Detroit Public Schools faces funding crisis as Treasury disputes debt repayment strategy

The December 10, 2024, Regular Board Meeting of the Detroit Public School District (DPSCD) focused on the district's ongoing financial challenges, particularly regarding the repayment of legacy debt and the implications of recent voter-approved measures. The meeting began with a presentation aimed at simplifying the complex issues surrounding school funding and debt management for board members and the community.

The superintendent outlined the current state of the district's finances, emphasizing the requirement for all Michigan school districts to levy an 18-mill tax, primarily from non-homestead properties, to receive state aid. This tax is crucial for funding K-12 education, and while wealthier districts benefit from higher revenues, DPSCD has been historically burdened by significant legacy debt.

A key point of discussion was the recent approval of Proposal S, which restored the 18-mill tax rate, allowing the district to generate approximately $10 million more annually. However, the revenue generated is primarily allocated to pay off the district's legacy debt rather than operational costs. The superintendent noted that DPSCD is on track to pay off a significant portion of its operating debt by March 2025, nearly two years ahead of schedule.

Despite this progress, the district faces a critical challenge following a recent opinion from the Michigan Treasury Department. The department stated that once the 18-mill operating debt is paid off, DPSCD must revert to using the 18-mill revenue for operational funding, rather than continuing to apply it toward remaining debts. This interpretation could lead to a substantial loss of funding, estimated at $100 million annually, if voters do not approve a new operating millage in a special election scheduled for May 2025.

The superintendent expressed disagreement with the Treasury's interpretation, arguing that state law allows for the continued use of the 18-mill revenue to pay off other debts. He highlighted precedents from other districts that have successfully utilized similar funding structures. The board discussed potential paths forward, including seeking legal clarity through the state court of claims or pursuing legislative action to amend the existing state language.

The meeting concluded with an acknowledgment of the complexities involved in the district's financial situation and a commitment to keep the community informed. Board members were encouraged to engage with the community to clarify the implications of these financial decisions and the importance of upcoming votes. The superintendent emphasized the need for transparency and communication as the district navigates these challenges.