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Heading into 2016, Detroit Public Schools drowning in debt

Jan 4, 2016

Credit flickr user Motown31 / http://michrad.io/1LXrdJM

Public schools in Detroit are looking at a rough year ahead.

Debt payments for Detroit Public Schools are already the highest of any school district in the state, but things are going to get even more dire next month.

Chad Livengood of The Detroit News' Lansing Bureau tells us that DPS will owe $26 million every month through 2016 to pay back this year’s operating debts, as well as debts carried over from previous years.

He explains that like many districts around the state, DPS borrows money at the beginning of the school year “for cash flow purposes.”

“There’s so many expenses at the beginning of the school year, and the state of Michigan does not send schools a payment in September, which is when schools begin,” Livengood says.

According to Livengood, most school districts that take on this kind of debt pay it back within the first couple months of the school year. But he says DPS stretches the money out through the school year, a practice which seems to have caught up with it.

“What happened last year was they got to August and owed $83 million, and couldn’t pay it back. They were just simply out of money,” he says.

The state agreed to let DPS push payment back another year with some interest penalties, Livengood says, so the district will owe $87 million this year on top of its base debt payment of $53 million for loans taken in the last 10 to 15 years.

“And then to keep the district afloat this school year, they had to borrow another $121 million at the beginning of the school year, and the repayment schedule of that payment kicks in in February. And that’s where their debt payments are going to balloon to what is equivalent to 97% of their monthly payroll costs,” he says.

Chad Livengood tells us more about the year ahead for Detroit Public Schools in our conversation above.