CHICAGO — Michigan Gov. Rick Snyder Thursday morning declared that a state of fiscal emergency exists in the suburban Detroit-area Highland Park School District and state officials said they would be forced to advance the district its January state aid payment so that it could cover its bills, including this week’s payroll.
More than half of the district’s students come from Detroit, which the state currently has under review for a financial emergency.
Snyder said the next step is appointment of an emergency manager to take over the system’s finances and academic curriculum.
School officials requested an appeal hearing, which will be held next Tuesday, Jan. 17, in Lansing.
The announcement comes a week after a state-appointed review team gave Snyder a report that concluded a local government financial emergency exists in the district, and that there is no satisfactory plan to resolve the situation.
The report said the district has suffered operating deficits in five of the last six fiscal years, and that its cumulative deficit increased by 51% from the end of fiscal 2010 to the end of fiscal 2011.
The team also reported that the school district has failed to comply with bond and note covenants and to make pension fund deposits, and that officials have shown a lack of cooperation from school officials in submitting deficit information.
Last July, the Highland Park schools superintendent informed the state that the district would be unable to repay a short-term note for $11.1 million, according to the review team’s report.
State Treasury officials have since determined that Michigan will need to begin intercepting part of the district’s state aid payments starting in February to ensure the repayment of the outstanding note. The state will intercept 49% of the district’s February payment and 100% of the August payment.
Driving the district’s fiscal problems is a “precipitous decline” in student enrollment, which has fallen by 58% since 2006, the report said. There are currently 969 students enrolled at the district, more than half of whom are Detroit residents.
“It is critical that students in the Highland Park School District get the education they need and deserve,” Snyder said in a statement. “For that to continue, the Highland Park School District must have stable finances. Through the comprehensive reviews that have been conducted, it is clear the district faces monumental financial challenges.”
Detroit Public Schools is the only other school district under state control. Three Michigan cities are also run by emergency managers.
