Saving DPS

Robert Bobb, the soon-to-be-gone emergency financial manager of the Detroit Public Schools, went to Lansing last week, asking for what amounted to loan guarantees.

The district doesn't have enough money to make ends meet, and probably never will. Bobb says it needs to borrow $219 million by next month. But the district already owes a vast amount of money. Six years ago, it took out a $264 million loan.

Assured Guaranty Municipal Corp. ensured that loan, and at the time prudently insisted on one condition: They got the right to block DPS from any more borrowing.

Why? Even back then, Assured Guaranty feared the school system might go bankrupt and leave them holding the bag. The more creditors there were, the less they'd recover. Now the schools are in much worse shape, as is the state itself. They are bleeding students — thousands leave every year — and dollars. Because most public education funding comes from a per-pupil grant from the state, the more kids leave, the more in the hole the Detroit Public Schools are.

Not surprisingly, the executives at Assured Guaranty aren't inclined to say, "Hey, go ahead! Borrow all you want! Pay us, don't pay us — it's all good!" No way, Bobby Bobb. So the man in charge had an idea. He would make like Chrysler, and apply for a loan guarantee, from the state this time, not the feds. So he went up to visit the Republican-controlled Legislature.

It is difficult to know what he was thinking, or if he really thought he had any chance of getting anywhere. Based on the lawmakers I talk with, to say he was viewed with a jaundiced eye would be to show too little respect for jaundice.

"What happens if the schools declare bankruptcy?" Bobb was asked. The emergency financial manager assured them the district had no plans to do that. Unfortunately, everyone over the age of 3 remembers that former General Motors Chairman Rick Wagoner said exactly the same thing about GM, right up until ... they filed for bankruptcy.

President Obama himself fired Wagoner. Bobb will be gone, at the latest by the end of June. I have no doubt that they won't file for bankruptcy on his watch; that will come later.

All you need to know about the Legislature's reaction is in a quote Senator Bert Johnson gave the Detroit News:

"I think you've got to question if it's a prudent move, given the nature of the district's finances. I think these committees are going to demand some serious accountability, and he's got to prove the merit of his proposal."

Bingo. Now consider this: Johnson is a Detroit Democrat. If he is that skeptical, what on earth are the Republicans who run the Legislature apt to do? They basically didn't say much, because they didn't have to. They still have no idea how they can balance the state's budget, given the giant deficit looming ahead. Does anyone seriously think they are going to give the perpetually insolvent Detroit Public Schools district a loan guarantee for a quarter of a billion dollars?

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