Detroit Public Schools [DPS]
may have no choice but to file for Chapter 9 bankruptcy
which would make it the first big-city school district
to use bankruptcy court
to avoid paying millions to vendors, employees and bondholders
…DPS has three choices to solve its projected $259-million budget deficit
raise more money, cut costs or declare bankruptcy
DPS would have to cut its costs as much as 50%
an almost impossible feat
given that more than 80% of most school district costs
are salaries and benefits mandated by contracts
[Emergency Financial Manager Robert] Bobb
a state appointee who took charge of the DPS budget in March
was not able to balance the 2009-10 budget
which totals about $1.2 billion
and calls for $21.8 million in debt service payments on bonds
sold to eliminate past deficits
A bankruptcy filing
could reduce the amount DPS will pay vendors and bondholders
…It also could allow a judge to rule
on DPS's requested changes to employment contracts
PEGGY WALSH-SARNECKI and CHASTITY PRATT DAWSEY
FREE PRESS EDUCATION WRITERS, July 10, 2009
The employment contracts and pension plans are untenable
wage and benefit reductions of 50% outside of bankruptcy
are virtually impossible
and there is no money to be found anywhere
unless Obama comes to the rescue
No large school district nationwide, has ever filed for bankruptcy…
If the judge dramatically slashes wage contracts and pensions
…it will set a nice precedent
for other over-burdened school districts to follow suit
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