DALLAS — Michigan lawmakers gave final approval Thursday to nearly $50 million of emergency cash needed to keep Detroit Public Schools open through the end of the current school year.
The bill provides $48.7 million in state restricted revenue from Michigan's tobacco settlement fund to help Detroit Public Schools meet payroll after April 8.
“The funds are to be used for daily operation costs of running the distressed school district,” said a spokesperson for the Michigan House Democrats. “The state, emergency manager, and the distressed school district shall enter into an agreement to provide for the expenditure of the funds.”
The district, under state emergency management oversight for the last seven years, has long been warning that its cash position was precarious and it could run short on cash this spring because of rising debt payments. The district has limited options. It has tapped out its state loan capacity under law and any new debt would only add to a burden that is driving its current liquidity crisis.
DPS' operating deficits ballooned over the last four years to an projected $335 million at the end of 2016 from $83 million in 2012 an enrollment plummeted, according to the Citizens Research Council of Michigan, a nonpartisan public affairs research organization.
The district began the current school year with legacy debts totaling almost $440 million. Adding to the district's more recent fiscal deficit challenges is its heavy reliance on short-term notes to help with cash flow throughout the fiscal year.
A long-term restructuring of the Detroit district is still in the middle of the legislative process.
A six-bill restructuring package passed the state Senate Tuesday.
The bills would split Detroit Public Schools into two entities.
The current school district -- Detroit Public Schools -- would be left intact only to levy taxes and repay the district's existing bond debts. A new school district, known as Detroit Community District, would own assets and operate the schools.
The bills propose $200 million in transition funds to form the new community district. An additional $515 million would be appropriated to fund the education needs and operation of the new community district.
The financial review commission that has overseen the finances of the city of Detroit since its 2014 bankruptcy exit would also take on oversight of the new community district. Two additional members would be added to the financial review commission to have input on the school district only. Those two seats would be filled by the superintendent and school board president.
The bills have to lay over for five days before being heard by Michigan’s House, which breaks for a two-week spring break beginning on Friday.
The House, which has proposed its own bills on DPS restructuring, on Thursday approved legislation that would place DPS under oversight of Detroit’s Financial Review Commission. Under House Bill 5385, the FRC would be empowered to reject or revise DPS’ operating budget and approve the appointment of the school superintendent and chief financial officer.
