Senate bolsters distressed school fund, exempts Detroit

Chad Livengood
Detroit News Lansing Bureau

Lansing — The state Senate sent Gov. Rick Snyder legislation Tuesday that adds more money to a fund for financially distressed cities and school districts from which to borrow, but exempts Detroit Public Schools from getting an emergency loan.

The two-bill package boosts the emergency loan fund for schools 40 percent from $50 million to $70 million and increases a loan fund for distressed cities 37 percent from $35 million to $48 million.

Snyder’s Treasury Department asked lawmakers to double the emergency loan fund for school districts to $100 million, but the Legislature pared back the request.

After three years in existence, the emergency loan fund for schools is nearly tapped out after the Treasury Department made loans to school districts in Allen Park, Buena Vista, Benton Harbor, Highand Park, Inkster, Muskegon Heights and Pontiac. About $1.5 million remains in the fund, according to a Treasury Department report.

The Buena Vista and Inkster school districts were dissolved in 2013.

The emergency loan fund for cities has a balance of $15 million after the city of Flint borrowed $7 million in April to pay off its deficit, ending four years of state-run emergency management.

The legislation specifically exempts any “first class” school district from borrowing from the fund. The 47,000-student Detroit school district is expected to end its 2015 fiscal year Tuesday with a $166.4 million deficit, according to the Michigan Department of Education.

“DPS was not immediately aware of House Bill 4331,” district spokeswoman Michelle Zdrodowski said. “However, if the Legislature is working to add $20 million to the cap on the state's emergency loan fund, it’s good news for all school districts in Michigan.”

Sen. Coleman Young II, D-Detroit, accused Republicans of seeking to “punish Detroit” by prohibiting the cash-strapped Detroit Public Schools from borrowing from the emergency loan fund.

“We all know about the precarious state of Detroit Public Schools,” Young said Tuesday on the Senate floor.

Lawmakers remain divided over Snyder’s request for up to $72 million a year to help DPS pay off $438 million in debt that was largely racked up state-appointed emergency managers.

“It takes some gall, some incredible intestinal fortitude to roll up astronomical debt in another person’s name and then make it illegal for them to pay it off,” Young said. “This is outrageous. It’s wrong. It’s separate and unequal treatment.”

Rep. Brad Jacobsen, a Republican from Oxford who sponsored the bill, could not be reached for comment Tuesday.

The Senate on Tuesday voted 25-10 in favor of Jacobsen’s House Bill 4331. Democratic Sens. Bert Johnson of Highland Park, Vincent Gregory of Southfield and Hoon-Yung Hopgood of Taylor were absent.

(517) 371-3660