DALLAS -- The latest quarterly deficit report the Michigan Department of Education submitted to the state legislature indicates a 30% decline in the number of school districts reporting a deficit as of June 30, 2016.
Only 29 districts remained in the red in fiscal year 2015-2016 compared to 41 districts reporting deficits a year ago, indicating that 16 eliminated their fiscal deficits.
Of the 29 districts that ended the year with deficits, 16 districts had reduced deficits and 6 ended the year with a greater deficit. Five districts that began the year with a positive fund balance ended the year with a deficit fund balance and 2 have deficits that are being eliminated through the capture of school operating taxes through the department of Treasury.
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.
State superintendent Brian Whiston, who spoke before the Senate, said that the increase in foundational allowance in recent years has helped. Michigan has increased the minimum per-pupil basic funding allowance for five consecutive budget cycles since it was reduced by $450 in fiscal 2010. The latest increase came in June when lawmakers approved a $54.9 billion fiscal year 2017 budget that added $150 million for kindergarten through 12th grade public education for a total of nearly $12.1 billion in state funding. That's an increase of $1.4 billion since fiscal year 2011.
Whiston also credited the state's early warning intervention law for stymieing the number of districts ending the year at a loss.
The law, enacted in 2015, is intended to allow school districts to receive assistance from their Intermediate School District and the Department of Treasury prior to facing a financial emergency. Legislation also called for the development of metrics that could be used to help predict the possibility of other districts going into deficit.
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."
Of the 27 operating districts that were in deficit at June 30, 2016, 13 fall under Treasury's oversight.
A separate report submitted by Treasury shows that during the 2015-16 school fiscal year, potential fiscal stress was declared to exist in 18 districts. The potential for fiscal stress has since been declared for Muskegon Public Schools after a review of the district's 2016-17 budget.
Those districts are required to perform an administrative review or submit periodic financial status reports to Treasury.
If a probable financial stress is evident it may warrant consideration of an emergency manager or consent agreement. Highland Park City Schools is the only school district in the state currently under emergency management. Pontiac and Benton Harbor schools are operating under a consent agreement.
Pontiac Public Schools continues to face a $25 million deficit, although it's down from $33.4 million in 2015 and $39 million in 2014, according to the state Department of Education. Benton Harbor reported a $12 million deficit, down from $15 million in 2015 and $15.1 million in 2014.
