Part I - No, The Richmond USD Case Did Not Challenge U.S. Bankruptcy Court Authority
Governor Snyder browbeat the Michigan Legislature to approve the $ 617 million bailout of Detroit Public Schools which he signed today by regaling them with a parade of horribles which would occur if the bailout was defeated and DPS was forced to file for bankruptcy. Daniel Howes regurgitated Governor Snyder’s compelling tales of impending doom delivered behind closed doors in a Detroit News article, but was any of it true?
Right at the top of Governor Snyder’s parade of horribles was the Federal bankruptcy filing of the Richmond [California] Unified School District on April 19, 1991 . Governor Snyder portrayed the outcome of this action as the U.S. Bankruptcy Court denying the petition and ordering the State of California to financially bail out the district. From Daniel Howes’ article:
There is scant precedence for school districts filing for bankruptcy, the Snyder administration found. In 1990, according to an administration letter to state Rep. Laura Cox, R-Livonia, the Richmond Unified School District in Northern California filed for bankruptcy because of $42.5 million in debt. The judge ruled the district could not be protected by the court in bankruptcy and ordered the state to provide the district with operating funds.
Nothing could be farther from the truth.