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Michigan approves plan to close half of Detroit schools

By Ben Rooney, staff reporter

NEW YORK (CNNMoney) -- In an effort to close a yawning budget deficit, Michigan has approved a proposal to drastically shrink Detroit's troubled school system over the next few years.

The plan calls for the closure of 70 schools, which would cut the number of schools in the district in half by 2014, leaving only 72 public schools in Detroit. The closures would be on top of the 59 that were shuttered last year.

As a result, high school class sizes would jump to 60 students each over the next few years.

The goal is to eliminate the school system's current $327 million budget deficit, according to the plan's author, Robert Bobb, who was named emergency financial manager of the 87,000-student Detroit Public Schools in 2009.

Bobb stressed that he is required by law to submit a plan that will close the deficit, and that his office is still working toward a longer-term solution. The restructuring, he says, reflects the harsh economic reality facing Detroit's schools, which have been hit hard by the recession and decades of decline in the auto industry.

"It's driven by an absolute requirement to get to zero in a prescribed period of time and doesn't take into account issues of educational quality or viability for parents," said Steve Wasko, a spokesman for Bobb.

Indeed, Bobb acknowledges that the current plan will drive parents and students away from the city's schools, which could actually make the situation worse. For each student that leaves, the school system looses $7,660 in state aid, according to Wasko.

In testimony before Congress earlier this month, Bobb said the cuts stem from structural issues that have developed over several years, including an ongoing decline in Detroit's population.

He said student enrollment in Detroit Public School's has been halved over the last decade, falling 83,336.

To address the long-term challenges facing the school system, Bobb would take a page out of a book by another Motor City institution: General Motors (GM).

Bobb would like to separate the Detroit Public School System into two separate entities, with one branch retaining the system's long-term debt liabilities, leaving the other to enact financial and academic reforms.

GM (GM) underwent a similar process in bankruptcy court in 2009. After shedding billions in debt, the automaker has since reemerged and raised a record amount of capital in its initial public offering last year.

The school system is not allowed to declare bankruptcy before Bobb's tenure ends on June 30, said Wasko. Bobb has said that the system will not file for bankruptcy.

Under Bobb's preferred option, the annual allocation of state funds would be used to pay off the debts of the "old" school system.

The "new" incarnation would receive a one-time funding from the state, and administrators would have the power to restructure management contracts that hurt the school system, according to Wasko.

-- CNNMoney's Poppy Harlow contributed to this report.  To top of page

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