Gov. Rick Snyder decided last week to delay the introduction of legislation to rescue the Detroit Public Schools until next month. That assures it won’t be passed by the end of the year, as the governor had hoped. Before he does send the bills to the Legislature, he’ll have to come up with a more realistic funding plan.
The governor needs $715 million over 10 years to pay off the DPS debt, which will top $515 million by the end of this school year, and to implement changes aimed at improving academic performance and operating efficiency across all city schools.
While education officials and advocates in Detroit have objections to the structural details of the plan, the biggest obstacle is getting the Legislature to approve the financing. Snyder is absolutely right that the $515 million in debt belongs to the state.
Most of it was racked up during the years DPS has been under emergency financial management by the state. And if DPS defaults on the obligation, taxpayers statewide will be stuck with the bill anyway.
That reality doesn’t seem to be moving lawmakers, who are hearing from their local school superintendents that, while they may sympathize with Detroit’s plight, they shouldn’t be asked to sacrifice to save DPS. Many lawmakers rightly note they have debt ridden school systems within their own districts that are not getting special help from the state.
Snyder faces a tough challenge in getting the money for Detroit from the School Aid Fund as he planned. His proposal is to use state money to replace the revenue from DPS’s 18-mill tax levy. The Detroit tax revenue would then be diverted to pay down the operating debt.
The cost to the School Aid Fund would equal $50 per student statewide. Pontiac, a troubled district dealing with its own massive debt, would lose roughly $300,000 in revenue each year. The sell is made harder because revenue is not coming in as robustly as was projected at the start of the year. Tax collections directed to the School Aid Fund are expected to be off $112 million. General Fund collections face a $24.7 million drop from what was expected.
So money will be tighter in Lansing, just as the Legislature is figuring out how to meet the obligation to divert resources from the General Fund to pay for road work under the recently passed transportation bill. Getting money from the Treasury to bail out DPS is far less an option than when Snyder crafted his plan in the spring.
Snyder will have to get much more creative in the financing. A long-term bond issue that is repaid from sources other than the School Aid Fund, or with smaller withdrawals from that fund, may be an option.
It’s also conceivable that the governor could craft a grand bargain for DPS similar to the one put together to bail out the city, with contributions from the state and philanthropic and corporate communities.
But unless he’s prepared for a long and wearying standoff like the one that preceded the roads deal, he should not rely on getting a heavy withdrawal from the School Aid Fund. The support from lawmakers just doesn’t seem to be there.