Michigan Orders DPS to Make Huge Cuts

Jennifer Chambers, Detroit News, Feb. 21, 2011

Swift and severe changes are coming to Detroit Public Schools.

State education officials have ordered Robert Bobb to immediately implement a financial restructuring plan that balances the district’s books by closing half of its schools, swelling high school class sizes to 60 students and consolidating operations.

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Bobb, appointed emergency financial manager in March 2009, filed his deficit elimination plan with the state in January, saying it would wipe out the district’s $327 million deficit by 2014. On Feb. 9, he told state lawmakers the plan is the only way DPS “can cut its way out” of its legacy deficit.

At the same time, Bobb said he doesn’t believe the proposal is viable because it would drive more students away, exacerbating the district’s financial emergency. But on Friday, Bobb confirmed he is working to implement the plan that will shrink the district to 72 schools for a projected 58,570 students in 2014.

“I believe the district can work its way out of these challenges,” Bobb said. “It will take some time. I am firm believer we have to continue to make the deep cuts, and they are going to be painful. In the long run, the district will be stronger. There can be no retreat.”

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Revenue is down dramatically, enrollment losses average 8,000 students a year and pension and health care costs weigh on the district.

And the bad news continues. Among DPS’ fiscal challenges: An expected loss of $273.87 in its per-pupil foundation grant of $7,660. The loss is the result of a projected 83 percent property tax collection rate in Detroit for fiscal 2011. Last week, Gov. Rick Snyder proposed a $470 per-pupil cut for all Michigan districts.

A general fund budget strapped with annual fixed costs such as $52.6 million in pension costs, $44.6 million for health care, $26.8 million in utilities, $6.6 million in public safety and $3.5 million in unemployment. Continuing enrollment declines. DPS has lost 83,336 students in the last decade, leading to a loss in state aid of more than $573 million.

The district’s deficit grew by $100 million in the last year–to $327 million–forcing it to deepen its reliance on short- and long-term borrowing, which costs DPS $55 million a year in principal and interest payments.

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State Rep. Paul Scott, R-Grand Blanc, chairman of the joint House and Senate Education Committee, said there are concerns about the state taking on the district’s liability.

“I don’t feel the taxpayers of Michigan are willing to become liable for that money with all the structural and institutional problems that exist,” Scott said.

“We need a long-term solution for public schools for Detroit and the state,” he said. “We just don’t have the solution right now.”

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