Decline and Fall

Crisis Financial Manager Tries to Fix Detroit Schools’ Budget
By Dakarai I. Aarons — July 31, 2009 10 min read
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Robert C. Bobb, the state-appointed emergency financial manager of the Detroit public school system, may have the biggest “turnaround” job in the nation.

The district, with an annual budget of $1.2 billion, has a deficit projected as of the end of last month to be $259 million and growing. Over the past 10 years, about half its students have left, leaving enrollment below 100,000 pupils for the first time since World War I. There is talk here in the Motor City that the school district, following the recent examples of Chrysler and General Motors, could go into bankruptcy, a call Mr. Bobb must make soon.

“To turn around the Detroit public school system, you can’t just say you have a sense of urgency. It has to be operationalized at every level of the organization,” Mr. Bobb said in a recent interview. “[W]e don’t have time to tinker around the edges. We have to be bold in our approach.”

“This is a school system which is in crisis,” he added. “Unfortunately, there are those who haven’t come to that reality. It’s difficult for them to wrap their minds around it because they’ve been in that bunker so long.”

In a May visit to Detroit, U.S. Secretary of Education Arne Duncan pronounced the school system “a national disgrace,’’ likening it to “New Orleans a few years ago, [but] without Hurricane Katrina.” He urged the city’s mayor, Dave Bing, to consider taking over the system.

A Decade in Review

March 1999 The Michigan legislature, backed by Gov. John Engler, approves a takeover of the Detroit schools. The mayor appoints six board members; the seventh is appointed by the governor.

September 1999 Teachers strike on the first day of school, forcing schools to close for a week.

May 2000 Colorado Springs, Colo., Superintendent Kenneth S. Burnley is hired as chief executive officer of the school district.

November 2004 Detroit voters reject a renewal of mayoral control and vote for the return to an 11-member elected school board in 2005.

April 2005 Mr. Burnley announces his resignation as the district prepares to return to an elected school board. The budget deficit stands at $200 million.

June 2005 The district’s chief operating officer, William Coleman, is hired to lead the system.

November 2005 A post-mayoral-control school board is elected.

September 2006 Teachers go on strike for 16 days.

March 2007 Mr. Coleman is fired as superintendent three months before his contract ends. Normandy, Mo., Superintendent Connie K. Calloway is hired as his replacement.

September 2008 The state formally declares that the Detroit schools have a “serious financial problem.”

December 2008 The school board places Ms. Calloway and Chief Financial Officer Joan McCray on leave after the state intervention.

February 2009 Gov. Jennifer M. Granholm announces the appointment of Robert C. Bobb as emergency financial manager.

March 2009 The school board fires Ms. Calloway and Ms. McCray, accusing them of financial mismanagement and failure to avoid state oversight. Ms. Calloway and Ms. McCray deny wrongdoing.

Mr. Bobb begins work, and the school board loses its financial authority over the district.

July 2009 The deficit is estimated at $259 million out of a $1.2 billion budget.

SOURCES: Education Week, Associated Press

In the meantime, Mr. Bobb, whose appointment runs through February, is trying to address the result of seven years of deficit spending. The district had a $103.6 million budget surplus in 2002, but failed to aggressively reduce staffing or close largely vacant schools as its enrollment dropped. Observers here say corruption has also played a role.

Cleaning up the financial situation is no easy task. The staff has uncovered more than 500 employees on the payroll whose positions were never budgeted, and contracts in desk drawers that were never accounted for, but were in effect and being paid.

Mr. Bobb says there are “hidden land mines” waiting at every turn. “Every day,” he said, “you are just a little bit surprised as to what you would uncover.”

How did the Detroit public schools come to this point? Keith Johnson, the president of the Detroit Federation of Teachers, has a simple answer: “We accepted the abnormal as normal.”

“It is not normal for students to come into a school that is dirty, that is not properly equipped for their instruction, for them to have to worry about other students with weapons—that’s not normal,” he said. “But we’ve come to accept it as just part of DPS. It’s not normal to have your priority away from the classroom.”

Mr. Bobb, a veteran public administrator who served as the city administrator, deputy mayor, and president of the school board of the District of Columbia, was appointed after a state financial-review team found the district was not making strides to resolve its deficit. The intervention by the state of Michigan resulted in the school board’s firing of Superintendent Connie K. Calloway and her chief financial officer after less than two years on the job. (Ms. Calloway and the former chief financial officer have since filed whistleblower lawsuits against the board.)

Robert C. Bobb is charged with one of the toughest jobs in education - pulling the Detroit school system out of a severe financial crisis.

Since taking the helm, Mr. Bobb has moved swiftly to root out problems and to get the district into working order. He has scheduled 29 schools to close this fall, announced the restructuring of another 40 schools that have failed to make adequate academic progress under the federal No Child Left Behind Act, and hired a former FBI special agent to serve as the district’s inspector general to recommend potential fraud cases for prosecution. More than half the district’s top executive positions have been eliminated, and more than 1,700 employees have received layoff notices as Mr. Bobb works to right-size the district.

In an attempt to get a handle on concerns about “ghost” workers and employee theft, the district issued new identification cards and ordered its 13,600 employees show up in person to collect their paychecks or direct-deposit stubs.

Michael P. Flanagan, Michigan’s superintendent of public instruction, has nothing but praise for Mr. Bobb’s take-charge approach, saying he has “grabbed the bull by the horns.” Mr. Flanagan set the process of appointing an emergency manager in motion last fall, when he declared the district had a “serious financial problem” as defined by state law. (“Detroit School District Again Facing Deficit, Threat of State Action,” Oct. 1, 2008.)

Gov. Jennifer M. Granholm appointed Mr. Bobb in March.

“He’s figured out a way to expose the corruption, and it’s going to change the system,” Mr. Flanagan said of Mr. Bobb. “People are open to this now.” The state schools chief said he took a lot of flak for the state’s appointment of a financial manager to run the district, but said that Detroit residents came to favor the move after seeing the results of Mr. Bobb’s work.

Mr. Johnson, the union president, agreed. “Time will tell if this actually becomes the reality,” he said, “but at least in terms of identifying the corruption, identifying the theft, identifying the wasteful spending, and then putting in some control mechanisms to preventing that from perpetuating itself, it’s a good start.”

The loudest critics of Mr. Bobb’s work here are members of the 11-person school board.

Robert C. Bobb, the emergency financial manager of the Detroit district, reviews his speech before the commencement exercises for summer school on July 24.

Board member Anthony Adams said the elected panel has been frustrated by a “total lack of communication” between Mr. Bobb’s office and the board on academic policy. In fact, the board voted last month to file a lawsuit against Mr. Bobb after he announced a plan to bring in four education management organizations to help redesign 17 of the district’s 22 high schools. The school board plans to contend that Mr. Bobb is overstepping his authority as the emergency financial manager.

“Nothing is gained by not having cooperation,” said Mr. Adams, a former deputy mayor of Detroit and the district’s one-time general counsel. “We are happy to embrace reform, to look at different models of how services can be delivered. Every approval should be occasioned by community discussion.”

Mr. Bobb has taken steps recently to work on his prickly relationship with the board, pledging to meet with members at work sessions to talk about the ongoing work and sharing budget forecasting.

This summer, the district offered its largest-ever summer school program, in an effort to get more students on track. The program, paid for with federal money, was free to the more than 33,000 students who participated. More than 400 students graduated in late July as a result.

Mr. Bobb has hired Barbara Byrd-Bennett, a former superintendent of the Cleveland school district and a former deputy chancellor of the New York City schools, as chief academic and accountability auditor. In this consulting role, Ms. Byrd-Bennett has analyzed reports on the Detroit schools—completed recently by the state review team and the Washington-based Council of the Great City Schools—to craft a long-term academic plan. (The system is under a state decree to implement the council’s findings.)

“When I’m gone, when Mr. Bobb is gone, there will be a rubric, a pathway, a culture of doing business in a very short time that will be sustainable,” Ms. Byrd-Bennett said in a recent interview. “Then, it will be about will. Do people have the will to do what is right? The road map and the tools will be there. And that’s a very different question.”

In her meetings with principals and other staffers, Ms. Byrd-Bennett said, she’s found many people willing to work harder to produce academic gains, but she has concluded that the district has lacked the strong professional development and other supports staff members needed.

“This is the first time we’ve had leadership at DPS where the primary focus of everyone has been about improving student achievement,” said Carol A. Goss, the president and chief executive officer of the Skillman Foundation, a local philanthropy that has worked extensively with Detroit schools. “[Mr. Bobb] really talks about it in the context of teaching and learning and preparing students for 21st-century jobs. It’s exactly what we have been hoping for DPS for so long. The thing I worry about most is how we sustain that.”

Mr. Bobb has been able to attract outside support for his efforts. The Los Angeles-based Eli and Edythe Broad Foundation has contributed $450,000 for an 18-month contract with Philadelphia-based Public Financial Management Inc., which is helping Mr. Bobb devise a deficit-elimination plan and create systems for budgeting and accounting. In addition, foundation staff members have gone to work on the ground.

Mr. Bobb is a 2005 graduate of the Broad Foundation’s urban-superintendents academy.

The Enrollment Cliff

The number of students attending the Detroit public schools has declined sharply over the past decade. Next year, the district is projected to have just more than half the number of students it had in 2001.

The Enrollment Cliff

SOURCE: Detroit Public Schools

David Esselman, an associate director of the foundation who is helping Mr. Bobb create an operations plan to organize and communicate the initiatives under way, said he’s been encouraged by the willingness to change he’s seen among Detroit school employees. In many cases, he said, central-office managers hadn’t felt the freedom to do their jobs.

“What I’ve found internally is that there are a lot of good midlevel managers in the system. It’s been great for us to build empowerment for them. It was a big surprise for us,” Mr. Esselman said. “It’s been really outrageous to see the level of corruption, malfeasance, and fraud by leaders in the system in the past.”

Eli Broad, himself a graduate of Detroit’s public schools, echoed Secretary Duncan’s comparison of the devastation in Detroit to that of New Orleans’ school system following the hurricane.

“If you look at what happened in New Orleans after Katrina, that’s been a dramatic turnaround,” Mr. Broad said. “I’m not saying it’s a perfect analogy. But you really have to almost start over in Detroit. [Mr. Bobb’s] got a big job, and we are trying to help him any way we can.”

Mr. Bobb’s tenure as emergency financial manager ends Feb. 28 unless he and Gov. Granholm, a Democrat, agree to an one-year extension. The short time frame makes the work more challenging, Ms. Byrd-Bennett said.

“Because it’s so intense and the time constraints are so definitive, we don’t have a moment to lose. The stakes are high on this one,” she said.

What will come next is anyone’s guess. Michigan’s attorney general ruled recently that the Detroit school system, because its enrollment has dropped below 100,00 students, has lost its “first class” status under state law. That means two area community colleges and some suburban districts are now permitted to authorize more charter schools in Detroit.

The dire financial situation may prompt Mr. Bobb to recommend filing Chapter 9 bankruptcy, which allows for the restructuring of governmental units. The Detroit Federation of Teachers, an affiliate of the American Federation of Teachers, adamantly opposes bankruptcy because it would allow the district to break its contract with employees.

Along with the U.S. secretary of education, Gov. Granholm, among others, has voiced support for a return of mayoral control to the Detroit school system. Many residents, however, are wary after such an effort from 1999 to 2005 left the district with a $200 million deficit and scant academic gains.

Mayor Bing, a Democrat who succeeded to that office in May and faces a November election, has said he would support mayoral control of schools if it came from a local referendum. His office did not respond to requests for an interview.

Mr. Broad, for his part, is optimistic about Detroit’s chances under Mr. Bobb.

“Something good has to happen out of all of that. You cannot go back to what it was,” he said. “If you have mayoral control, and you have Robert Bobb there with the support of the governor, I think there’s a chance of creating a different system of schools, rather than just one school system.”

Coverage of leadership is supported by a grant from The Wallace Foundation, at www.wallacefoundation.org.
A version of this article appeared in the August 12, 2009 edition of Education Week as Decline and Fall


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