The Critical Nature & Tie of Education to Municipal Fiscal Sustainability

eBlog

March 26, 2015
Visit the project blog: The Municipal Sustainability Project

Detroit’s ABC’s of Bankruptcy. In Monopoly, if one gains a “Free Get Out of Jail” card, one’s chances of winning are improved. But gaining federal judicial approval to exit from the largest municipal bankruptcy in history offers no such equivalent benefits. In all the juggling Michigan Gov. Rick Snyder, Detroit Mayor Mike Duggan and the Detroit City Council must now confront if Detroit is to have a sustainable human and fiscal future, getting the ABC’s of fixing the city’s school system are critical. That promises to be a tall order: “By most measures, Detroit’s school system (DPS) remains in a financial free-fall,” Shawn D. Lewis of the Detroit News wrote yesterday. The system is $53 million behind in its public pension obligations—an unexcused tardiness that has triggered the already virtually bankrupt entity $7,600 a day in interest penalties; DPS is on pace to be $81 million behind in mandatory pension contributions by July 1, according to Michigan state records, but that is before counting in the additional late homework debt of $78,000 in fees for each month the Motor City’s system DPS remains delinquent — a sign Ms. Lewis writes of “worsening finances for Michigan’s largest school system as it continues to rack up debts and hemorrhage students and cash. Forgoing required contributions for pension payments mirrors a cash-hoarding tactic the city of Detroit pursued in November 2012 — nine months before declaring bankruptcy.” DPS now has a projected fiscal deficit of $166 million this year; at the same time, DPS is running an increasing human deficit: its enrollment has dropped to 47,238 students this year, less than a third of a decade ago―and this notwithstanding state oversight for 12 of the past 15 years and the recent arrival of its fourth state-appointed emergency manager, or, as Ms. Lewis writes: “The Detroit district has run a deficit in nine of the last 11 fiscal years, sometimes papering over its debts with borrowing against its future school aid revenues. It has resulted in a net accumulated deficit of $1.28 billion during that period.” Is a meaningful, long-term recovery from municipal bankruptcy and a fiscally sustainable path to the future for the Motor City’s fiscal future absent a reversal of its nearly two-thirds population decline – and its fiscally deteriorating and unsustainable perception of its public school system possible? The gravity of this fiscal challenge to Detroit’s future now, it appears, lies not with retired U.S. Bankruptcy Judge Steven Rhodes, but rather with the Coalition for the Future of Detroit Schoolchildren, formed to look for ways to try and address—and turn around―Detroit’s long-troubled educational system. The coalition has been examining how the city’s fragmented school systems impact student outcomes and efficiency in operations; it is looking to outside education experts from Detroit and across the country in an effort to identify the best ways to improve the city’s broken education system. The leaders of the 31-member Coalition, which include Skillman Foundation President and CEO Tonya Allen; the Rev. Wendell Anthony, Fellowship Chapel and President of the Detroit branch of the NAACP; David Hecker, president of AFT Michigan/AFL-CIO; John Rakolta Jr., CEO of Walbridge Aldinger Co.; and Angela Reyes, executive director of Detroit Hispanic Development Corp. expect to issue its findings and make recommendations for making Detroit’s school system more equitable, accessible, and successful for all Detroit children next Monday―a report Ms. Allen notes in which the coalition will “share a common belief that Detroiters should have a say in coming up with solutions that can make Detroit schools work for kids, and that now, as the city is recovering in so many other ways, is the time to make real change happen.” The coalition appears to understand that Detroit’s road to economic recovery will be neither sustainable, nor even possible if people do not have confidence in the city’s education system: “Detroit’s vitality and global competitiveness is linked to its schools, which are educating our future workforce.”

Borrowing that Could Bankrupt Detroit’s Future. High administrative and special education costs and debts―nearly $1,200 in DPS funds now are diverted―per student―toward paying off past operating deficits: an unsustainable fiscal road to perdition that officials report will handcuff DPS at least until 2022: this is debt service burden which is reported to be higher than virtually any other Michigan school district, according to state officials, with the debt—and late fees―owed to the Michigan Public School Employees Retirement System. That means that of the amounts left for actual classroom education of the Motor City’s children, out of the $14,444 DPS budgeted per child last year, just 27 percent went toward basic classroom instruction—a signal disparity from other school districts in the metropolitan region, and less than half the statewide average, according to a Detroit News analysis of the 2013-14 spending data. In contrast, the Detroit school system has among the highest per-pupil costs for administration ($1,963 per student) in the state, among districts with more than 1,000 students, with Ms. Lewis noting: “Even with cost-cutting state emergency managers, the district’s 204 central office employees last year are more than the 200 it had a decade ago when there were 100,000 more students and 5,000 more teachers.” Even though DPS drastically undercuts its investment in the city’s future workforce, it faces a special needs population considerably higher than the state average: close to one in five DPS five students receives some form of special education services: “Special-needs students have been a rising share of Detroit’s enrollment since 2003. And a geographically large footprint and the district’s competition with charter schools and suburban districts for students compound its transportation costs. Its average cost to bus a student — $651 — is twice the cost elsewhere in Wayne County, according to state data.

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