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Lawmakers allow state to offer schools more emergency loans – with one big exception

Jul 9, 2015

Credit Mercedes Mejia / Michigan Radio

Michigan lawmakers have approved loaning more money to schools facing serious financial problems.

Long term, low interest emergency loans help school districts restructure and pay down their debt.

But the state’s Emergency Loan Board already offered more than $48 million dollars in loans to school districts, almost all the money state law allowed. Now the cap has been lifted to $70 million.

That’s $30 million less than the state’s treasury department wanted.

“This was the number that the sides arrived at and that’s what we’ll work with,” said Dave Murray, a spokesman for Governor Rick Snyder’s office.

“I know that there are some districts that are going to, they need to be able to access that loan money this year,” said Jennifer Smith, director of government relations at the Michigan Association of School Boards.

Smith says Pontiac schools is interested in another emergency loan. So is Benton Harbor Area Schools. Both districts are working to pay down their deficits under Michigan’s emergency manager law.

Loans have been issued to convert traditional districts to charter schools, pay off debt, “or other problems that can be corrected quickly as they work with the state treasury to get their financial house in order,” Murray said. “These are short term problems,” he added.

Along with the new cap, lawmakers also carved out one big exception for the emergency loan program; Detroit Public Schools.

“Detroit has had a long term structural deficit problem and that’s going to take a different kind of solution,” Murray said.

Basically, it’s going to take a lot more than $20 million to help DPS and the appointed Emergency Loan Board isn’t going to make that call on its own.

Murray says Snyder and others are working on a comprehensive solution to fix Detroit schools’ financial and academic issues this summer.