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Milan Area Schools warns of state budget delay, prepares to borrow to cover payroll and operations
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Summary
With Michigan lawmakers still negotiating the school-aid budget, Milan Area Schools officials warned Sept. 24 that the district may need short-term loans to cover payroll and basic operations if state aid is delayed past Oct. 10.
Milan Area Schools officials told the board Sept. 24 they are preparing to borrow funds and supply legal documents to lenders if the state does not deliver a school-aid budget in time to provide October state aid.
The board heard a financial update from Ms. Hendricks, who said the district has modeled cash flow and could be unable to make the Nov. 15 payroll if no state payment or other revenues arrive and the district does not borrow. "I don't think we can make payroll in November," Ms. Hendricks said during the meeting.
Superintendent Patrick McMahon (identified in meeting materials as superintendent McMahon) and board members described contingency steps already under way: engaging the district law firm to prepare loan documents, contacting banks about lines of credit or tax‑anticipation notes, and planning a resolution for the Oct. 8 board meeting to authorize seeking private borrowing if needed. McMahon said, as the Free Meals for All program ends statewide Sept. 30, families should file free-and-reduced‑price meal applications if they believe they qualify.
Board and staff explained why the timing matters: Michigan typically pays districts 11 monthly state‑aid payments, with no payment due in September; districts count on the October payment to cover payroll cycles. Ms. Hendricks said that if a budget is approved after Oct. 10, it could take 10–15 days for the state to process payments, delaying cash to districts.
Board members emphasized the stakes. One board member said the state’s political dispute is forcing districts into borrowing that will cost interest the district otherwise would not owe. The board discussed several practical issues if the district cannot secure funds: inability to pay hourly and salaried staff, buy food for cafeterias, run transportation, pay utilities or security, and maintain essential services.
The board also discussed the district's prior, separately adopted resolution urging state lawmakers to pass a school‑aid budget on time; that resolution and an emailed response from state Representative Reggie Miller were read aloud during the meeting. Miller's reply said her caucus has introduced bills to secure funding for categorical programs and asked districts to continue pressing leadership.
The board plans to consider a borrowing‑authorization resolution at its next regular meeting, Oct. 8, and staff said they have contacted at least one bank that indicated readiness to offer short‑term assistance. Legal counsel is preparing required documents; a board vote would be required before any loan is taken. The district stressed that borrowing authority does not obligate the district to borrow—it would simply allow staff to act quickly if needed.
No formal action to borrow occurred Sept. 24; the board instead received the presentation and directed staff to pursue preparatory steps so the district can move quickly if the state budget impasse continues.
Ending
District officials said they will update the board and public as circumstances change and that they will pursue the least‑cost, legally compliant option to maintain operations and payroll if state aid is delayed.
