Memorandum 1145, May 2017

In a Nutshell

• The Detroit Public Schools (DPS) district had amassed over $3.5 billion in operating debts and capital liabilities by the end of FY2015.
  • A package of bills enacted in June 2016 to address a host of chronic problems facing DPS included a state-financed debt retirement plan. 
  • To provide the district with the funds to retire its debts, the state is allowing the proceeds from the 18-mill local school operating tax to be redirected toward debt repayment.
  • A “new” district, Detroit Public Schools Community District, took the place of DPS last July. 
• Since adoption of the new district’s original FY2017 budget, significant changes affecting the budget include:
  • the addition of the enhancement millage funds levied by the intermediate school district and shared among all school districts within it;
  • a transfer of FY2016 year-end funds from DPS;
  • almost $10 million from the sale of district assets; and
  • recognition of lower projected spending to reflect staffing vacancies.
• The Detroit Public Schools Community District (DPSCD) currently projects to end the fiscal year with a $64 million General Fund surplus, up from $17 million in the original budget. However, the long-term budget improvement is much less when one-time resources are factored out. In total, one-time resources account for about two-thirds of the total projected year-end surplus.
• The district continues to face some uncertainty related to its long-term financial future that could derail the “fresh” financial start that state policymakers crafted for the school district.
  • The district must make academic improvements.
  • The loss of students has moderated in recent years and the district is likely to experience a 10 percent bump when the Education Achievement Authority schools are folded back into DPSCD.
  • A key challenge facing the district is to balance the need to increase efficient use of its facilities, while ensuring that Detroit school children have access to a nearby school.