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(Reuters) - Michigan officials on Wednesday declared the Highland Park School District in a financial emergency, a step that could lead to a state takeover of the school system.
The school district of Highland Park, a small, low-income city entirely surrounded by the city of Detroit, would become the fifth public entity in Michigan to be run by a state-appointed manager.
A 10-member review team appointed by Governor Rick Snyder in November concluded that no satisfactory plan exists to resolve the district's fiscal problems and recommended the governor appoint an emergency manager to run the district, which serves an estimated 969 students.
Snyder has 10 days to review the report.
The Detroit Public Schools and the cities of Benton Harbor, Ecorse, Flint and Pontiac are already being run by state-appointed managers. Detroit, Michigan's largest city, also faces a possible state takeover.
Snyder last week named a review team to do an assessment of Detroit, to determine if it, too, has a financial emergency that warrants the appointment of a manager.
A 2011 law made it easier for Michigan to intervene in a fiscally troubled government. The law, which is being challenged in court and is the subject of a ballot repeal drive, also beefed up emergency managers' powers, allowing them to void contracts and collective bargaining agreements.
The state team that reviewed the Highland Park School District said its cumulative deficit rose by 51 percent over the past fiscal year, while its enrollment has decreased by 58 percent since 2006. The team also found the district had more than $1.7 million in old bills that could lead to a court-ordered increase in the property tax levy.
"The thorough review completed by the financial review team clearly shows that (the district) is facing monumental financial challenges," said State Treasurer Andy Dillon in a statement.
Edith Hightower, the district's general superintendent, said the school board will examine the review team's report this week. If the state process helps the district provide a quality education for its students, "we welcome it," she said.
Reporting by Karen Pierog; Editing by Leslie Adler