Snyder seeks debt-free Detroit public school district

Chad Livengood, and Shawn D. Lewis

Gov. Rick Snyder announced plans Thursday to create a new debt-free Detroit public school district and pay off the old district's debt with an additional state contribution of between $53 million and $72 million annually for up to 10 years.

Michigan Governor Rick Snyder announced on Thursday April 30, 2015 plans to create a new debt-free Detroit public school district during a news conference at State offices in Detroit.
(Max Ortiz/The Detroit News) 2015

Snyder's plan for overhauling education in Detroit calls for establishing a "brand-new school district, not a charter" school system that would be governed by a new seven-member board initially appointed by the governor and the mayor, said John Walsh, Snyder's strategy director.

Snyder would get four appointments to the board of the new district, to be known as the City of Detroit Education District, while Detroit Mayor Mike Duggan would get three, Walsh said.

The governor detailed his multifaceted plans midday Thursday at a press conference at the Cadillac Place state office building in Detroit's New Center. He said the overhaul is needed to improve outcomes for the city's children and relieve the district's debt load, which he called "crushing."

"It's time to act," the governor said. "We're not seeing the results these children deserve. In math and science, 94 to 95 percent are not proficient, and in reading, two-thirds are not proficient."

Under Snyder's proposal, there would be a six-year "pathway" for returning to a locally elected Detroit school board by staggering out elections for two seats in November 2017, two seats in November 2019 and the remaining three seats in November 2021, Walsh said.

Detroit's elected school board has been effectively sidelined for six years while the district has been under the control of four state-appointed emergency managers.

"We believe an appointed board is appropriate because of the massive financial investment the state of Michigan has to make," Walsh told The Detroit News.

The governor said he hoped to get legislation moving soon but added, "From a practical matter, it probably won't be done until fall."

Snyder's proposed financial assistance for DPS could be triple the $195 million lump sum lawmakers committed last year toward boosting the city of Detroit's pension funds and helping settle the largest municipal bankruptcy in U.S. history. The governor said the district has accumulated $483 million in debt.

Under the proposal, Walsh said, the state would need to commit an extra $53 million to $72 million annually for 8-10 years from the School Aid Fund toward operating funding for the new DPS.

"We're setting up a successor school district that wouldn't have the legacy debt," Snyder said.

As first reported last week by The Detroit News, the old DPS district would continue to collect the 18-mill non-homestead property tax and use the money to pay down the district's operating debts. The tax generates approximately $72 million annually, while the district faces debt service payments of $53 million each year, diverting $1,100 per student away from classroom instruction, according to the Citizens Research Council of Michigan.

By creating a new district, "What we're essentially doing is isolating the debt," Snyder said.

The annual cost to the state could be lowered if about $300 million in outstanding bond debt can be refinanced, Walsh said.

"We're taking a look at some financing options that would help soften the blow," Walsh told The News.

The new DPS would inherit the district's pensions, union contracts and employees, Snyder said. "The 'new co' would include all the other components that would transfer to them, including operations, teachers and buildings," he said.

The News' early report of the governor's plan to split the district into two has already generated criticism from the Detroit Federation of Teachers, whose members staged protests Thursday morning at Cadillac Place and state Capitol. The protests caused the district to close 18 schools Thursday because of a teacher shortage.

Snyder said the teachers were "protesting without having heard what I have to say. I'm not sure how their being out there protesting is helping the kids."

He added: "This shouldn't be about adults; it's about the kids."

Edwina Lawson, a fourth- and fifth-grade math teacher at Horace Mann Elementary on the city's west side, said she's skeptical of Snyder's plan, given the state's intervention track record in DPS.

"On paper, a lot of stuff looks good, but once you put the plans into play and they don't work, it creates havoc for the students and parents," said Lawson, who has taught in the district for 18 years. "It seems like the wounds continue to get bigger."

Also weighing in was the Coalition for the Future of Detroit Schoolchildren, a 36-member group that issued a report in late March with recommendations for overhauling the city's school system. Among them: returning DPS to local control, putting Education Achievement Authority schools back in the district and having the state pay off the district's debt.

"We believe the Coalition's Choice Is Ours report — which put kids first, preserved choice for Detroit families, and was carefully crafted and pressure-tested by a diverse group of citizen volunteers over the course of a hundred days — offers the best way forward for Detroit schoolchildren," said coalition co-chair John Rakolta Jr. "We look forward to seeing the specifics in Gov. Snyder's media presentation today and we're hopeful that the Choice Is Ours report influenced his thinking."

Referring to the coalition's suggestion to integrate the EAA into the state School Reform Office, Snyder said, "That's something we're looking hard at."

The governor discussed his plan while flanked by Harvey Hollins III, director of the Office of Urban Initiatives, and Walsh.

"I understand that people get very emotional because we're talking about kids and their futures," said Snyder. "We need to look at what's best for the entire state of Michigan."

Two layers of oversight

The governor's plan calls for two other layers of academic and financial oversight of Detroit schools.

The new appointed school board would be under the oversight of a financial review commission "similar in nature to what we used with the grand bargain" in Detroit's bankruptcy, Walsh said.

Walsh, a former legislator from Livonia, was the lead sponsor of the Detroit bankruptcy legislation last spring that led to the state's $195 million contribution to the pension settlement fund that shielded the Detroit Institute of Arts collection from a fire sale to satisfy creditors.

Detroit Public School teachers demonstrate in front of the Capitol Thursday morning, protesting Gov. Rick Snyder's proposal.

Darnell Earley, who became the fourth emergency manager of DPS since 2009 in January, would remain in place until his 18-month term ends in mid-2016 to supervise the financial matters of the "old" DPS, Walsh said.

Snyder also is endorsing a proposal put forward by the Coalition for the Future of Detroit Schoolchildren to create a new commission with oversight over the academics of all public schools in the city operated by DPS, charter authorizers or the EAA.

The five-member Detroit Education Commission would be able to hire an "education manager" who would be charged with closing schools with academic achievement tests in the bottom 5 percent of all Michigan schools for at least three years, Walsh said.

The education manager would serve as the "air traffic controller" of where schools operate in Detroit and could determine whether a shuttered school should be "bid out" to be run by another operator, Walsh said.

Snyder's plan calls for him to get three appointees to the commission and for Duggan to get two appointments, Walsh said.

Appointees to all three boards — the new DPS school board, the financial review commission and the education commission — would have to be Detroiters and nobody could be on more than one board, Walsh said.

Asked why he would get a majority of the appointees on the new boards, Snyder answered, "There would be a huge investment from the state to get this set up and operating."

The Detroit schools coalition also called on Snyder and the Legislature to relieve DPS of the debt accumulated under state emergency management.

The governor's office is trying to line up legislators to support the Detroit school management reform plan and get bills passed before the Legislature's summer recess in late June. But there's already been resistance to bailing out another governmental entity in Detroit.

Asked if his plan in a bailout, Snyder replied, "I don't view it as a bailout when it's really being done in getting something stable and working well."

Snyder's plan calls for the new DPS district and Detroit Education Commission to be up and running by July 1, 2016, to give all parties time to prepare, Walsh said.

"We would rather do it right and not by some artificial date," he said.

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