The federal judge who oversaw Detroit’s historic bankruptcy case will now tackle the financial problems of the city’s financially struggling public schools, Michigan Governor Rick Snyder announced on Monday.
Steven Rhodes, who retired from the U.S. District Court last year, will become transition manager of Detroit Public Schools (DPS) while state lawmakers work on bills to improve the district’s academics and finances, the Republican governor said in a statement.
He called Rhodes “a natural choice” to oversee the finances and operations of Michigan’s largest public school system, while seeking an interim superintendent to run the academic side.
“[Rhodes] is highly respected in the city and was invaluable in leading Detroit out of bankruptcy. Detroit needs strong public schools for the city’s economic comeback to continue through its neighborhoods,” Snyder said.
Detroit exited the biggest-ever municipal bankruptcy in December 2014 after Rhodes approved a plan allowing the city to shed about $7 billion of its $18 billion of debt and obligations.
The school system, which has 97 schools and about 47,000 students, is drowning under $3.5 billion of debt, including $1.7 billion of bonds backed by property taxes, and is suffering from declining enrollment.
Despite being under state oversight since 2009, the school district has a $515 million operating deficit and is on track to run out of money this spring.
Snyder this month announced the departure of the school system’s state-appointed emergency manager, Darnell Earley, who previously was the emergency manager of Flint, which is currently dealing with a lead-tainted water crisis.
Bills pending in Michigan’s legislature would create two entities—the Detroit Community District to run the schools and the current DPS to retire debt. Snyder is seeking $72 million annually over 10 years to fund the plan, using money from Michigan’s share of a nationwide settlement with U.S. tobacco companies. He has also asked lawmakers for an immediate $50 million to enable DPS to continue to pay employees and vendors.
Unlike the city of Detroit’s bankruptcy, the state would be on the hook in the event of a bankruptcy filing to cover $1.45 billion over 11 years to pay off bonds issued for DPS through Michigan’s school bond loan fund.