appointees who are not elected by the city voters or appointed by city elected officials and are not subject to removal by city voters or a city elected official," the memorandum said. …