Detroit Public Schools May File for Bankruptcy

September 4th, 2009 by Reed Allmand

Seven years of overspending its budget may cause Detroit Public Schools to file for bankruptcy.

It’s a good thing that Michigan sent a state-appointed financial manger to get Detroit Public School’s financial situation in order, because once Robert Bobb got there he started referring to their budget as the worst he’d ever seen.  He said, “They said the sky was falling but they didn’t act.”

Bobb has overseen drastic measures since taking over, including closing 29 schools, cutting central office staff, and letting 33 principals go.  These changes weren’t enough to meet a June 30th deadline in which the budget deficit was supposed to be eliminated, because Mr. Bobb said too radical of changes would have been necessary.  Some of things he mentioned that might have had to happen were cutting security, drastically increasing class sizes, getting rid of transportation except for special education, and eliminating all central office employees except for where they are required by law.

Even though Bobb has already made many moves to shore up the budget situation, there are still many things to come.  For one, the job cuts are supposed to increase from around 1,766 to 2,451 in the next year.

One of the biggest hurdles DPS is facing is that enrollment keeps dropping.  The current budget includes a projected loss of about $79.1 million due to falling enrollment.  In fact, the enrollment is supposed to drop from 94,054 to 83,777 in the next year.  To try and fight the falling enrollment numbers, a $500,000 campaign to keep kids is being planned.  The thought is that if the campaign is successful, the enrollment won’t drop as much.  This would mean more money for the schools as well as kids getting a better education.

Next year the school district will start the year with about $259 million in debt which is significantly down from the originally projected $430 million in debt.  The improvement is significant, but there is still a lot of work that needs to be done.  Some of the future plans have to be approved by labor unions as well as the Detroit Federation of Teachers.  This means Bobb is going to have his work cut out for him.

Although Bobb has the schools headed in the right direction, bankruptcy might be the next move for them.  The financial situation is too dire to be remedied without bankruptcy.  This is what happens when an entity outspends its budget for seven years in a row.  The good news for DPS is that bankruptcy can help them restructure and eliminate debts.  The schools will be able to rebound much faster and efficiently with the help bankruptcy can provide.