CHICAGO - Easing Detroit Public Schools' debt burden is considered key to the district's revival and survival, and bankruptcy is possible, according to one of the reformers working on the turnaround effort. "Everything is being considered," said David Hecker, president of the American Federation of Teachers Michigan/AFL-CIO, referring to the possibility of bankruptcy. "Nothing is not on the table."
Hecker co-chairs the Coalition for the Future of Detroit Schoolchildren, a group that is crafting recommendations for Gov. Rick Snyder on how to revamp DPS.
The group aims to have formal recommendations to the governor after March 31. It's part of a larger plan to turn around the long-troubled district, an effort considered crucial to the post-bankrupt city's recovery.
"Of course we're here in Detroit, so there's the grand bargain to look at," said Hecker, referring to the $800 million mix of public and private money going to the city's pensions crafted during the city's Chapter 9 that is deemed the heart of its bankruptcy exit plan.
"People say: 'There was a grand bargain for the city, can something similar work for the schools?'" he said.
The coalition's finance committee is working with a bond attorney and other experts to discuss various ways to ease the district's debt load, said Hecker. Its annual debt service totals roughly $56 million a year. That translates into $1,200 per student, he said.
"This absolutely has to be addressed," he said. "Alleviating the debt is extremely important for Detroit public schools to be able to move forward."
Hecker said the committees are still kicking around ideas and no concrete recommendations are being discussed publicly.
Some of the recommendations may require new legislation. In an interview with the Detroit News last week, one of Snyder's advisors said one possible legislative proposal would authorize the creation of a new debt-free district for DPS with the debt being serviced by an outstanding levy until it matures. The advisor, John Walsh, also told the News that Snyder has been "very clear" about ruling out bankruptcy as an option. Filing for Chapter 9 requires the governor's approval in Michigan.
But Hecker said the coalition is not ruling anything out yet.
"A lot of things will come off the table, but we're not closing ourselves off from anything," Hecker said. "The debt needs to be taken care of and it needs to be taken care of in a way that's not detrimental to the children of DPS and not detrimental to the men and women who provide that education."
DPS carries roughly $2.1 billion of debt. Of that, $1.6 billion is unlimited-tax general obligation bonds secured by the state's School Bond Qualification and Loan Program. Another $325 million is long-term state aid revenue bonds, secured by an intercept feature on state aid; and $108 million is in the form of loans from the Michigan School Loan Revolving Fund, according to Moody's Investors Service.
