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Tuesday, November 16, 2004
•DPS must balance budget to comply with state law.
•Deficit-elimination plan includes warning of school closings, reductions in workforce and changes to employee benefits.
•District will seek new legislation to help provide deficit-reduction bonds and other support.
During the 2003-04 fiscal year, Detroit Public Schools predicted a budget shortfall for the district of $250 million by the end of the 2004-05 fiscal year. Subsequently, reduced revenues due to a larger-than-forecast drop in student enrollment increased the potential shortfall amount to $274 million. Actions to address the shortfall, including school closings, workforce reductions and spending cuts, reduced the projected shortfall by approximately $76 million. As a result, the district now faces a total budget shortfall of $198 million for the year ending June 30, 2005, consisting of a $150 million shortfall this year and a $48.7 million deficit from the 2003-04 fiscal year.
In compliance with state law, within the next 90 days the district will submit a plan to the State Superintendent of Public Instruction to eliminate the deficit by June 30, 2006.
Declining student enrollment, spurred by a steady decline in the city's population, lower birth rates and increased competition from charter and private schools and other public school districts, has battered the District's finances. Enrollment has fallen by more than 20 percent, from 175,988 in the 1996-1997 academic year students to 140,700 today. The cumulative financial impact of the enrollment drop since fall of 1996 now exceeds $250 million per year.
In addition, the district has been adversely affected by three consecutive years in which state funding for Michigan public schools has been reduced or has remained flat. The financial impact on Detroit Public Schools over the past three years totals at least $125 million per year.
“The district needs to get smaller, faster in order to bring our expenditures in line with revenues and to be able to provide the type of high-quality education that our students deserve,” said Detroit Public Schools' Chief Executive Officer Kenneth S. Burnley, Ph.D. “We are required by state law to balance our budget. If we do not eliminate the deficit, we will be in violation of the law and could face an interruption in state funding. Just as some businesses must downsize to survive, we must take immediate action, however painful it may be, to right-size our staffing and number of schools to reflect the city's declining population and the district's reduced student enrollment.
“Many urban public school systems in our country are in a similar situation,” Dr. Burnley added.
“And, we are facing the same financial affliction as nearly every major public institution in Michigan -- including the City of Detroit, the State of Michigan, other public school systems and many of our large public universities.
“We owe it to our children and their families to provide the best possible education,” said Dr. Burnley. “We know what we need to do, and it must be done with precision and urgency. We have the right team with the right experience and right judgment to make the district stronger, leaner and more effective. Smaller will be better.”
A plan to eliminate the deficit will be announced over the next few weeks. The plan is expected to include the following:
•Closing of 25 to 40 schools throughout the district after the end of the current school year.
•Reduction of as many as 4,000 staff positions achieved through early retirements and job eliminations.
•Working with the Michigan Legislature to reinstate statutes allowing the district to issue
deficit-reduction bonds payable over the next 15 years.
•Requesting that the Michigan Legislature maintain the $15-million supplemental funding currently provided under the reform plan.
•Good faith bargaining with labor unions on wages and benefits.
•A request to eliminate the deficit over a five-year period instead of two years – a step that will mitigate the impact on employees.
“Despite our budget challenges, we remain committed to protecting vital educational programs and providing a safe and secure environment for our students,” said Dr. Burnley. “Early-childhood programs, the Comprehensive Reading Initiative, the Algebraic Thinking mathematics initiative program and alternate-education programs are critical to our students' success. We also must meet our special-education needs and comply with the federal No Child Left Behind program. Our children and their parents are counting on us to deliver these programs. They deserve these programs. And, we have every intention of maintaining these programs by downsizing in other areas.”
Dr. Burnley said that school closings and staff reductions are the most difficult decisions he has made in his career. “As a native Detroiter and a career educator, I want what is best for the children of our city,” he said. “That's why we must do the right thing and take these actions now.
“Eliminating the deficit will require an unprecedented team effort involving our labor unions, state government, employees, parents and the community,” said Dr. Burnley. “The pace of change must accelerate in order to put the district on a sound financial footing. We are in a serious situation, but it is not insurmountable if all of our stakeholders work together in order for our schools to survive and prosper.”
