Contact:  Martin Ackley, Director of Communications (517) 241-4395
Agency: Education

September 17, 2008

LANSING - By declaring that Detroit Public Schools has a serious financial problem, State Superintendent of Public Instruction Mike Flanagan says he is confident the financially struggling district can be turned around.

In a letter to Governor Jennifer M. Granholm, Flanagan declared the state's largest school district in a "serious financial problem." The letter sets in motion a process that will establish a Review Team to examine the district's finances under the state's Local Government Fiscal Responsibility Act (Public Act 72 of 1990).

"This is an opportunity to help get the district on-track financially," Flanagan said. "We see positive things being done in the classrooms that are focused on student achievement, and need to secure the financial stability of the district.

"I firmly believe that the actions being taken are going to make the Detroit Public Schools stronger for the children of Detroit," Flanagan said.

Flanagan's announcement followed a meeting Tuesday with district officials, including Superintendent Dr. Connie Calloway, Board President Dr. Carla Scott, and members of the Detroit Board of Education who sit on key board committees. The meeting was held to obtain details clarifying the district's Deficit Elimination Plan - a plan approved by the board in June to eliminate its $408 million budget deficit.

Flanagan said that during the course of the meeting it became clear to him that the district's challenges in implementing the cuts outlined in the Deficit Elimination Plan, and systemic financial problems dating back several years, led him to conclude that an outside review is necessary.

"It was a constructive meeting, and it is evident that the district superintendent and board members are committed to the students of Detroit," Flanagan said. "But I believe we all came away recognizing and concluding that the district has a serious financial problem."

The Governor will appoint the Review Team, which by law must consist of the State Superintendent of Public Instruction, State Treasurer, State Budget Director, and nominees of the Speaker of the Michigan House of Representatives and Senate Majority Leader.

By state law, the Review Team has 30 days in which to examine the financial condition of the district and report its findings to the Governor and State Superintendent as to whether a financial emergency exists in the district.  

To avoid a financial emergency being declared, the Review Team and the local board of education can enter into an agreement that outlines direct actions the district must take to resolve the problem.

If no agreement can be reached, the State Superintendent has the authority to determine that an emergency financial condition exists and submit to the Governor three names from which to appoint an Emergency Financial Manager. An Emergency Financial Manager would assume authority over all fiscal matters of the school district and makes all fiscal decisions for the district.

"This is a detailed and deliberate process that doesn't automatically mean an Emergency Financial Manager will be appointed," Flanagan explained. "That is a last resort."

Flanagan was emphatic to state that this action is not a state takeover of the school district, but a fiscal review of the district at this point. If an Emergency Financial Manager is appointed, the local superintendent and board of education would continue to have roles in the operation of the schools.

"We are sensitive to the pride and ownership that the Detroit community has in its local school district," Flanagan said. "By working together to help make the district financially stable, we are making it stronger and doing what is right for the children of Detroit."