After six years and four state-appointed managers, Detroit Public Schools’ debt has grown even deeper

After six years and four state-appointed managers, Detroit Public Schools’ debt has grown even deeper

Part One of two.
Click here for Part Two of Curt Guyette's series on Detroit Public Schools.

On a recent night when temperatures hovered near zero, Aliya Moore and her two school-aged daughters bundled up for the 20-minute drive from their home in northwest Detroit to the Frederick Douglass Academy, a public school not far from Midtown.

They made the trek through the bitter cold to join about 40 others for a meeting of public officials who've been stripped of all their power — the Detroit Board of Education. The board discussed legal action to challenge the appointment of yet another state-appointed manager to run the district — the fourth in less than six years — and floated the idea of seeking an independent audit. To pursue either of those things, the board would have to figure out how to do so with no district funding — which has also been eviscerated by order of the emergency manager.

Until a few years ago, Moore never bothered coming to meetings like this. For a long time, she confesses, little thought was paid to either the board or the emergency manager.

It's not that she didn't care about the quality of education her children receive. She cares deeply. But as long as things were going well at her neighborhood school, she didn't feel the need to become enmeshed in the conflicts surrounding the district's long-standing financial crisis.

And things were very good at the Oakman Elementary-Orthopedic School, specially built in the 1920s to accommodate the needs of children with physical handicaps.

Moore's eldest daughter, 13-year-old Chrishawna, had been going there since kindergarten. Tyliya, now 7, spent much time at Oakman as well, accompanying her mom on frequent visits to do volunteer work there.

Neither child has a disability. Instead, Moore liked that the school was within walking distance of their home. More than that, though, she wanted Chrishawna and Tyliya to learn about diversity and how to get along with a variety of other children.

In that respect, Oakman offered a special opportunity.

The girls say they loved it there, and formed close relationships with the other kids and the staff, most of whom had been at the school for years.

When it was announced that the place would close in 2013 in an attempt to help narrow the district's perpetual budget gap, the community rallied in an attempt to save it. Activists and parents joined students, drawing widespread media coverage.

But the protests, heart-rending as they were, failed.

That's in line with the purpose of Michigan's emergency manager law, considered by experts to be more far-reaching than any other like it in the nation. Given vast authority over financially struggling cities and school districts, appointed emergency managers can make unpopular cuts without having to worry about being voted out of office by irate constituents.

So Oakman's doors were boarded up and its students sent to other schools less well-equipped to meet their needs.

And Moore was transformed into an activist.

"Unless it is affecting you, you don't get involved," she said. "You think, 'That's not my fight.'"

Because of its unique qualities, she believed the school would survive no matter how bad the district's finances grew. She called it, "being in my Oakman bubble."

"We thought they would never close Oakman," said Moore.

But close it did.

Now, its interior ravaged by scrappers and badly damaged by the elements, Oakman is unlikely to ever reopen.

Moore has a hard time accepting that.

"I hear people say, 'Let it go.' But I can't let it go," she said.

For her and others, Oakman has become a symbol.

"Why would you attack the smallest and most vulnerable?" asked Moore, who is featured in a recent documentary that chronicled the unsuccessful fight to save the school and exposed what advocates say was the district's duplicity in justifying its actions.

Moore considered the closure an assault on her "babies," meaning not just her own girls but roughly 320 children attending Oakman. So she turned to the school board for help.

That's when the full effect of living in a school district under the control of an emergency manager began to sink in.

The board can't set policy. Its members have no say in selecting the district's superintendent or where resources are directed. Board members can hear complaints from parents but have no ability to take any meaningful action. And they were powerless in trying to block the closure of Oakman, or any other school.

As some of the members are prone to say, they are a "board in exile."

The state takeover — at least the most recent iteration of intervention — began in March 2009, when Robert Bobb, a former president of the Washington, D.C., Board of Education with much experience as a city administrator, was appointed emergency financial manager of a district then responsible for educating some 95,000 students.

Now, nearly six years later, that number has plummeted by nearly 50 percent, with 48,900 students enrolled in the district, according to the most recent numbers posted online by the district.

The number of schools has fallen dramatically as well, down to 103, with more closures slated. There were 198 DPS schools during the 2007-08 school year, the last full year that an elected board had full responsibility for overseeing the district.

In one of the news stories about Oakman's closure, it was reported that the school would be one of four shuttered by the district after the conclusion of the 2012-13 school year. At the time, EM Roy Roberts — the second of four appointees to run the district — promised there would be no more after that because DPS was finally getting its financial house in order.

Roberts' promise proved to be false.

A revised deficit elimination plan submitted last year by Jack Martin, the emergency manager who succeeded Roberts (and who has recently been replaced by yet another EM), calls for the closure of 24 more schools and other district-owned buildings in the coming years in an attempt to produce a balanced budget and eliminate the accumulated "legacy" deficit.

That tide of red ink — annually amounting to tens of millions of dollars, and sometimes hundreds of millions of dollars — isn't the only legacy DPS is dealing with.

The district's struggles can be traced to a skein of historic factors, beginning with the city's long-declining population, a trend that started in the 1950s and continues today.

Another major factor was the approval of 1994's Proposal A in a statewide referendum that radically changed the way Michigan finances education, shifting from a primary reliance on local property taxes to a "per pupil" foundation grant provided by the state.

The two factors — the continued loss of students and the state funding that comes with them (currently $7,296) — combined with a host of other problems to throw the district into a long downward spiral.

In an attempt to reverse that trend, the state has tried twice in the last two decades to address the crisis — not by addressing the underlying structural issues, but by usurping the elected board's power.

The first big shift came at the end of the last century.

In 1999, then-Gov. John Engler signed into law Public Act 10, which removed the elected school board and replaced it with a seven-person "reform" board, with six members appointed by the mayor (Dennis Archer at the time) and the state superintendent of public instruction serving as the seventh member.

The rationale for taking such an extreme step was laid out by the defense in a lawsuit challenging the constitutionality of the takeover law:

"The Reform Board came about as a result of a desire to improve the Detroit Public Schools, a school system many had identified as in distress. In 1997, the old school board initiated a study of the Detroit Public School System. The board asked New Detroit Inc., a nonprofit group whose mission is to improve the social and economic status of Detroiters, to conduct this study and to provide specific recommendations for improvement. New Detroit constituted a Review Panel, and the Panel spent hundreds of hours studying the Detroit Public Schools.

"In July 1997, the Review Panel issued a report. The report found serious problems with the governance, administration, management, finance, and operations of Detroit Public Schools. The report also noted that Detroit Public Schools students score poorly on achievement tests and that Detroit Public Schools suffers from a high dropout rate. The report recommended immediate and fundamental change at every level."

The court upheld the law.

For those fighting the takeover, it was a bitter loss.

"When the 1999 takeover was implemented, DPS had modestly increasing student enrollment," wrote public-school advocate Russ Bellant in a 2011 report by Critical Moment, a local independent magazine. "The District had a $100 million positive fund balance and academic scores in the broad mid-range of districts in the state. There was no performance justification for the takeover."

"The conventional wisdom," contended Bellant, "is that the actual reason for the takeover was to take control of $1.2 billion remaining from the $1.5 billion bond approved by voters in 1994. It was a golden egg that tempted too many in Lansing and Detroit."

In November 2004, as the result of a sunset clause in PA 10, Detroiters were able to decide whether they wanted the "reform" board to remain in place or return power to an elected board. The results were overwhelming. By a margin of 2-1, Detroiters voted to have an elected board.

Voters went back to the polls in November 2005 to select the new board, which was installed two months later. One of the first orders of business was figuring out how to recover from the actions of the reform board, which had taken a $100 million surplus and turned it into a $200 million deficit.

Despite the scope of the problem, the elected board wasn't given much time to fill that substantial hole. In a little more than three years, the state would again intervene.

In January 2009, Democratic Gov. Jennifer Granholm turned to what was then a little-used state law, Public Act 72, to appoint an "emergency financial manager" charged with addressing the district's ongoing financial troubles.

She chose Bobb.

"Robert Bobb is a proven leader who brings valuable expertise in financial and executive management and a passion for urban education," Granholm said when announcing Bobb's appointment. "Robert has the ability to get the Detroit Public Schools' fiscal house in order so the district can devote its attention to ensuring that every student receives a quality education."

There was controversy as well.

"It turns out [Bobb is] a recent graduate of the Broad Foundation's Superintendent Academy. The Broad Foundation, along with the Kellogg Foundation, pays Bobb $145,000 a year on top of his $280,000 government salary," wrote Susan Adams of Forbes magazine. "For those of you not familiar with Broad, it is one of the leading foundations promoting school choice and privatization across the country."

In theory, the relationship between Bobb and the elected board was supposed to be a power-sharing arrangement. The emergency financial manager law limited the scope of Bobb's authority to strictly financial matters, with academics and related issues remaining under the purview of the elected board members and the superintendent they'd hired.

At least that was the board's interpretation.

Bobb had a much more expansive view of his authority, saying, "If a penny touches any of the issues involving the Detroit Public Schools system, then I am engaged and involved."

He wasn't going to let the board stand in the way of that.

"We're moving forward with our plan," he said six months into his tenure. "At this point it's up to the school board whether they and we are going to work together."

The board, believing the law was on its side, chose to fight. Meanwhile, in terms of what was clearly his responsibility — trying to balance the district's budget — Bobb was clearly failing.

Bobb did not respond to requests to be interviewed for this story.

After having vowed to put the district in the black by producing a multimillion-dollar budget surplus in his first year, the actual results were dramatically different.

"Instead of a $17 million surplus Bobb projected for this fiscal year, spending has increased so much Bobb is projecting a $98 million deficit for the budget year that ends June 30," The Detroit News reported in March 2010.

A year later, the district's financial situation had grown so dire Bobb had to go before the state legislature seeking its help. He wanted lawmakers to approve what was termed "bond security legislation" — basically a state promise to cover debt payment to assuage lender fears that the district might go bankrupt. Without such a guarantee, lenders were demanding interest rates that would be crippling.

To help assure legislators that the district was being run responsibly under his control, Bobb touted his efforts at cost containment. Those measures included slashing the district's work force by more than 25 percent, privatizing custodial and other services, and establishing the Office of the Auditor General, which he said had "conducted 220 audits and 29 investigations. The audits helped to strengthen internal controls for cash management and improved operations in food services, finance, athletics, payroll, and public safety. The investigations conducted by the OAG have resulted in several cases being turned over to the Inspector General for further review."

Bobb also instituted other far-reaching budget cuts that included closing 59 schools in the span of two years. Despite all that and more, the district's financial situation continued to deteriorate, with Bobb blaming the problem on "unanticipated" revenue declines. Critics pointed to the high-priced consultants and contractors Bobb brought in as a factor.

Of particular note was Barbara Byrd-Bennett, hired by Bobb on a nine-month contract to be the district's chief academic and accountability auditor. She received a salary of nearly $18,000 a month plus an armed personal driver. In addition, Byrd, a former chief executive officer of Cleveland's public schools system, "brought with her at least six consultants who are collectively being paid more than $700,000 for about nine months of work," according to a 2009 Detroit Free Press article.

Whatever the cause, the DPS' sinking bottom line was this: The deficit had grown to $284 million under Bobb's watch.

No one could dispute that the ongoing loss of students was a major factor.

The district had lost "83,336 students in the last decade, representing a decline of more than 50 percent and at a rate much higher than the loss in population within the city of Detroit," Bobb told legislators. That resulted in "a related decline in state aid of more than $573 million since 2000 alone."

In the midst of closing dozens of schools, declining enrollment, teacher pay cuts, and layoffs, Bobb put great effort into an ultimately successful campaign to have Detroit residents approve a $500 million bond issue, with the money used to build eight new schools and modernize 10 others.

The loan would be repaid by extending for six years an increased millage tax placed on the city's property owners.

Part of the reason school enrollment fell at a rate much higher than the city's overall population could be traced to other "reforms" passed during the Engler administration in the 1990s. The establishment of both charter schools and school choice legislation — implemented on the stated theory that increased completion would force schools to improve in order to attract students much as if they were "customers" in the free market — added to enrollment declines at DPS.

Consequently, Bobb needed the legislature's backing to facilitate borrowing more than $200 million required to help keep the district solvent.

Such borrowing would be an integral part of the strategy employed by Bobb and his state-appointed successors in coming years as they struggled to stem the district's relentless tide of red ink.

As for the fight for control over academics, a court win for the elected board turned out to be a pyrrhic victory.

In reaction to what many in Detroit Public Schools saw as Bobb's overreach, the elected school board sued in an attempt to curtail his efforts to control academics as well as the district's finances.

In December 2010, Wayne County Circuit Court Judge Wendy Baxter ruled in favor of the board, saying it was responsible for curriculum issues.

"Ironically, Judge Baxter's ruling comes a year almost to the date after the announcement that Detroit's schoolchildren ranked lowest in history on a national math test," said Bobb in response at the time. "Judge Baxter's ruling is a step backward and endorses the past academic policies which, along with the financial practices and the overall direction of the school district, were a total failure."

He didn't mention that, at that point, the elected board had only had control for three of the previous 10 years. But it really didn't much matter for him personally, because Bobb would be on his way out of town within six months.

More significantly, Republican Rick Snyder was about to move into the governor's office at the start of January 2011.

One of the first orders of business after Snyder became governor was passage of a law that greatly expanded the powers of emergency financial managers. Public Act 4 was seen by many as a direct response to the Detroit Board of Education's court victory limiting the scope of Bobb's power.

The change was reflected in the title given to appointees assigned to financially failing cities and school districts. Instead of being emergency financial managers, they were simply "emergency managers," with a range of authority unequaled anywhere else in America.

These emergency managers could end contracts (including collective bargaining agreements), sell off assets, abolish and create local ordinances at will, change governmental structures, and determine what, if any, authority elected mayors, city councils, and school boards could have.

In regard to school districts, they were given unilateral control of academic policies — which is exactly the broad authority Bobb wanted, and his replacement, retired General Motors executive Roberts, would have.

Then lose.

And then regain.

In reaction to the sweeping powers granted to emergency managers under PA 4, a petition drive was immediately launched to let voters statewide decide if they wanted a law that far-reaching. When it finally qualified for the ballot in August 2012, it was automatically suspended. When that happened, appointed emergency managers such as Roberts reverted to being emergency financial managers with more limited authority. In November of that year, voters soundly rejected the law.

The response by conservatives in the legislature was to quickly pass Public Act 436, which looked much like its predecessor in many ways. One major difference, however, was the attachment of appropriations. That made the new law "referendum proof."

When the law took effect in March 2013, Roberts regained complete authority over all aspects of the district.

But the district continued to lose students and the money that came with them. What made things different at the start of the 2012-13 school year was that much of the bleeding could be directly attributed to a self-inflicted wound.

Created at the behest of Snyder, a unique school district called the Education Achievement Authority was initially tasked with taking over 15 of Detroit's lowest-performing schools. It was created through a little-used state law that allows two units of government to form a new entity. In this case, the signatories to the agreement were Eastern Michigan University and Detroit Public Schools' emergency manager.

The EAA opened its doors in September 2012, and the impact on DPS was both immediate and severe.

In a financial report submitted to the state, DPS reported:

"A continuing financial and budgetary challenge for the District is the continuing decrease in pupil enrollment. Over the past several years, the District's pupil enrollment decrease has averaged approximately 10 percent. ... The most significant factor driving higher than normal enrollment for fiscal year [2012-13] was the transfer of 15 schools along with their students (11,000 pupils) to the Education Achievement Authority ..."

The EAA has been mired in controversy since its inception. EAA Chancellor Veronica Conforme, in an attempt to improve both the district's academics and its badly tarnished public image, recently announced a major overhaul intended to give individual schools more autonomy and freedom to innovate.

The only apparent positive for DPS in all this is that enrollment has declined significantly at the EAA,with many of these students apparently returning to the district.

With regard to academics, there's ongoing dispute regarding how well students have done since the state stepped in six years ago.

Getting to the truth of that matter is difficult, in part because there are multiple ways to evaluate the state's standardized test results, a main measure of student achievement.

Take, for example, this statement made in a DPS publicity brochure:

"Since 2010, Detroit Public Schools students' standardized assessment scores [showing their proficiency in different subjects] on the Michigan Educational Assessment Program (MEAP) have risen in 14 of 18 subjects/grades tested. DPS closed the gap with state peers in a number of categories. For example, in the vital Reading assessments, DPS closed the gap (demonstrated increases in performance exceeding statewide increases) in 5 of the 6 grades tested."

If, however, you look at how those proficiency scores compare to those of students across the state, the results appear quite different.

"Since the state intervened in 2009, an overwhelming majority of non-charter public school students in Detroit continue to lose significant ground when compared to their peers across the state," according to an extensive analysis of MEAP scores done by Wayne State University education professor Thomas Pedroni, who heads the university's Leonard Kaplan Education Collaborative for Critical Urban Studies.

Also significant, when making comparisons to previous years, is the fact that the recent test scores touted by the DPS do not include the EAA.

In July 2013, Snyder announced that Roberts was being replaced by Martin, then chief financial officer for the city of Detroit. Among other things, Martin had also served a short time as the emergency manager of Highland Park's public schools.

"Detroiters and Michiganders alike are thankful for Roy's leadership, and we are deeply committed to continue improving the city's educational system," Snyder said. "The students, teachers, administrators, and families of Detroit Public Schools have benefitted from Roy's work on fiscal stability and improving academic standards and school safety. There is still work to be done, and Jack Martin's problem-solving skills, expertise, and strong management and leadership abilities will help continue the positive transformation of Detroit Public Schools."

Snyder's claim that there was work remaining to be done didn't quite do justice to the challenges that awaited Martin.

By the time Roberts left, with the district under state control for more than four years, the student population had fallen to 51,318, and the budget was continuing to hemorrhage red ink. In yet another attempt to stop the financial bleeding, DPS officials noted in the financial report covering the 2012-13 financial year that the district had "called together over 600 stakeholders from all corners of the Detroit community to assist with the development of a strategic plan to help guide the District forward. The strategic plan was completed in April 2013 and provided the District with fresh new ideas and a focused look into its future and what needs to be done to deal with the declining pupil challenge that has continued to drain revenue from the District."

While media accounts of the school district's finances tend to focus on annual budget deficits — which fluctuate from year to year — another budget line that doesn't get attention is what's referred to in financial reports as the "total net deficit," which weighs shortfalls against assets and provides a clearer picture of the ledger.

Using that measure, the district's financial situation has grown consistently worse while under the control of state-appointed managers.

At the end of the 2007-08 fiscal year, the last full year in which the elected school board was in charge, the total net deficit was $369.5 million.

By the time of Martin's appointment, the figure had ballooned to $686.5 million. As a result, according to the district's financial report, "The unrestricted net position deficit balance highlights a potential inability to meet future operational needs as well as working capital and cash flow requirements."

One year later, at the end of the 2013-14 fiscal year, the figure had reached $763.7 million. Another dire warning was issued.

Also growing steadily worse has been the district's long-term debt, which, due in part to repeated borrowing to cover annual budget shortfalls, jumped from $1.5 billion in 2007-08 to $2.1 billion at the end of 2013-14.

Like the district's other former emergency managers, Martin didn't respond to interview requests left at his Bloomfield Hills accounting firm.

Also reluctant to answer questions was Steve Wasko, the district's assistant superintendent, community relations and chief spokesman for all of the state-appointed managers who have been running DPS since 2009.

Wasko did not respond to repeated requests for an interview and refused to answer even basic questions submitted by email.

He did, however, provide a few documents touting the successes of emergency management in recent years. Among those claimed accomplishments:

• Most of our employees are at the top of the District's pay scale. As an example, it costs DPS an average of $93,333 for each teacher. This condition represents one of the components of the District's structural deficit. The DFT and other unions have agreed to work with us to resolve this problem. Phase I of the Employee Severance Plan saved the District $5.9 million; Phase II which was rolled out this month is projected to save the District approximately $11 million in FY 2015 and approximately $60 million over the next five years.

• DPS recently recorded a fall enrollment of 48,904 students. This represents a decrease of only 1.8 percent, or 920 students, from the previous year. This is significant for a number of reasons, including the fact that our demographer projected that we would have only slightly more than 46,000 students attending our schools this year; and previous enrollment losses had been averaging at least 10 percent for the last decade or so.

• DPS reorganized its police department, employing law enforcement veterans and opened a $5.6 million police headquarters and command center, a 23,000-square-foot high-tech facility built from the ground up in six months to provide an improved 24-hour security system to enhance public safety on campuses. The command center is part of a larger $41.7 million districtwide security initiative to improve safety and security through advanced technology and infrastructure and a reorganization of the police department.

Not included in the material provided by Wasko was this notable fact:

According to recent reports, the projected annual deficit for the current fiscal year is nearly $170 million.

Which is why, when installing yet another EM last month, Snyder once again found it necessary to point out there is still more work to be done.

During the press conference announcing the appointment of Darnell Earley as the district's EM, Martin sat stone-faced as his replacement, who has no experience running a school district, told reporters he was ready to address the ongoing financial crisis by digging into the books and looking for areas where cuts can be made.

As if no one had thought of that over the course of the previous six years.

Throughout all of this, the elected school board, operating without any resources, has attempted to regain its authority. Three of its members are party to a federal lawsuit challenging the constitutionality of the state's emergency manager law.

The board also went to court seeking an order allowing it to exercise its option to remove an EM after he or she had been in place for 18 months. That was one of the issues being discussed at the recent meeting Aliya Moore and her girls attended.

As it turns out, that 18-month limit is largely illusory. According to the court's interpretation of the law, if an appointed manager steps down before the 18-month term expires, the clock is reset.

Which just happened.

One day before his term ended, Martin, without explanation, retired, opening the way for Snyder to appoint Earley.

"Progress has been made, but there's still more to be done," Snyder said during the press conference with Earley and Martin at Burton International Academy. "That's what this transition is about. We need to keep working together."

There are, however, some key voices absent from any chorus joining hands to sing "Kumbaya."

Notably, there's the Detroit teachers union, which just elected as its president Steve Conn, who came into office vowing to fight emergency management.

A longtime member of the group BAMN (By Any Means Necessary), Conn ran 12 times to be the union's president. He said in a recent interview that his openly confrontational approach finally gained traction with the district's teachers because they had finally realized that cooperation had only led to layoffs, pay cuts, privatization, and larger class sizes.

The key to improving the district, he said, is focusing on education and not finances, and that the union under his leadership will do all it can to force that philosophy to the forefront of the debate.

There's also the elected school board, which has also vowed to carry on the fight against emergency management.

At their most recent meeting, board members discussed pursuing further legal challenges to the EM law and the way the way the district has been conducting business. Also discussed were ways to generate outside funding to pay for an independent audit to examine why, despite all the cuts already made, the district is coming up $170 million short this year — meaning that it is spending that much more than it is bringing in, digging DPS' financial hole that much deeper.

Moore and her two girls are regular attendees of these meetings. Oakman may be closed for good, but the activism its closure inspired is as strong as ever.

"To see them close that school, it showed to me that the people who did that didn't really care about kids," said Moore. "It told me what they really cared about was money.

Daughter Chrishawna, polite and poised beyond her years, talked about how much she missed the school and the way that the "general ed and special ed kids" happily meshed, with the able-bodied pitching in to help their handicapped classmates.

"We all learned to work together and share," she said.

She has her sights set on college and plans a career as a math teacher, or maybe fashion designer.

But that decision is still years in the future.

They talk about the closure of Oakman and how it has affected their lives. The girls now attend Paul Robeson Academy, part of DPS. It's not as close as some others, but it's a good fit.

"I like it," says Chrishawna. "Not as much as Oakman, but it's a good school."

And she's prepared if anyone ever tries to put it on a closure list.

"I know what to do," she said. "I will talk to my classmates and tell them what's going to happen and get them to protest with me."

Her mom has learned a few lessons as well.

"This whole thing has changed my life," she said. "I'm a quiet person by nature. But I've learned to be more vocal and to outwardly express the inner passion I have for our children. And what I've seen happening to them is so unjust, so savage, I just can't stop fighting against what's being done to them."

Curt Guyette is an investigative reporter for the ACLU of Michigan.
His work
is funded by a grant from the Ford Foundation.

Editor's note: Part Two of this two-part series looks at efforts underway to help improve educational opportunities for students throughout Detroit, as well as provide an analysis of the forces making that such a monumental task.

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