Detroit Schools
Paul Sancya  /  AP
Detroit and other public school district across the state were counting students attending class on Wednesday as part of fall count day. Yearly per-pupil funding from the state is mostly based on those figures. Declining enrollment could cost the district millions.
updated 9/26/2008 1:44:12 PM ET 2008-09-26T17:44:12

Detroit's troubled school system, already running a $400 million deficit, is facing a loss of at least $40 million in state aid and the possible appointment of an outsider to manage its finances.

Results of an official head count conducted this week were expected to show enrollment down by thousands of students, costing the district $7,660 apiece in state aid.

Detroit schools and others across the state used food, carnivals and other gimmicks to entice parents to get their children to class for the head count Wednesday.

Other districts across the state also face deficit and funding troubles, State Schools Superintendent Michael Flanagan said.

"But the numbers here are so big," he said of Detroit. "This is not only big in terms of $400 million, but it is a third of their budget."

School board member Tyrone Winfrey has threatened a reprimand of Detroit Public Schools Superintendent Connie Calloway, claiming she and the district failed to understand the financial situation and take immediate measures, including layoffs, to cut costs.

"We were told we had a fund balance of $5.2 million, then about May 12 or May 13, I was told we had a $45 million deficit," he said. "We kept some teachers on the payroll that should have been off the books eight months ago. How do you not see that?"

It's not what school board members expected last year when they appointed Calloway and gave her a $280,000 yearly salary that made her one of the state's highest paid public employees, Winfrey said. Calloway didn't immediately return a phone call.

Michigan bases yearly per-pupil funding mostly on the head count, state Department of Education spokeswoman Jan Ellis said.

Detroit public schools spokesman Steve Wasko said last fall's head count showed an enrollment of 104,000, while a state Department of Education formula put the number at just under 102,000. In a deficit elimination plan presented to the state, Detroit has budgeted for enrollment to dip as low as 96,000 this year, he said.

'Sweating bullets'
The struggling district also would lose first-class district standing if enrollment drops below 100,000. That would allow some community colleges to open charter schools in the city, further decreasing enrollment and state dollars, Wasko said.

Flanagan said more cuts would have to be made if the district's enrollment comes in under 96,000. Wasko said a preliminary 88,000-student enrollment count made prior to count day is not official and that complete figures are still several weeks away.

Flanagan declared what he calls "a serious financial condition" for the district in a letter last week to Gov. Jennifer Granholm. A review team will try to put together its own deficit elimination plan to help the district.

"If we can't get that I would appoint a financial manager," Flanagan told The Associated Press. "The school board and superintendent would still have all the decision-making on all the educational programs, but the manager would make all financial decisions."

Flanagan said he has met with Calloway and board president Carla Scott.

"In fairness, it's a very difficult situation to take $400 million out of their budget," he said. "I'm sure they are sweating bullets."

Debts and shortfalls
The state's action would not be a repeat of then-Gov. John Engler's 1999-2005 state takeover of the district, which removed the elected board, Flanagan said.

During the takeover, Detroit piled up a $48 million debt and worked around a shortfall of $150 million.

Scott and Calloway have indicated they welcomed the state's current involvement, Wasko said.

"They did not find it threatening and saw it as much more of a partnership, not a one-way effort," he said.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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