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California bankruptcy ruling a precedent for Detroit Public Schools The Detroit News, July 31, 2009

Detroit — Detroit Public Schools, facing a $259 million deficit and diminishing cost-cutting options, has a recent California court ruling on its side as officials weigh Chapter 9, experts say.

Chapter 9, a rarely used form of municipal bankruptcy, could allow the district to discard its labor agreements, said retired U.S. Bankruptcy Judge Ray Reynolds Graves, who has been advising the district’s emergency financial manager, Robert Bobb.

“The bond obligations and the labor contracts are the big financial burdens on DPS,” Graves said. “Failure of the constituents to make sacrifices will make Chapter 9 inevitable. If people don’t want to make deals, then (the district will) have to file.”

More on municipal bankruptcy at Riski

Photo – Lake of the Clouds, Porcupine Mountains, Michigan

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