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Reason Foundation

Detroit School Bankruptcy--Bellwether for Nation's Public Schools?

Lisa Snell
July 23, 2009, 11:55am

The Wall Street Journal reports that the Detroit public schools are on the brink of bankruptcy:

DPS's enrollment -- which largely determines its allotment of state funding -- is about half what it was in 2001, as suburban districts and charter schools have siphoned off tens of thousands of students. By this fall, DPS will have 172 schools open and more than 100 vacant. Meanwhile, the high-school-graduation rate is 58%; coupled with the enrollment losses, only about one-quarter of students who start high school in the district graduate from it in four years, according to outside estimates. . .

Behind DPS's predicament are many of the same problems that have haunted the city's auto industry for years: excess capacity, high labor and pension costs, fleeing customers, ineffective management, outside competition and -- except for a handful of respected programs -- a reputation for low quality.

This is not a Detroit problem, it is a national public school problem.


Many other school districts are losing students and money and have labor and pension costs that continue to encroach on their day to day operating costs. In addition, charters continue to gain significant market share in very specific geographic regions. The National Alliance for Public Charter Schools reports that in 2007–2008 school year, 12 communities had at least 20 percent of their public school students enrolled in public charter schools, double the number of communities from the 2005–2006 school year. Also, 64 communities now have at least 10 percent of public school students in charter schools.

Many other school districts face a similar financal scenario as Detroit. Spending keeps going up, while enrollment is shrinking. Like the auto industry, school districts need to fundamentally change their economic model. Unfortunately, at least for now, most districts continue to be bailed out by taxpayers.


Lisa Snell is Director of Education


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