From surplus to ballooning deficit: the legacy of government takeover & Emergency Managers in Detroit Public Schools


In 1999, the Detroit Public School system had a positive fund balance of $246,300,000 according to a ten-year summary in their 2008 Comprehensive Annual Financial Report (pages 91-92). That was the same year that the DPS was taken over by the State of Michigan under Republican John Engler. The school district was placed under the control of an Emergency Financial Manager in 2009 and has been under a state-appointed Emergency Financial Manager or, more recently, an Emergency Manager continously since then, ostensibly to fix the financial crisis blamed on the DPS school boards prior to 1999.

How has the state takeover and the imposition of un-democratic emergency management worked out? As it turns out, not so well.

Yesterday we learned that the DPS budget deficit has not only not been reduced. It has actually skyrocketed under the three different Emergency Financial Managers/Emergency Managers that have run the district.

Detroit Public Schools’ deficit is growing by millions of dollars as it continues to borrow additional millions.

According to a quarterly report issued Wednesday by the Michigan Department of Education, the state’s largest district projected its deficit at $238.2 million as of June 30, up from $169.4 million a year earlier. The state report says DPS was among 14 districts whose deficits climbed in 2014-15.

Michelle Zdrodowski, a DPS spokeswoman, said factors behind the deficit spike included lower revenue from property taxes and asset sales, higher maintenance and utility costs and a charge for legal contingencies.

Friday, the district borrowed $121.2 million through the Michigan Finance Authority. State aid revenue notes to be issued by the finance authority carry a 5.75 percent interest rate and are due Aug. 22, 2016.

According to a state document detailing the financing, DPS has $337.8 million in outstanding loans.

So, to summarize, the year before Robert Bobb took over DPS as the first Emergency Financial Manager in 2009, the school had a $219 million deficit and now it’s $238.2 million.

In other words, in the 16 years since the state took over Detroit Public Schools because they believed the state could do a better job than the democratically-elected school board, the state government has not only not improved the financial picture, they have actually made it worse. If activists were to get their way and the state was compelled to return control to the local school board, they would be left to deal with almost a quarter billion dollars in debt that they are not responsible for.

If you are looking for proof that Michigan needs a better school funding model, this, I would argue, is it.

[Photo/graphic by Anne C. Savage, special to Eclectablog]