CHICAGO - Turns out, it is all about the money.
For years, Michigan's leaders have insisted that management, not money, was the big problem for the state's distressed local governments and school districts.
A change in management - usually via the emergency management law - was what was needed, they said, not more money.
But in the end, more money has ended up being the solution nearly every time the state has intervened in a troubled government, according to an influential research group that has turned its lens to the problems at Detroit Public Schools.
"Even in Detroit, under an emergency manager, he realized he couldn't do it and took the city into bankruptcy, and at the end of the day, with the grand bargain, the city received additional money," said Craig Thiel, senior research associate at the Citizens Research Council of Michigan, an independent public policy research group.
"The policy as it's spelled out in the emergency management law is that we'll solve these problems without any additional resources, but all of the problems by this date have been solved by additional resources," Thiel said.
In a new report titled "State Assumption of School Debts," the research council argues the Legislature needs to craft a clear policy for dealing with distressed school districts before tackling the Detroit schools, where the main proposal on the table is for the state to take over a big chunk of the school district's bond debt and some of its pensions.
The report comes as Gov. Rick Snyder is expected to unveil as soon as this week a proposal to reform the long-troubled district. The plan is expected to divide DPS into two districts, an 'old' one that exists only to service outstanding state-aid backed operations debt, and a 'new' one that would take over all educational duties and the remaining bond debt.
The district's debt, which totals $2.1 billion, has become a major target for Snyder and a high-profile coalition of Detroit leaders who want the state to take over at least $300 million of the state-aid operations debt.
"Debt is a huge issue," Thiel said. "Detroit Public Schools has been under emergency management for the last half-dozen years and it can't solve its problems without additional resources," he said. "We're saying if you're going to have to provide additional resources that's fine, but don't do it this back-door way."
The state under Snyder has taken over the outstanding bond debt of four troubled school districts: Highland Park City Schools, Muskegon Heights School District, Buena Vista School District and Inkster Public Schools.
In the first two cases, Snyder shifted the new districts entirely into charter schools, which by law are not allowed to levy a tax, and kept the shell of an old district solely to service debt. In the latter two cases, the state left the old district to service the debt and sent students to other nearby districts.
Neither method is likely to work in Detroit, and the governor is reportedly working on an alternative model.
Most of DPS' $300 million of state-aid backed debt was originally issued as short-term notes that were later refinanced into long-term bonds. The bonds are paid for with an 18-mill non-homestead local school operating tax, which makes up the local contribution to the state's school aid fund.
While some say the local levy proves that Detroiters would continue to pay for the servicing of the debt, Thiel notes that Michigan is required to make up for the shortfall with state money. The tax is estimated to generate $72 million in the current year, according to the report.
If the state replaces that $72 million with school aid fund revenues, it would mean the loss of $50 to every student across the state, CCR said.
"So while the use of the 18-mill tax appears to be a 'local' solution to school district debt relief, it is undeniably a state-financed solution," the report says.
In addition to $54 million in annual debt service, the coalition wants the state to take over another roughly $70 million of legacy costs, for a total of $124 million a year.
Meanwhile, the district's current emergency manager, Darnell Earley, wants to roll over $85 million of one-year notes issued last August into longer term debt, saying the district can't afford to repay the loan by this summer.
"At the end of the day, the borrowing, when originally done just to meet cash needs, there's an equity issue here when you have students in the future paying for the borrowing associated just with operations today," said Thiel.