School & District Management

Detroit Schools Bankruptcy Analysis Wrapping Up

By The Associated Press — August 06, 2009 2 min read

The Detroit schools’ emergency financial manager on Thursday backed off of earlier statements that the cash-strapped district may be headed toward bankruptcy.

Robert Bobb announced in July that his office had meetings with lawyers and a former federal judge to debate the merits of Chapter 9 bankruptcy to help bail out the district.

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Read this story for more on Robert Bobb and his efforts to close Detroit’s budget deficit.

Bobb said Thursday during the unveiling of an ambitious student retention campaign that he is not sure whether bankruptcy “is the best course of action” for the district, which faces a deficit of at least $259 million and plummeting enrollment.

Chapter 9 allows government units to restructure debt, and potentially, even contracts. But Bobb said the district already has worked with most of its creditors to slash more than $3 million in debt.

Keith Johnson, president of the 7,700-member Detroit Federation of Teachers union, argued against bankruptcy, saying it would imply the district is “broke” and send the wrong message to the parents it’s trying to keep.

“Bankruptcy would be the most expedient way to eliminate the district’s deficit, but I believe the adverse impact would offset that,” Johnson said Thursday.

Salaries and benefits for Detroit Public Schools employees take up about 85 percent of the district’s budget. The administration and unions are in contract negotiations leading up to the Sept. 8 start of school.

Bobb has been on the job 157 days. Appointed by Gov. Jennifer Granholm to correct district finances, he ordered 29 schools closed by this fall and laid off 1,700 employees, including more than 1,000 teachers.

A number of audits have revealed unchecked spending, fraud and little oversight.

One recent check revealed more than 500 ineligible people on district health care plans. Without those health and life insurance costs, the schools will save $127 million annually.

A separate public safety audit found an undocumented inventory of 11 motorcycles, 160 BlackBerries, 97 two-way phones and dozens of medal detecting stations and wands.

Indictments or arrests stemming from the audits are expected, Bobb said.

“We continue to dig,” he told Detroit-area media executives in a meeting Thursday. “You have to be serious about fraud, waste and abuse, and ferret those things out.”

During the meeting, Bobb pitched the “I’m In” campaign, designed to halt the exodus of students from the district and persuade some parents to return their children to Detroit schools.

Detroit’s falling population, along with competition from charter schools and suburban public schools, helped reduce the district’s enrollment to less than 100,000 last fall.

Fewer students mean less money coming in. The district receives $7,550 per student from the state.

Symbols of the “I’m In” effort will be 172 blue wooden doors. The doors — one for each of the district’s schools — are meant to remind parents about an improved curriculum and commitment to excellence. They will be displayed later this month in downtown’s Hart Plaza and on Belle Isle over Labor Day weekend.

The campaign also will feature snappy radio and television ads extolling the benefits of a Detroit Public Schools education, Bobb said.

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