16 Michigan school districts eliminate deficits

Jonathan Oosting
Detroit News Lansing Bureau

Lansing — Public school districts in Flint, Warren and Southgate were among 16 Michigan districts or charter academies that eliminated their fiscal deficits between June 2015 and June 2016, according to a new state report.

Twenty-seven districts remain in the red, down from 41 a year ago, the Michigan Department of Education said Tuesday in a quarterly report presented to state legislators. It is a 39 percent decline.

Warren Consolidated Schools eliminated a $2.2 million deficit over the past two years and, as of June, had a positive fund balance of $5.7 million, according to the state.

Flint Community Schools wiped out a nearly $22 million deficit over the same stretch, while Southgate Community Schools eliminated what had been a roughly $4 million deficit in 2014.

After reducing per-pupil funding in fiscal year 2012, Gov. Rick Snyder and the Republican-led Legislature have increased foundational allowances in recent years, “which definitely helps,” said state Superintendent Brian Whiston.

Whiston also credited a new “early warning” law approved in 2015 that gives the Michigan Treasury Department more authority to intervene in the face of potential budget shortfalls, beginning an extended process prior to any potential consideration of emergency management.

Among other things, the law requires school districts with reserve funds of less than 5 percent of their general fund budget to send reports to the state.

By “putting a light on” budget assumptions, the law has “forced districts to make some tough choices,” said Whiston. “And in some cases, its student count, obviously.”

In addition to the 16 districts that eliminated deficits last year, 16 others reduced deficits, six increased deficits and five others went into deficit, including Grosse Ile Township Schools and four charter school academies.

Despite an emergency manager, Detroit Public Schools’ general fund deficit increased from $215.9 million to $308 million between June 2015 and Jun3 2016. Snyder and state legislators in June finalized a $617 million bailout that created a new deficit-free Detroit district.

Pontiac Public Schools continues to face a $25 million deficit, down from $33.4 million in 2015 and $49 million in 2014, according to the state Department of Education. The district is operating under a consent agreement with the state.

Sixteen Michigan districts and charter schools are subject to early warning oversight by the state Treasury, according to a separate department report presented to legislators Tuesday.

Seven others went through a preliminary financial review process last year, including Mount Clemens Community Schools, but a state review board determined they did not face probable financial stress that warranted consideration of an emergency manager or consent agreement.

Those districts are still required to generate an enhanced deficit elimination plan, which allows for Treasury to make on-site visits, monitor finances and provide technical assistance.

The early warning law was an intentional move by the governor’s office and Legislature to help districts avoid the emergency manager process, said Paul Connors, director for the Treasury’s Office of School Review and Fiscal Accountability.

“That’s why they gave Treasury a bunch of different tools so we can handle them administratively,” Connors said.

All told, 606 Michigan school districts or charters increased their general fund balances in the 2016 fiscal year, according to Treasury, and collective closing balances increased 30.5 percent to $1.7 billion.

Flint Public Schools, which eliminated its deficit but ended the fiscal year with a $112,000 balance, is a “work in progress,” Connors said, but positive fund swings across the state are the result of efforts “to improve fiscal management and making tough decisions.”

“There isn’t any smoke and mirrors,” he said.


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