Wednesday, January 6, 2016

State AG Says Shelby County Schools Not Liable for MCS Post-Employment Debts

Opinion, which is advisory, not legally binding, is welcomed by County Commissioners, who say $30 million of annual liability and $1.1 billion overall could shift from SCS to City of Memphis, though Strickland says no.

Posted By on Wed, Jan 6, 2016 at 2:38 PM

click to enlarge Commissioner Reaves announcing Slatery opinion - JB
  • JB
  • Commissioner Reaves announcing Slatery opinion

A bombshell from the state Attorney General’s office could open the way for fiscal relief for Shelby County Schools and saddle the City of Memphis with an expense that city officials thought they had been delivered from after the end of the city/county merger crisis.

Attorney General Herbert Slatery, responding to an inquiry from state Senator Brian Kelsey on behalf of Shelby County government, ruled that debts relating to the OPEB (Other Post-Employment Benefits) obligations of the former Memphis City Schools do not devolve upon the post-merger SCS, as had been generally supposed, but, — potentially, anyhow —upon the City of Memphis.

OPEBs involve obligations for post-employment health care, insurance, disability payments, and various other non-pension benefits.

The operative paragraph of Slatery’s opinion is as follows: “Where there is any school indegtedness owned by the town, city or special school district at the time the transfer of administration is effectuated, the indebtedness shall remain the obligation of the town, city, or special school district…”

The opinion goes on to say that “existing arrangements for the retirement of the indebtedness shall be continued until the indebtedness is retired and paid in full, unless the county legislative body, by resolution adopted by a majority of the members, agrees to assume the school indebtedness owed by the town, city, or special school district.”

Reaction from members of the Shelby County Commission, who learned of the ruling from education chairman David Reaves while meeting in committee on Wednesday was generally one of relief — coupled with assertions that the Commission was in no danger of volunteering itself as a funding source.

“I’m the happiest man here, except for you,” exulted Commission chairman Terry Roland to SCS superintendent Dorsey Hopson, who had just concluded testimony about a variety of school matters.

Roland’s Commission colleague Heidi Shafer congratulated Roland on his prescience months ago in having raised doubts about the liability of SCS (and thereby Shelby County government) for the portion of the county OPEB liability formerly owed by MCS. Reaves estimated that that amount, which SCS had provisionally assumed responsibility for, amounted to some $30 million annually-- or, as others were estimating, as much as $1.1 billion overall.

“They [SCS] could use that money for operating expenses. They could use it for iZone schools or whatever,” Reaves said.

Shafer stated an obvious caveat, however —— that an opinion from the state Attorney General’s office is merely advisory without the powers of legal mandate. AG opinions normally are acted upon as de facto rulings, but in this case, given the fiscal stakes for all parties, court action would almost certainly have to precede any resumption of financial responsibility on the part of the City of Memphis, which had been responsible for annual payments of $70 to $80 million overall, including OPEBs, to Memphis City Schools before the merger and surrender of the MCS charter.

County Attorney Ross Dyer said it was possible, as several Commissioners immediately theorized, that the City of Memphis might become the liable party for the MCS OPEB sums, but said he didn’t “feel confident speaking to it” before the City itself responded.

The first inkling of that response came later Wednesday from Memphis Mayor Jim Strickland's press office, which issued this statement:  "It's important to note that Memphis City Schools was a special school district, and was separate and apart from city government. The attorney general was not asked if city government is responsible for the special school district debt. The attorney general was asked if Shelby County government was responsible for the special school district debt."

A possible complication is the relevance of court rulings that held the City of Memphis to "maintenance of effort" obligations toward Memphis City Schools prior to the MCS charter surrender and the school merger.

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