DPS faces bankruptcy if lawmakers don't act

Posted: 6:49 PM, Jan 14, 2016
Updated: 2016-01-14 18:49:38-05

State Superintendent of Schools Brian Whiston says lawmakers need to urgently take action to address the Detroit Public Schools debt. The district is on track to run out of cash to pay for any operations by April.

"They will have to file bankruptcy," said Whiston of the district's options if no action is taken.

Whiston warns a Detroit Public Schools bankruptcy will have more significant ramifications for the state than the Detroit City bankruptcy.

"When the city filed bankruptcy, they were able to negotiate lower debt right? If the schools file bankruptcy there is no negotiations," explains Whiston.

All of the debt will become the state's responsibility.

"There would be about $100 million in legal fees. Then the state is responsible for the debt," said Sen. Goeff Hansen (R-Muskegon).  "It is over a billion and a half dollars that the state would be on the hook for."

On Thursday Sen. Hansen introduced Senate Bills 710 and 711.

The bills follow a plan proposed by Gov. Rick Snyder last year.  They would create two school districts. 

Detroit Public Schools would be the "old district" - only responsible for debt. It would still collect millage money to pay off the debt. It would not run schools. 

A "new district" called the Detroit Community School District would provide education. 

The legislation would provide $250 million from the state's general fund to start the new DPS district.  It promises $515-million to pay district debt.

It does not say where the money would come from.

"Whats controversial about it is they are talking about taking school aid money," said Sen. Coleman Young III, (D-Detroit). "And you got people in other districts like -'Whoa! Don't do that'."

He and other lawmakers say someone needs to say where the money would come from.

The legislation calls for the commission that reviews Detroit finances since bankruptcy to oversee finances for the new district until debt is repaid. 

The elected school board in place without power right now due to emergency management would never be given power.  A new school board would be elected in November, and would take power in January 2017.  Until then the board would be made up of appointees chosen by the mayor and the governor.

Detroit lawmakers and the state superintendent of schools say the bill doesn't do enough.

Superintendent Whiston says he wants to see funded academic reforms added to the bill, as well as a plan to manage the choices parents have.

He says some areas of the city have too many schools, and others have too few.

"We also need to put Detroit Public Schools on a level playing field with the charter schools. If we don't address that we'll be back here in a year," said Rep. Brian Banks (D-Detroit).

He says, right now, DPS has financial obligations outside of the debt that has accumulated that charter schools don't have.

Plus, Detroit lawmakers ask, is the bill doing enough to cover the debt?

"Why not have an audit to get an accurate accounting of what the debt actually is?" asked Rep. Sherry Gay-Dagnogo (D-Detroit), a former school teacher. "Under emergency management there has not been transparency."

The district has been under non-stop emergency management since 2009.