Council Comments No. 829, March 19, 1970

On January 27, 1970, seven months after the beginning of the fiscal year, the Detroit board of education passed a budget for the 1969-70 year which contemplates a $16 million deficit. It seems probable that the financial stability of the Detroit school district will be seriously affected by the outcome of budgetary operations for the 1969-70 year.

A financial problem began to take shape in the 1967-68 year when the Detroit school district ended the year with a deficit of $6.7 million. A presumably balanced budget was approved in 1968-69 which included the funding of the $6.7 million deficit. Actually, total expenditures in 1968-69 were $194.2 million including the funding of the deficit, and revenues were $190.5 million leaving a deficit of $3.7 million on June 30, 1969.

The budget for the 1969-70 year approved by the board of education provides appropriations of $222.4 million and revenues of $206.3 million and contemplates a year-end deficit of $16 million.

In May, 1968, the Detroit school board attorney gave an opinion to the board of education that under then existing state laws the board “should not budget a deficit.” In 1969, the legislature expressly provided in the state school aid act for the 1969-70 year that “School districts receiving moneys under this act shall not adopt or operate under a deficit budget” (Public Acts 1969, No. 22, Sec. 85a).

1970-71 Budget

In the 1970-71 fiscal year beginning July 1, 1970, the school board will be faced with the dual problems of financing the 1969-70 deficit and fulfilling the obligations of labor contracts already signed. The school district predicts a revenue-expenditure gap of between $30 and $40 million in 1970-71.

Various educational aid proposals now before the legislature provide for additional aid to the Detroit school district in amounts varying from $10 million to $50 million in “general aid.” To become effective, the legislation which would provide an additional $50 million is contingent upon legislative enactment of some $342 million in additional state income taxes.

Under existing law, the school district can raise additional local revenue only through popular approval of extra voted millage. If the board of education wants voter authorization to levy any additional millage for the 1970-71 year, it will have to move expeditiously to establish a date for the millage election.

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