Detroit schools get $231M loan from state to help pay employees, vendors

Mar 4, 2011

The Detroit Public School district received a $231 million dollar loan from the state. 

The loan will help the district with "employee payroll and vendor payments," according to Steve Wasko, a spokesman for the district. He says the loan won't help with any of the district's long term financial problems:

  1. $327 million budget deficit.
  2. $161 million dollars in budget cuts if Governor Rick Snyder's proposed education cuts go through.

Michigan Radio's Sarah Cwiek filed a story for NPR about the district's $327 million budget deficit. Here's an excerpt:

With Detroit's public school district facing a $327 million budget deficit, the state-appointed Emergency Financial Manager has proposed closing half the district's schools and putting up to 60 kids in a classroom.

Robert Bobb admits that his deficit elimination plan could be disastrous for students — he calls it "draconian" — but he may have no choice but to implement it.

In January, he gave the plan to the state of Michigan, warning that it's the only way for Detroit Public Schools to "cut its way out" of its deficit. The state's department of education says that's exactly what Bobb should do.

"We're working through some very difficult and challenging budget situations," Bobb said last week. He backed away somewhat from one of the plan's most staggering provisions: 60 kids in some classrooms. But he says class sizes will go up as the district closes about half its schools.

The plan also calls for replacing individual school principals with regional ones, and cutting all general bus service.

Lots of Michigan districts take out short term loans in August to help pay employees and vendors because districts' fiscal year is out of sync with the state’s fiscal year. The Detroit Public Schools district borrows twice a year for cash flow purposes - in August and March.