Published Online: November 11, 2008
Published in Print: October 1, 2008, as Detroit School District Again Facing Deficit, Threat of State Action

Detroit School District Again Facing Deficit, Threat of State Action

The Detroit school system is facing a financial crisis that could lead to a takeover of its budget authority if state officials aren’t pleased with a plan to slash the budget.

Michigan’s largest district is operating with a deficit of more than $400 million in its $1.1 billion annual budget, created by a plague of long-standing financial problems, poor accounting practices, and plunging student enrollment.

The district, which this fall enrolls about 98,000 students, has crafted a deficit-elimination plan, but movement on it has not come quickly enough. The slow progress led Michigan Superintendent of Public Instruction Michael P. Flanagan to send Gov. Jennifer M. Granholm a letter, dated Sept. 17, saying the district has a “serious financial problem” as defined by state law, allowing the governor to establish a review team to examine its finances.

The decision to warn the governor came after Mr. Flanagan met with Detroit Superintendent Connie K. Calloway, members of her staff, and some school board members to discuss the district’s plan to address its deficit.

“It became apparent by the end of the meeting that they have a financial crisis,” Mr. Flanagan said last week in an interview. “The plan they submitted to me had holes in it, and wouldn’t add up to $400 million. I think they are working at it.

“This [situation] has been decades in the making, so I don’t even fault the current superintendent and board, but nevertheless it is their job to get it resolved.”

State Review Team

The state review team will work with district officials to hammer out a plan to reduce the deficit. If the district and the team can’t agree, Mr. Flanagan will then appoint a financial manager with sole authority over budget decisions.

“I’m optimistic we don’t get to that, but I need to hold that possibility out,” Mr. Flanagan said. “I wouldn’t hesitate if we can’t get a consent agreement.”

Liz Boyd, a spokeswoman for Gov. Granholm, a Democrat, said a process is under way to select the review-team members. The panel will be selected in conjunction with the president of the Michigan Senate and the speaker of its House of Representatives.

“We see this as an opportunity to help the school district get its financial house in order,” Ms. Boyd said.

In 1999, the state took control of Detroit’s schools under legislation that gave the city’s mayor the authority to appoint six school board members; the seventh was the state superintendent of public instruction. That tenure ended with a $200 million budget deficit. Voters returned to an 11-member elected school board in 2005.

Steven Wasko, a district spokesman, said Ms. Calloway, who began work as Detroit’s superintendent in July 2007, and the board take the financial crisis very seriously.

“What we’re trying to correct in the period of less than two short years is a situation that has been percolating for a great number of years, and is based on long-term trends,” he said. “It is clear to Dr. Calloway and her administration that the need to right-size the district in the instructional and noninstructional areas is simply a need that has not been met in a great number of years.”

Charters Take Students

Although the enrollment of the district has dropped by more than 67,000 since 2000, to an estimated 98,000, the teaching staff has not been reduced in a proportional way, Mr. Wasko said. The district views the state’s intervention as a boost in efforts to get the budget back in line, he said.

The district is being guided in its work, in part, by a review done by the Washington-based Council of the Great City Schools, which represents 66 of the nation’s largest urban school districts.

Michael D. Casserly, the council’s executive director, said Detroit’s problems stem from a multitude of factors, including an exodus as people have left in search of jobs, taking school-age children with them. “On top of that, the school district has had a hard time dealing with a number of students leaving for charters, and has had difficulty raising student achievement substantially enough to recapture the public’s confidence,” he said.

The district’s official enrollment, when calculated later this fall, is expected to dip below 100,000 students for the first time since World War I. If that happens, the district could lose its “first class” status under Michigan law, which defines the school board governance structure and sets rules for ethics and purchase approvals.

And without that designation, two area community colleges and some suburban districts would be permitted to open more charter schools in Detroit.

Bringing the school system’s budget into line can be done, but will require closing more facilities, trimming staff, and keeping a tighter reign on the budget, said Thomas E. Glass, a University of Memphis professor of leadership and a former superintendent in Arizona.

“State funding has been erratic at best,” Mr. Glass said. “Can it be fixed? Anything can be fixed. The question is who is going to fix it. ”

Vol. 28, Issue 06, Page 7

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