Michigan board OKs implementation of Detroit schools bailout
LANSING, Mich. (AP) -- A Michigan board on Monday approved emergency loans and other facets of a plan to execute a $617 million bailout of Detroit's school district that will give some control to locally elected officials after more than seven years of state management.
The Local Emergency Financial Assistance Loan Board voted 3-0 on three measures proposed by an emergency manager who was appointed by Gov. Rick Snyder to oversee the financially-strapped district. The loan board, which is controlled by top officials in Snyder's administration, rejected alternatives proposed by existing school board members, who have effectively been powerless for years.
Under the Republican-passed restructuring laws, the 46,000-student district is being divided in two to retire massive operating debt. It has faced plummeting enrollment due to Detroit's population decline and the departure of many students to publicly funded charter schools and traditional suburban districts.
The new district will educate students. A new board will be elected in November, and a commission of state appointees that oversees the city's budgets post-bankruptcy will review the schools' finances.
The existing board has filed a lawsuit challenging the laws that were enacted in June. Tom Bleakley, an attorney for the current board, said a provision that authorizes the new district to hire uncertified teachers in Michigan's worst-performing district is unconstitutional.
"There's a message loud and clear that the children of the Detroit Public Schools are second-class citizens," he said.
Bleakley also said lawmakers wrote the legislation as a "local act," meaning it needed two-thirds support - not simple majorities - in the House and Senate along with a citywide public vote.
During public comment at the meeting, about a dozen people spoke against emergency manager Steven Rhodes' requests. After the board voted, some yelled "shame on you," ''Jim Crow" and "black lives matter" as the members left a back exit.
The loan board voted Monday to authorize the borrowing of $235 million through a bond sale to eliminate or refinance the old district's short- and long-term debt. The annual interest rate cannot exceed 18 percent, a figure that was criticized by opponents.
State Treasurer Nick Khouri, a loan board member, said the rate "clearly" will not be 18 percent and instead will be "whatever the market entails - probably 4, 5 or 6 percent." Treasury spokesman Jeremy Sampson said the interest rate should be between 1.5 percent and 2.5 percent.
The board also voted to transfer all DPS assets to the new district, and to endorse $150 million in emergency loans to cover "transitional operating costs" to help launch the district.