Education

Insane: Detroit Public Schools Spend as Much on Debt Service as Salaries & Benefits

One more reason why school choice is coming, whether traditional school districts like it or not.

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This week is National School Choice Week, and Reason will be highlighting the ways in which expanding K-12 educational opportunities for children and parents can make schools better and more innovative. And we'll be documenting various ways in which traditional school districts are imploding despite spending more and more money on a per-pupil basis.

Which brings us to Detroit, a city whose schools are facing sick-outs by teachers complaining about many things, including the shoddy quality of physical plant (this, despite spending something like $14,400 on average per pupil).

Earlier this month, The Detroit News reported that starting in February, the district will be spending equal amounts on debt service and salary and benefits:

That is simply amazing and points to long-term financial mismanagement that is almost certainly too far gone to ever rectify. From the News' account:

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 to being insolvent, where you've got multiple bills that are owed to the state that have gone unpaid."

Needless to say, the state is the only available lender to the district and the money it's paying on debt interest only means other bills aren't getting paid:

To avoid a default, the district has made the debt payments before honoring bills for vendors and employee pensions. DPS owes the state's school employee pension system $114 million — a bill that's expected to top $157 million by July.

The district has another $40 million in vendor bills that are more than 90 days past due, Demetriou said.

Full story here.

Unsurprisingly, the district's administrative costs are the highest in Michigan—the sort of management that creates such a situation doesn't come cheap.

Going forward, Detroit (and other districts with similar if not as pressing debt-service and related costs) would benefit from switching to "student-based budgeting," where federal, state, and local dollars follow the individual student to whatever school he or she enrolls in. Such a plan gives extra dollars for learning disabilities, English as a second language, and other situations that call for added instruction. In its most committed form, student-based budgeting (sometimes called "backpack funding") creates a system by which individual schools compete for student dollars and, more importantly, are responsible for all the administrative costs of their own schools. It effectively removes "the district" as the focus of delivering education. That's a good thing, as large districts are rarely if ever paragons of managerial efficiency and competency.

The history of simply plowing more money into education has failed to raise test scores or equalize outcomes among low-income and higher-income students and there's no reason to believe anything short of creating a different power dynamic—one that puts power in the hands of students—will change any of that, including insane and unsustainable district finances.

For more on National School Choice Week, go here.

Watch "Backpack Funding: The Big School Reform That Fits in a Tiny Package":

NEXT: Rhode Island: Children Under 10 Shall Not Be Left Home Alone, Even Briefly

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  1. Meanwhile, the Chicago Board of Education’s deficit is projected to reach $1 billion per year through 2020. It’s going to be glorious when the era of cheap debt is finally over.

    1. Given that so many pension systems are completely dependent on a ballooning stock market, it’s going to be an interesting year for municipal financial reports.

      1. “Given that so many pension systems are completely dependent on a ballooning stock market, it’s going to be an interesting year for municipal financial reports.”

        And ballot bond issues to ‘bail out the underfunded schools’

      2. “Given that so many pension systems are completely dependent on a ballooning stock market”

        CalPERs seems the poster child for this.

    2. We might see an end to public schooling, and it has started in the epicenters of progressive derp.

      How exactly are these crumbling school systems in some of America’s largest cities barely provoking a yawn? Rhetorical question. I know why.

      1. Because they’re full of poor children?

        1. Well yeah, everyone hates the poor children. Or maybe because these cities are decades-long bastions of Democrat rule and public employee unions, and that would contradict the proggie narrative? Nah, that couldn’t be it.

          1. You say that like the “proggie narrative” doesn’t already account for these things. It does.

            1. Yes, “we didn’t do it hard enough” seems to be the prevailing belief.

              For us on the outside of it all, the inner-city Democratic Party is just a hair to the right of Chavez and Castro, being barely kept in check by the constraints built into our republic and by the occasional revolt on the part of voters.

              For a significant number of people, the inner-city Democratic Party “sold out to neoliberalism” and/or has been hamstrung by some Republican somewhere. They really believe that the solution is to go even farther left, the plain evidence of failure thus far be damned.

    3. The era of cheap debt for CPS ended several years ago. Nobody in Chicago government cares.

  2. Goddamn libertarians done went and messed up Detroit’s public school system.

    1. I’ll bet it’s the same private-sector business that poisoned Flint’s water.

    2. It’s because they hate the poor children. Unless they are polishing monocles.

  3. This is a revenue problem, not a spending problem. Some students are just more expensive to go into hock for set up huge administrations for educate than others. Closer to me, Baltimore, one of America’s best funded large school systems, cannot afford toilet paper for all of its schools.

  4. So DPS is a microcosm of the entire Federal government.

    1. Skating by on credit cards is the American Way.

      1. Rock, flag, eagle, and credit cards.

        1. Being reelected by low-information voters: Priceless. For everything else, there’s MasterCard.

          1. ^This. A thousand times this.

            You should win some sort of prize this post.

    2. The president did promise that what happened in Detroit could happen everywhere. Like, as a campaign promise, with an ad and everything. And people elected him.

      1. Sounds more like a threat than a promise.

        1. Apparently if you tell people you plan to reduce civilization to ashes, but you do so in a hopeful tone, then they’ll vote for you in droves.

  5. Defund the entire thing, and watch the mass-protesting parasites screech.

  6. This just proves that Bernie is right – we can’t afford to keep paying those dirty Jews One-percenters their blood money, we must make education free. Just repudiate the debt! Jeez, how hard is this? Cities aren’t “teetering on the edge of bankruptcy”, it’s just those blood-sucking leeches taking all our money from them. They didn’t build that, we built that! How the hell can you justify taking the textbooks right out of the mouths of children hungry for learning and giving it to these evil greedy bastards trying to convince you it’s their money? Don’t buy into their lies! It’s your money and they’re trying to steal it from you.

    1. One closed tax loophole will cause the magic money fountain to go full geyser.

    1. Right after the next inauguration, would be my guess.

      Assuming 90+% of the current Congress is re-elected and there is no turnover in Congressional leadership, I wouldn’t be surprised if it passed with a veto-proof majority, in fact.

  7. Declare bankruptcy. Reset the pensions retroactively to defined contribution. Walk away from the debt.

    Spread the pain over the people who caused the damage and the people who enabled it.

  8. When do we blame the republican governor?

    1. Interesting you say that.

      An important fact has been left out of this article and most articles on this topic.

      The state of Michigan has been running the Detroit Public Schools since March of 2009, (This was actually the second time in the last 20 years the state took control. John Engler removed the elected school board in 1999, and the state relinquished control in 2005.)

      Needless to say the Republican Party has had control of the state of Michigan for the vast majority of the intervention, yet they haven’t been able to make any improvements.

      It’s not a Democrat/Republican issue, but a government issue. No matter which party rules from Lansing, DPS continues to fail. It’s time to move past partisanship.

  9. NOT LIKE HOME BUDGET

    *sticks fingers in ear*

    LALALALALALALALALA

  10. Who exactly is it, who lends these people money? These things should be zero budgeted (hah I know) They better squeeze every penny in payback soon, cause with a stroke of a pen they’re gonna have a bad time… Gubmint will call it a donation to the greater good mehbe give them a handshake and plaque or something… I have a friend who also has the nerve to try and borrow more money before he’s paid back the first loan… Guess what? Nobody lends him money.

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