US: 24 Detroit public schools to close, teacher pay cuts in latest approved DEP
WORLD / Detroit, U.S. – State Superintendent Mike Flanagan approved this week the Deficit Elimination Plan (DEP) proposed by Detroit Public Schools in order for the district to continue receiving State School Aid.
“It’s important that Detroit Public Schools continues to receive sufficient State Aid as the district works through its longer-term financing options,” Flanagan said. “Having an approved Deficit Elimination Plan is a component in that process.”
WXYZ.com covers this in their news:
What is the Deficit Elimination Plan?
By law, a local unit of government ending its fiscal year in a deficit condition shall formulate and file a deficit elimination plan with the Department of Treasury within 90 days after the beginning of the next fiscal year to correct the condition. This extends of public school districts.
A deficit condition is defined as a fund where the total expenditure for that fund, including an accrued deficit, exceeds total revenues in that fund for the fiscal year.
According to DPS’ approved plan, school closures and another round of teacher pay-cuts are action points to help reduce the deficit that caused the district to be in emergency since 2009. In 2011, teachers were subjected to a 10% pay reduction by then-emergency manager Roy Roberts.
The further reduction in teachers’ pay will save the district an estimated $13.3 million dollars. Other proposed actions include changes to employees health insurance plans (saves $13 million), selling off closed facilities to the city for $5.5 million, restructuring and reducing close to 2000 positions in the district and closing down 24 schools starting 2016.
DPS to borrow $111 million to aid cashflow
According to a press release by the Department of Treasury, the Local Emergency Financial Assistance Loan Board (ELB) approved a proposal from Detroit Public Schools Emergency Manager Jack Martin, to borrow $111 million through the issuance of State Aid Notes (SAN). Proceeds from the transaction will help the district with its cash flow situation.
Under Public Act 436, the Local Financial Stability and Choice Act, before an emergency manager can authorize the borrowing of money by a school district, such a transaction must be approved by a local unit’s governing body. The DPS board disapproved of the proposed transaction earlier this month, and submitted an alternative proposal, which the ELB considered before making its decision today. Under PA 436, the board “shall approve the proposal which best serves the interest of the public in that local government (school district).”
The annual State Aid Note program, offered by the Michigan Finance Authority, provides cash flow assistance to approximately 200 school districts, on a short-term basis.
FY 2015 plans said no school closures
On the DPS’ website, a press release on June 2014 stated the DPS’ proposed budget for Fiscal Year 2015 “does not call for the closure of any schools for the 2014-15 school year, which the district has come to understand can have an extremely adverse impact on enrollment recruitment, retention and revenues.” The Budget, which reflects an anticipated revenue decline of approximately $49.3 million, is focused on the district’s ability to create and offer increasingly relevant programs, undertaken on new platforms, presented to new markets, leveraged by public and private resources, while devoting new across-the-board energy to retention strategies.
“Since 2006 the District has been faced with budgetary and financial challenges. The general fund deficit has ranged from as high as $327 million to a low of $76.5 million. The current deficit is projected at $127,054,101 for FY 2014. This proposed FY 2015 Budget reduces that legacy deficit to $125,747,592.”
“Factors contributing to the FY14 deficit increase include general fund charge-backs for planned grant expenses in middle school instruction and special education services, prior year Medicaid services overpayment, enrollment, increases in rates from the Detroit Public Lighting Dept. and Detroit Water and Sewerage Dept., and additional campus security. Overall, DPS anticipates a revenue decline of approximately $49.3 million.”
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