Debt payments set to balloon for Detroit Public Schools
Lansing — The debt payments of Detroit Public Schools — already the highest of any school district in Michigan — are set to balloon in February to an amount nearly equal to the school district’s payroll and benefits as the city school system teeters on the edge of insolvency.
Detroit Public Schools has to begin making monthly $26 million payments starting in less than a month to chip away at the $121 million borrowed this school year for cash flow purposes and $139.8 million for operating debts incurred in prior years. The city school system’s total debt payments are 74 percent higher from last school year.
The debt costs continue to mount while Gov. Rick Snyder and the Legislature remain at odds over how to rescue Michigan’s largest school district. A bankruptcy of the district could leave state taxpayers on the hook for at least $1.5 billion in DPS debt.
The school district’s payroll and health care benefits are projected to cost $26.8 million in February — meaning the debt payments will be 97 percent of payroll. General fund operating debt payments that exceed 10 percent of payroll are “a major warning flag,” municipal bond analyst Matt Fabian said.
“That’s extremely high,” said Fabian, managing director of Municipal Market Advisors in Concord, Massachusetts, who also followed the city of Detroit’s bankruptcy case. “That’s no longer, really, a normal school district. The school district has turned into a debt-servicing entity. It’s making its own mission impossible.”
As a result, the Detroit district won’t have enough cash to pay any bills in four months.
“We’re running out of money in April,” said Marios Demetriou, deputy superintendent of finance and operations at DPS. “We need help to fix the school district once and for all. Our kids deserve a good education and when you don’t have cash there are things that are lacking.”
Financial analysts say the skyrocketing debt payments owed to the state expose an unprecedented amount of money being diverted from classroom instruction to pay off past debts, even as the city school system eliminates 100 central office jobs this month.
The Detroit district’s payments on old debts — some dating back a decade or longer— amount to $3,019 of the $7,296 per student grant the district will receive from the state this school year, a Detroit News analysis of public records shows.
“That’s $3,000 that isn’t available for each kid this year, and it pays for the education of kids 10 to 15 years ago,” said Craig Thiel, senior research associate at the Citizens Research Council of Michigan. “They’re as close as they’ve ever been toDebt payments set to balloon for Detroit Public Schools:
