State approves loan for Detroit Public Schools requested by emergency manager

Aug 20, 2014

A state emergency loan board  agreed to lend the Detroit Public Schools $111 million to make up for a funding shortfall, on the same day state schools superintendent Mike Flanagan approved the district's new deficit elimination plan.

The state expects to lend about 200 school districts money to help them start the school year. That is normal in Michigan, which doesn’t send its first school aid payments until October.

Credit Mercedes Mejia / Michigan Radio

But in Detroit, the process has pitted the school board in the state’s largest district against its emergency manager.

DPS emergency manager Jack Martin says the district needs $111 million to get through the first two months of the school year, while the Detroit school board put in an alternative plan to borrow just $81 million.

On Wednesday, the state Emergency Loan Board (ELB) sided with the emergency manager. State officials say that was the right decision.

“I don’t believe the (school) board’s proposal included as much background and data supporting its argument, its position,” said Terry Stanton, a spokesperson for the Michigan Department of Treasury. “And the ELB determined that borrowing $81 million simply wouldn’t be sufficient to address some of the significant cash flow issues the district has.”

The district is battling a $127 million deficit, up about $33 million from the prior year. That's due mostly to a failed millage proposal the district had budgeted for.

Earlier Wednesday morning, the Michigan Department of Education approved DPS’ plan to tackle its deficit. That plan calls for cutting teacher and other support staff pay by 10% starting in October, and closing 24 schools through 2019.

As that happened in Lansing, DPS teachers, parents and community activists gathered in Detroit to protest the plan. They say that after five years of cuts imposed by state-appointed emergency managers, this new round could harm the district beyond repair.

Pastor Steve Bland called the plan "insulting." “I understand issues of cutting fat, but we’re cutting bone," Bland said. "We’re down to bare minimum.”

Parent Arlyssa Heard said she wants to keep her kids in DPS. But with many class sizes now exceeding 40 students, it's getting harder to justify.

“When we keep getting to crossroads like this, you force parents to have to make other decisions," Heard said. "We don’t have time to waste. My son’s a third-grader, but I can’t spend the next nine years fighting this.”

The Detroit Federation of Teachers calls the new plan "devastating." The union says it's mulling its legal options to fight the imposed pay cut.