CHICAGO — Detroit Public Schools is facing a $363 million structural deficit — with officials warning it could get worse — as the district begins a new fiscal year today.
The district’s emergency financial manager, Robert Bobb, was expected to unveil the full fiscal 2011 budget at a public meeting last night.
Preliminary documents released yesterday outline a $558 million general fund budget, down 25% from 2010’s $748 million spending plan.
DPS has seen its deficit climb by $144 million over the past year despite being under state-mandated emergency financial management.
Officials said the deficit was due to falling Michigan aid as the result of the state’s fiscal 2010 K-12 budget cuts, as well as falling enrollment and rising retirement costs.
Bobb warned that the deficit could climb further due to those factors.
The district is also seeing a $28.4 million increase in its debt payments starting in 2011. DPS’ debt service will jump to a projeced $65.6 million in fiscal 2011 compared to $37.3 million in 2010, according to budget documents.
The budget comes as the district is in the midst of a $1.2 billion capital campaign that includes at least $500 million of borrowing.
Last December DPS issued $325 million of federal stimulus bonds to help launch the campaign. It’s unclear when the district plans to next enter the market. DPS officials were unavailable for comment by press time.
Gov. Jennifer Granholm appointed Bobb as emergency financial manager in January 2009. His term will be up in March, which the fiscal 2011 budget reflects by trimming $1.5 million, the cost of the EFM’s office.
DPS officials called the 25% cuts “painful” in preliminary budget documents, while saying they were aimed largely at administrative functions rather than classrooms.
Still, under the new budget, some class sizes could increase to 40 students, according to local reports.
In budget documents yesterday, Bobb said he would submit a deficit-elimination plan to the state by Nov. 15.
The plan will “present a roadmap for the elimination of the legacy deficit and a massive restructuring of the school district,” Bobb said in the documents.
“That plan, which will include an implementation strategy, will leave the organization stronger than when we arrived and able to manage its own finances on its own.”
Voters last November approved a controversial $500 million bond issue that Detroit Mayor Dave Bing and Bobb said was important to rebuilding the district and the city.
In December 2009, DPS priced $325 million of Build America Bonds and qualified school construction bonds as part of the capital campaign.
Proceeds from the bonds will be used to build seven new schools — two of which broke ground last week — and renovate 11 others.
The bulk of the district’s revenues come from state aid, which provides $438 million of DPS’ $558 million proposed 2011 general fund.
Property taxes contribute $91.5 million, additional state aid accounts for $10.1 million, and other sources account for $18.7 million.
The district’s 2011 student enrollment is 77,314, down about 10% from last year. Enrollment first fell under 100,000 in 2009.
The decline is significant, as it triggered a Michigan law that allows community colleges to establish new charter schools within the district’s boundaries. That could mean fresh threats to DPS’ ability to attract new students and increase badly needed state aid tied to enrollment levels.
Moody’s Investors Service maintains an underlying rating of B1 on the district. DPS has roughly $1.8 billion of outstanding debt.
