Thursday, March 20, 2014

Detroit Public Schools Under Emergency Management Continues to Run Deficits, Close Buildings

March 20, 2014 at 7:44 am

Detroit schools' deficit jumps $39 million in 3 months

Jennifer Chambers
The Detroit News

Emergency Manager Jack Martin thinks DPS is two to three years away from resolving its deficit. 'I would like to be the last emergency manager,' he said.

Five years after it fell under state control, Detroit Public Schools is still struggling to fix its finances, with its deficit ballooning $38.8 million in the past three months, to a projected $120 million.

Since the state took control March 2, 2009, DPS has shrunk steadily: It lost 37,000 students, shut 100 school buildings and shed 5,000 employees. Annual budgets have been slashed by $500 million in five years. Deficits have risen and fallen; borrowing continues.

DPS partly attributes the rising debt to shortfalls of $10.7 million thisyear in property tax revenue and $21 million in Title I aid.

Federal Title I aid goes to schools with lots of low-income students. DPS had budgeted $130 million in Title I money for 2013-14 but now expects only $109 million. It originally expected $68.4 million in property tax revenue, but now says it will receive just $57.7 million because collection rates have fallen.

In the meantime, as revenue falls short of targets, some operating costs are rising — $19 million in extra maintenance and operations spending, for example.

DPS spokeswoman Michelle Zdrodowski said the district’s chief financial officer is “closely reviewing” the Title I cut, a decision she said came from the state. Zdrodowski said DPS cut its property tax collection rate to match that of the city, because Mayor Mike Duggan reduced residential property assessments.

The financial problems mean DPS is not close to leaving state control. Emergency Manager Jack Martin thinks the district is two to three years from resolving its deficit.

“I’ve always said I would like to be the last emergency manager,” Martin said Wednesday. “There will have to be something in place that, if not an emergency manager, something that maybe looks like or functions with emergency manager powers.”

Martin believes finances are intrinsically tied with enrollment and academic performance in DPS, which once had 300,000 students.

Martin, whose 18-month term ends Jan. 15, said improving enrollment is key to improving finances. And the way to boost enrollment, he says, is to improve academics.

In that area, DPS students have made minimal progress and remain in the bottom for state and national test scores. In 2009, DPS students earned historically low math and reading scores on a test given to urban districts — the worst in the exam’s 40 years. Four years later, DPS scored the lowest in the nation in math and tied for lowest in reading.

Doug Ross, who ran DPS’ self-governing schools — buildings that control their own budgets, operations and hiring — in 2012, said the emergency managers have made progress on finances, but not academics. “However, it really is unfair for us to expect them to produce significant educational gains given their (business) background,” Ross said.

Dan Varner, chief executive officer of Excellent Schools Detroit and secretary of the State Board of Education, said public education at DPS and other city schools has not improved. “I remain disappointed with the lack of progress and think the situation is as urgent as it was five years ago,” he said. “ ... kids in Detroit are still getting a mediocre education.”

Enrollment key for district

Rising red ink and years of mismanagement led the state to take over DPS. In the spring of 2009, then-Gov. Jennifer Granholm named Washington, D.C., insider Robert Bobb to run the 87,000-student, 200-school district. In his early months, DPS’ deficit fluctuated from $259 million to $327 million, as waste, corruption and overspending were uncovered.

Bobb closed more than 30 schools, requiring security guards to escort him in and out of meetings where irate parents demanded his removal.

Reflecting on his two years at DPS, Bobb thinks EMs should be renamed emergency financial and academic managers. “The relationship should be with Michigan Department of Ed and not the Treasury department. As someone who looked at financials, we can fix the financial issues. But what do we do with children?” Bobb said.

In May 2011, ex-General Motors executive Roy Roberts took over and acted quickly to remake DPS. He broke union contracts by imposing a 10 percent wage cut, reduced central office staff and created self-governing schools.

He also turned over 15 DPS schools to the Education Achievement Authority, a new state-run district for low-performing schools.

Roberts retired and was replaced in July 2013 by Martin.

Under Martin, the deficit has swung from $49.8 million as of Oct. 15, to $81.4 million as of Nov. 25, to $120.3 million last month. Enrollment losses slowed this school year, and high school enrollment actually climbed.

Martin says an early retirement plan being offered this spring could save $12 million and health care changes could save $10 million.

“Enrollment is the 1,000-pound gorilla in the room,” he said. “If we can stabilize and increase our enrollment, it really takes care of most of the other problems, the deficit. One way to get to the enrollment numbers we need is through strong academic performance.”

Keith Johnson, president of the Detroit Federation of Teachers, said DPS is better off financially because budgeting and spending controls have been improved since 2009.

Johnson, who leads more than 4,000 union members, said each emergency manager has impacted DPS differently. “Roy Roberts’ tenure as EM did a lot to destroy the culture of DPS,” Johnson said. “ ... He wasn’t willing to negotiate and work collaboratively.”

Roberts says he was a businessman, not an educator, and the district needed a business solution. “There is no question that DPS is better today than it was five years ago — considerably better,” he said Wednesday.

Gov. Rick Snyder, who appointed Roberts and Martin, believes DPS has made progress “both financially and academically,” spokeswoman Sara Wurfel said in a statement.

“Given the financial and population/enrollment free fall DPS was in at the time, it’s hard to fathom where we’d be otherwise absent emergency managers,” Wurfel said.

Differences of opinion

Detroit school board President LaMar Lemmons said state control has hurt DPS. He points to the loss of schools to the EAA and Bobb’s move to take academic control from the board. “It was five years of dictatorship. ... 30,000 students lost,” he said.

Not everyone is disappointed.

Parent Edward Long says he is happy with the education his two children are getting at Cass Tech High School. He sees a future at DPS when there is no emergency manager.

“Five years sounds like a very long time,” Long said. “As a person born and raised here, Detroit has some historical issues — that is the reality of it. My concern isn’t the length of it. I just want the job to get done.”

DPS’s growing deficit

The district saw its deficit increase by $38.8 million over the past three months. Factors include:
■$21 million shortage in Title 1 money
■$10.7 million drop in property tax collections
■$19 million in additional spending for maintenance and operations
Source: DPS budget

jchambers@detroitnews.com
(313) 222-2269

From The Detroit News: http://www.detroitnews.com/article/20140320/SCHOOLS/303200042#ixzz2wVlLdFlb

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