Get Involved
Right Arrow
  • Permission to reprint this blog post in whole or in part is hereby granted, provided that the Citizens Research Council of Michigan is properly cited.

  • Recent Posts

  • Stay informed of new research published and other Citizens Research Council news.


    By submitting this form, you are consenting to receive marketing emails from: Citizens Research Council of Michigan. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact
    April 13, 2018

    Hope springs eternal for the Detroit Public School District, at least its financial future

    In a nutshell

    • Detroit Public Schools Community District proposed budget for 2018-19 is balanced and grows year-end fund balance
    • Student enrollment is held constant after enrollment gains in current-year from closure of 11 Education Achievement Authority schools
    • Long-term projections based on minimal enrollment growth and small state funding increases

     
    Is the Detroit Public Schools Community District a failing district? Or has the district turned the corner to retain and attract students?  Observers were presented with two different narratives this week.
    On Tuesday, the school district appeared at the bottom of the list of large cities on the 2017 National Assessment of Education Performance (NAEP) test results, often called the nation’s report card. This is the fifth consecutive time Detroit was last among big cities. On the same day, the elected school board approved a budget for next school year predicated on enrollment and financial stability. The financial portrait presented in the budget is one of growth through attracting additional students, investing in teacher and administrator professional development, and upgrading technology. This stands in stark contrast to budgets of the past decade in which state-appointed emergency managers liquidated assets and cut personnel regularly.

    By the numbers
    The district’s 2018-19 budget is the first crafted by Superintendent Nikolai Vitti since taking office last May and largely reflects his vision and strategic priorities. The current 2017-18 spending plan was put together in early 2017 by the district’s transition manager, Steven Rhodes, before the new superintendent was hired.
    Key assumptions behind the budget include flat student enrollment and a modest bump in the state per-pupil foundation grant. Enrollment in 2017-18 was aided by the return of 11 Education Achievement Authority (EAA) schools to the district, increasing from 45,720 students in 2016-17 to 50,875 students this fall. Budgeting flat student enrollment after years of declines (with the exception of current year) could be viewed as risky. A modest three percent enrollment loss would translate to nearly $12 million revenue decline. While the budget would remain balanced, the loss of revenue would account for about two-thirds of the budgeted contingency.
    The district’s total revenue is based on an estimated $120 per-pupil increase from the state foundation grant, the low end of what is being discussed in Lansing currently. The governor’s proposed 2018-19 state budget provides a range of per-pupil increases to districts ($120 to $240 per-pupil) with the largest targeted at districts with the lowest grant. If the legislature adopts the governor’s plan, Detroit would see a $236 per-pupil increase next year. By planning for the minimum increase, the district has some flexibility to adjust its budget after the state budget is finalized.
    Overall, the proposed 2018-19 budget includes general fund expenditures of $732 million, up from $719 million in the current year. Additionally, the budget provides for general fund contingency expenses of $18 million to bring total expenditures to $750 million.  General fund spending is supported by $758 million in expected revenue, about $3 million less than is anticipated this year. The budget is balanced between proposed spending expected revenues.
    Further, the budget grows the district’s end-of-year general fund balance from $96 million to $105 million. The district ended its first year in operation, 2016-17, with a fund balance of $79 million aided largely by a few one-time items resulting from the wind-down of the “old” district and the state’s financial package.
    The budget still must be approved by the Detroit Financial Review Commission before taking effect on July 1. The commission is responsible for overseeing the district’s finances following the 2016 financial rescue package.
    Long-term outlook
    In addition to the immediate spending plan, the district has loosely sketched out a five-year financial projection showing continued balanced budgets and increasing year-end fund balances. Projections assume annual student enrollment growth of one percent per year and small per-pupil increases through 2022-23. Of these two key assumptions, the former may be more optimistic than the latter. As the 2018-19 budget takes shape, and after its implementation, the long-term planning budget must be updated to ensure its accuracy and value.
    Long-term financial planning is notoriously difficult.  It is made even more so when many of the inputs (student enrollment, state funding, pension funding obligations, etc.) are out of the local school district’s direct control. In the case of Detroit Public Schools, years of governance and financial instability rendered long-term financial planning a futile endeavor. Consequently, little was done on this front previously.
    Following the 2016 financial rescue, a new governance structure and district leadership, and the creation of the new debt-free Detroit Public Schools Community District, long-term planning is now more possible. Risks are still inherent and should be accounted for in such an endeavor. The district operates in a very fluid public education market with multiple provider alternatives within and outside of the city competing for the same student population.
    Preliminary assessment
    Release of the most recent round of NAEP test results demonstrates that Detroit’s main public school system has a ways to go in improving how it is preparing its students for success. Detroit’s problems are not unique in Michigan as the state’s performance on this national measure, while slightly improved from 2015, is far from acceptable (Michigan ranks 35th in 4th grade reading and 33rd in 8th grade math nationally). Detroit’s struggling low-achieving schools, along with others across the state, are being helped with additional supports via partnership agreements brokered by the Michigan Department of Education beginning in 2017.
    On the financial side, the first two years of district operations show glimmers of hope and a definite break from the past. The district no longer appears plagued by poor planning, overspending, mass student defections, fraud, and ballooning operating deficits. The proposed 2018-19 budget continues to build upon the fresh start granted the district in 2016.
    Sustained financial improvement, however, is not guaranteed. It will require the district to both grow revenue and control costs. Stabilized, or even better, slowly growing student enrollment will address the revenue side. On the expenditure side, the district continues to operate a number of half-empty school buildings.  School closures and program consolidations must remain an option if the district wants to maintain the financial stability created by new leadership, improved management, diligent state oversight, and growing revenues.

    Hope springs eternal for the Detroit Public School District, at least its financial future

    In a nutshell

    • Detroit Public Schools Community District proposed budget for 2018-19 is balanced and grows year-end fund balance
    • Student enrollment is held constant after enrollment gains in current-year from closure of 11 Education Achievement Authority schools
    • Long-term projections based on minimal enrollment growth and small state funding increases

     
    Is the Detroit Public Schools Community District a failing district? Or has the district turned the corner to retain and attract students?  Observers were presented with two different narratives this week.
    On Tuesday, the school district appeared at the bottom of the list of large cities on the 2017 National Assessment of Education Performance (NAEP) test results, often called the nation’s report card. This is the fifth consecutive time Detroit was last among big cities. On the same day, the elected school board approved a budget for next school year predicated on enrollment and financial stability. The financial portrait presented in the budget is one of growth through attracting additional students, investing in teacher and administrator professional development, and upgrading technology. This stands in stark contrast to budgets of the past decade in which state-appointed emergency managers liquidated assets and cut personnel regularly.

    By the numbers
    The district’s 2018-19 budget is the first crafted by Superintendent Nikolai Vitti since taking office last May and largely reflects his vision and strategic priorities. The current 2017-18 spending plan was put together in early 2017 by the district’s transition manager, Steven Rhodes, before the new superintendent was hired.
    Key assumptions behind the budget include flat student enrollment and a modest bump in the state per-pupil foundation grant. Enrollment in 2017-18 was aided by the return of 11 Education Achievement Authority (EAA) schools to the district, increasing from 45,720 students in 2016-17 to 50,875 students this fall. Budgeting flat student enrollment after years of declines (with the exception of current year) could be viewed as risky. A modest three percent enrollment loss would translate to nearly $12 million revenue decline. While the budget would remain balanced, the loss of revenue would account for about two-thirds of the budgeted contingency.
    The district’s total revenue is based on an estimated $120 per-pupil increase from the state foundation grant, the low end of what is being discussed in Lansing currently. The governor’s proposed 2018-19 state budget provides a range of per-pupil increases to districts ($120 to $240 per-pupil) with the largest targeted at districts with the lowest grant. If the legislature adopts the governor’s plan, Detroit would see a $236 per-pupil increase next year. By planning for the minimum increase, the district has some flexibility to adjust its budget after the state budget is finalized.
    Overall, the proposed 2018-19 budget includes general fund expenditures of $732 million, up from $719 million in the current year. Additionally, the budget provides for general fund contingency expenses of $18 million to bring total expenditures to $750 million.  General fund spending is supported by $758 million in expected revenue, about $3 million less than is anticipated this year. The budget is balanced between proposed spending expected revenues.
    Further, the budget grows the district’s end-of-year general fund balance from $96 million to $105 million. The district ended its first year in operation, 2016-17, with a fund balance of $79 million aided largely by a few one-time items resulting from the wind-down of the “old” district and the state’s financial package.
    The budget still must be approved by the Detroit Financial Review Commission before taking effect on July 1. The commission is responsible for overseeing the district’s finances following the 2016 financial rescue package.
    Long-term outlook
    In addition to the immediate spending plan, the district has loosely sketched out a five-year financial projection showing continued balanced budgets and increasing year-end fund balances. Projections assume annual student enrollment growth of one percent per year and small per-pupil increases through 2022-23. Of these two key assumptions, the former may be more optimistic than the latter. As the 2018-19 budget takes shape, and after its implementation, the long-term planning budget must be updated to ensure its accuracy and value.
    Long-term financial planning is notoriously difficult.  It is made even more so when many of the inputs (student enrollment, state funding, pension funding obligations, etc.) are out of the local school district’s direct control. In the case of Detroit Public Schools, years of governance and financial instability rendered long-term financial planning a futile endeavor. Consequently, little was done on this front previously.
    Following the 2016 financial rescue, a new governance structure and district leadership, and the creation of the new debt-free Detroit Public Schools Community District, long-term planning is now more possible. Risks are still inherent and should be accounted for in such an endeavor. The district operates in a very fluid public education market with multiple provider alternatives within and outside of the city competing for the same student population.
    Preliminary assessment
    Release of the most recent round of NAEP test results demonstrates that Detroit’s main public school system has a ways to go in improving how it is preparing its students for success. Detroit’s problems are not unique in Michigan as the state’s performance on this national measure, while slightly improved from 2015, is far from acceptable (Michigan ranks 35th in 4th grade reading and 33rd in 8th grade math nationally). Detroit’s struggling low-achieving schools, along with others across the state, are being helped with additional supports via partnership agreements brokered by the Michigan Department of Education beginning in 2017.
    On the financial side, the first two years of district operations show glimmers of hope and a definite break from the past. The district no longer appears plagued by poor planning, overspending, mass student defections, fraud, and ballooning operating deficits. The proposed 2018-19 budget continues to build upon the fresh start granted the district in 2016.
    Sustained financial improvement, however, is not guaranteed. It will require the district to both grow revenue and control costs. Stabilized, or even better, slowly growing student enrollment will address the revenue side. On the expenditure side, the district continues to operate a number of half-empty school buildings.  School closures and program consolidations must remain an option if the district wants to maintain the financial stability created by new leadership, improved management, diligent state oversight, and growing revenues.

  • Permission to reprint this blog post in whole or in part is hereby granted, provided that the Citizens Research Council of Michigan is properly cited.

  • Recent Posts

  • Stay informed of new research published and other Citizens Research Council news.


    By submitting this form, you are consenting to receive marketing emails from: Citizens Research Council of Michigan. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

    Latest Research Posts

    Back To Top