(AP) DETROIT – State education officials have ordered the emergency financial manager for Detroit Public Schools to immediately implement a plan that balances the district’s books by closing half its schools.
The Detroit News says the financial restructuring plan will increase high school class sizes to 60 students and consolidate operations.
[Emergency Financial Manager Robert] Bobb filed his deficit elimination plan with the state in January, saying it would wipe out the district’s $327 million deficit by 2014.
In 1994, Detroit approved a 1.57 billion dollar bond issue for its 175 schools. By 2009, 14 of the schools that had approved spending had been closed down or consolidated. That same year, 2009, Detroit passed a 0.5 billion dollar bond issue for school construction and improvement. According to Detroit Public Schools website, there are now 142 schools in the district. Of course, Detroit is still paying on both bond issues. And closing half the schools would mean reducing the number of schools from 1994′s 175 to 71. In effect, after the closings, Detroit will be paying on capital improvement bonds equaling over 29 million dollars per open school.
It looks like that Porkulus money is coming back to bite the Detroiters who fed at the federal trough, just as the Detroit Federation of Teachers (who actually supported the 2009 proposal) warned.
The leader of the main teachers union of Detroit Public Schools, Mark O’Keefe supports Proposal S. O’Keefe who is the President of the Detroit Federation of Teachers supports the proposal, but has taken Robert Bobb the lead spokesperson of the bond referendum to task over hidden property tax increases.
During a public hearing on October 19, 2009, O’Keefe stated: “what has been said is the taxes aren’t going up, they’re staying at the same level longer.” O’Keefe further pointed out: “any way you cut it, the (stimulus) money is going to have to be paid back” citing the possibility of property tax increases. O’Keefe cited the possibility of property tax increases with having to come up with a local match as The American Recovery and Reinvestment Act of 2009 requires in most cases for government entities who accept these dollars to repay the government. Also, O’Keefe warned school board members and prospective voters that people remember the mismanagement that plagued the 1994 bond referendum was approved and felt that voters in 2009 were more skeptical on approving another high dollar bond referendum.
According to Detroit Public Schools’ own FY2010 budget report (pdf), at a time when the economy was still going strong prior to the 2008 bubble burst, Detroit schools were deficit spending in a big way.
The projected FY2009 Year-End cumulative deficit of $276.8 million – reduced from the original projections at the beginning of the emergency financial period – is equivalent to 43.6 percent of the General Purpose Fund 11 expenditures projected for the year. If budget trends were allowed to continue in FY2010 without corrective action, it is estimated that the deficit would grow to over half a billion dollars by the end of FY2010. This tremendous gap results from seven consecutive years of deficit spending beginning in FY2003.
During the period of FY2002 – FY2009, the District?s only year of positive operating budget results was FY2005, when DPS borrowed $210 million to pay off the deficit at that time, and to cover the underlying imbalance between spending and revenues that was still continuing to grow. At a time when proper stewardship of DPS?s limited resources was most important, difficult decisions were not made, and those that were made were not executed. [page 6]
Over the past decade, there has been a massive decline in student enrollment, a decline that is unmatched by the decline in population.
In the Fall of 2008, DPS enrollment in K-12 was 94,054 – more than 70,000 students fewer than in the Fall of 2000 (166,887). District demographers project a further decline of 10.7 percent (10,277 students) by the Fall of 2009, reducing enrollment to 83,777 students – roughly half of 2000 levels.
While regional economic decline has contributed to this trend, the drop in DPS enrollment far exceeds the decline in City population. In large numbers, DPS students are choosing to leave the system to attend charter schools, private schools, and open enrollment public schools in neighboring communities because of an erosion of confidence in the quality of a DPS education. Throughout the decade, the decisions made to invest more in the status quo than in children have contributed to the District?s downward spiral. [page 7]
More about the student flight later.
Other Key Budget Drivers
Along with declining enrollment, the District budget faces budgetary pressure from multiple factors further detailed in the Summary of Revenues and Summary of Expenditures sections to follow. These factors include:
* Cuts in Michigan per pupil funding as a result of statewide economic pressures;
* Weakness in local property tax receipts due to regional industry, commercial, and housing market decline;
* Extraordinary debt service resulting from the FY2005 decision to pay off the deficit in that year with borrowed funds;
* Rising healthcare and pension costs for District employees, consistent with national benefit cost trends;
* Central administrative staffing that had not been reduced in prior years at a pace commensurate with declining enrollment;
* High facilities maintenance and utility costs associated with aging infrastructure;
* Outdated technology and inefficient practices, resulting in transportation and other operations costs at levels well above national urban district averages;
* Inadequate integration of special education services into the District?s regular education programs, requiring large General Purpose Fund subsidies;
* High rates of poverty and crime in the surrounding community, contributing to greater needs for school security and safety than in other Michigan districts; and
* Historically weak management systems and internal controls, eroding accountability and integrity of the dollars spent by the District. [page 7,8]
As part of the plan to fix DPS’s problems, the FY2010 budget noted that 10 employees were already referred for prosecution(!) while others were referred for termination as a result of Inspector General investigations. In addition, the budget plan included “Employee benefits reform strategies, including dependent eligibility verification, vendor rebids, and plans to negotiate a more affordable healthcare program with the District?s collective bargaining units.”
Over $350 million in General Purpose Fund dollars was allocated to schools for FY2010. This is primarily composed of salary and benefits for over 3,000 teachers. With more than two-thirds of total FY2009 projected District spending on personnel such as teachers, principals, custodians, and security officers, escalating workforce cost trends nationally are particularly difficult for DPS. DPS is projecting to spend $127.7 million on active employee health benefits in CY2009 (All Funds), and underlying costs per employee are expected to increase by approximately 10 percent in FY2010.
According to the State of Michigan, Office of Retirement Services, DPS will need to contribute 116.7 million to the Michigan Public Schools Employees Retirement System in FY2009 (All Funds) for pensions and retiree medical care at a rate of 16.5 percent of salaries. At the start of the decade (FY2000), the rate was just 11.7 percent. Next year, the FY2010 rate will rise again to 17.0 percent. [page 21]
The health and pension benefits to Detroit public school employees paid out on top of their salaries are outrageous and need to be severely cut back. But there’s that collective bargaining thing again, preventing the taxpayers from paying an appropriate amount of tax dollars and instead requiring the taxpayers to give out Cadillac Plans with all the trimmings.
But at least Detroit Public Schools puts out a superior product, right? Oops. From 2004 to 2008, Michigan’s graduation rate has steadily declined from 88.7 percent to 75.5 percent, while Detroit’s graduation rate has been in the 58 percent to 68 percent range. That’s not a good product. But at least test scores are good, right? Well… The Michigan Educational Assessment Program disagrees. While the state of Michigan passes at a rate of 81.0 percent for reading and 82.1 percent for math, Detroit passes at an anemic rate of 59.7 percent for reading and 58.9 percent for math. That “not good” product has become a highly inferior product. It’s no wonder parents are taking their kids out of Detroit public schools and putting them elsewhere. Wouldn’t any concerned parent pull their kids out of such failures for schools?
And why pay for such Cadillac benefits for such failures of educators? Oh, that’s right, TENURE AND COLLECTIVE BARGAINING (financial hostage-taking). You can’t fire the teachers and you cannot pay them what they’re worth because the contract between the union and the union-selected government won’t let you.
But at least they’re hundreds of millions of dollars in the red. Good money after bad.