Debt payments sinking Detroit Public Schools: transition manager

Reuters News
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Posted: Apr 18, 2016 4:27 PM

(Reuters) - Nearly $64 million in debt payments are sinking the Detroit Public Schools (DPS), underscoring the need for a long-term state legislative fix, according to a report released on Monday by the district's state-appointed transition manager.

Steven Rhodes, a former federal bankruptcy judge who began running the district in March, said while Michigan lawmakers approved $48.7 million last month to keep DPS operating for the rest of the school year, action on legislation to deal with the district's debt is needed by mid-June.

"The alternative is another year, or more, of increasing

deficits and debt, and more yearly requests for supplemental appropriations," Rhodes said in his initial financial and operating plan.

Michigan's largest public school system, which serves 45,786 students, has been under state control since 2009. Rhodes said annual debt payments are "sucking revenues away from our classrooms at the rate of approximately $1,394 per student."

Rhodes had warned last month that without an immediate infusion of state cash, the district would not be able to pay teachers and staff and would close after April 8. Legislation to split the school system into the Detroit Community District to run schools and the current DPS to retire debt with the help of new state money was passed by the Senate and is pending in the House.

The report pegged the district's total debt at $3.9 billion, including $1.5 billion of bonds and a $1.3 billion unfunded pension liability.

"DPS simply cannot pay that debt while attempting to provide a quality education for its students," the report said.

For fiscal 2016, which ends June 30, the report projected revenue at $710.5 million and expenses at $731.4 million, resulting in a deficit of almost $21 million.

(Reporting by Karen Pierog in Chicago; Editing by Matthew Lewis)