School Impact of Detroit Bankruptcy Uncertain

By Jaclyn Zubrzycki — July 18, 2013 2 min read
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The city of Detroit filed for bankruptcy this afternoon. This is the largest municipal bankruptcy in the nation’s history and comes after decades of decline in a city that was once a thriving industrial center.

The Detroit Free Press reports that the filing opens a 30-to-90 day period in which the city’s eligibility for Chapter 9 protections will be determined.

The city owes more than $18.5 billion to creditors, according to Forbes.

The Detroit Public School system is one of the city’s creditors, according to this report from Detroit’s emergency manager Kevyn Orr.

A spokeswoman for Detroit’s public schools said that it was too soon to tell if and how the bankruptcy will affect the city’s schools.

Here is the bankruptcy filing:

The filing will have implications for city workers and pension holders, for the city’s creditors, for lawsuits involving the city—and also for indebted cities around the country, which will likely follow the outcome of this filing closely.

Like the city, Detroit’s public school district is run by a state appointee, who was put in place to address the district’s financial and academic woes. In 2009, when the school system was first taken over by the state, bankruptcy was floated as an option by then-emergency manager Robert Bobb. The district did not declare bankruptcy in the end, but closed a large number of schools. A new emergency manager, Jack Martin, took the reins of the district earlier this month.

Meanwhile, in nearby Inkster and in the beleaguered Buena Vista school districts, state officials are considering the possibility of dissolving the districts altogether. The districts have until Monday to secure loans in order to stay in operation. The Detroit Free Press has more.

UPDATE (3:48 p.m.):
A Michigan judge has ruled that the filing was unconstitutional, the Free Press reports. It looks like the filing may have a long journey through the court system.

In the meantime, David Head, a spokesman for the Michigan Department of Education, said that the implications for Detroit’s schools will be minimal, as the school system is a totally separate organization and funded by the state.

Photo: State-appointed emergency manager Kevyn Orr, left, and Michigan Gov. Rick Snyder, leave a news conference on Friday in Detroit after addressing issues on the city’s bankruptcy. On Thursday, Detroit became the largest city in U.S. history to file for bankruptcy when Orr asked a federal judge for municipal bankruptcy protection. (Carlos Osorio/AP)

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A version of this news article first appeared in the District Dossier blog.