A sweeping plan to rescue Detroit's public school district from financial collapse cleared the Michigan Senate Tuesday, advancing a rescue package aimed at averting the district's threatened bankruptcy. The vote sent the legislation to the House for further negotiation as lawmakers raced to resolve a crisis years in the making for Detroit Public Schools, then the largest school system in the state.
Years of deficit spending led to the brink
Detroit Public Schools had been under some form of state financial oversight for much of the previous two decades, cycling through emergency managers as enrollment declined and deficits piled up. By early 2016, the district was reportedly operating on borrowed money just to cover payroll and had accumulated roughly half a billion dollars in operating debt on top of separate long-term bond obligations.
What the restructuring plan does
The legislation was built around a debt and operations split. The old Detroit Public Schools would continue to exist on paper as a legacy entity, collecting a portion of local property tax revenue and using it, along with state money, to pay down existing operating debt over roughly eight and a half years. A new entity, the Detroit Public Schools Community District, would take over educating students, starting with a clean financial slate.
The overall package ultimately totaled around $617 million when signed into law that June, including roughly $467 million to retire old operating debt and about $150 million in transition funding.
Political fight over local control
A central sticking point was how much authority the state would retain over the new district. Republican lawmakers pushed for continued state oversight, including an appointed financial control board, while Detroit officials and the teachers union argued residents should regain local control through an elected school board. The compromise that eventually passed returned governance to a school board chosen by Detroit voters, while layering in financial monitoring tied to state aid.