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Report: Other schools would pay the price if DPS's debt is forgiven

Apr 23, 2015

A new report says taking on Detroit Public Schools' debt could cost districts across the state.
Credit Christian Schnettelker / Creative Commons

 A new report says restructuring Detroit Public Schools' debt could cost other school districts millions of dollars.

The Citizens Research Council of Michigan says other districts would lose about $50 per student if DPS is allowed to use property taxes to pay off its debt. Schools normally use these taxes to fund operations. But if the taxes were used to pay off debt, the state would have to make up the difference.

Last month, a group of business and community leaders released recommendations for improving Detroit’s struggling school district.

The Coalition for the Future of Detroit Schoolchildren said the state should take on DPS’s debt, since much of it was accumulated while the district was under emergency management.

If the proposal were to go through, it wouldn’t be the first time the state has assumed responsibility a financially struggling district’s debt.

In 2012, Muskegon Heights and Highland Park schools received financial assistance after emergency managers converted the districts to charter schools. The state absorbed Buena Vista and Inkster schools’ debt in 2013 after both districts were dissolved.  In all four cases, local property taxes have been shifted from the state's fund for schools, to pay off the local district's debt instead.

The CRC said the state needs to consider consequences associated with those actions and develop a transparent, long-term policy for handling school debt before taking on DPS’s request or that of any other district.

“55 other school districts across the state began the current fiscal year in a deficit situation,” said Craig Thiel, a CRC research associate who wrote the report. 

A request from any of those districts, some of which are under the control of state-appointed emergency managers, may not be too far off,” he said.

Governor Snyder is expected to announce his plan for overhauling Detroit Schools next week. DPS’s debt is expect to be a big part of it.