Detroit Schools Would Already Be in Deficit if Not for Teacher Vacancies, Extra State Money

The reconstituted Detroit public school district would already be back in a deficit if it had filled 300 teacher openings and was not getting extra “transition cost” money from a 2016 state bailout. If the district were fully staffed and not getting the extra state dollars, it would once again be spending more than its current revenue can support.

That’s according to documents from the state commission that oversees the finances of the still-shrinking school district under the direction of the bailout law.

The most recent report from the Detroit Financial Review Commission was released June 1.

The report states: “It should be noted that if necessary positions were filled and transitional funding not provided, the District would have been in deficit.”

The Detroit Public Schools Community District has started a campaign to fill those vacancies. An article by the statewide news site MLive had this headline: “Want to work in Detroit Public Schools? They’re hiring 300 teachers.”

Chrystal Wilson, the district’s spokeswoman, told MLive the district wants to hire 300 teachers for the 2017-18 school year.

The district has not responded to emails from Michigan Capitol Confidential.

Overall, the district’s fiscal challenges have been reduced. Detroit’s chief finance officer told the transition board that for the first time in years, the district didn’t have to borrow against future state aid payments to pay its bills. Detroit schools projects a general fund surplus of $64.5 million in 2017.

The overhauled school district achieved solvency primarily “from one-time transfers related to the new District’s legislation, one-time asset sales, and underspending in personnel-related expenses,” according to the commission’s report.

The bailout package used $617 million from the state’s settlement with tobacco companies to unburden the school district of debt incurred through years of spending more than it took in. The bailout money allowed an 18-mill local school property tax to be diverted to servicing the debt rather than operating schools.

Officials who have tried to estimate the district’s budget have had trouble accurately predicting its revenue. From December of last year to February, the district overestimated its revenue by 30 percent, or $42 million. The latest report in May states that the district revenue projections were “in line” with what was budgeted.

The district continues to fall short on enrollment projections, though. For the 2016-17 budget, it projected enrollment at 45,511. Instead, it was 45,153, which put it in a $2.9 million deficit. Enrollment dropped even further to 44,689 in the spring count day. According to the financial review commission, each student is worth about $8,022 in funding to the district.

John Rakolta is a Detroit businessman who started tracking the Detroit school district’s finances once he became part of a coalition in 2014 aimed at turning it around. He said that the district received $15 million this school year as part of the bailout and will get another $10 million next year. He said the “transitional funding” stops in 2018-19.

Rakolta said he's heard different about the district's bottom line. He said he's been told by school officials that without the bailout money or unfilled positions, they’d still have a $5 million surplus.

“I am concerned with the budget," Rakolta said in an email. “Although we have made significant progress over the last 12 months there are still two significant issues that need to be resolved to stabilize the system.”

Rakolta said the exodus of students has to stop and the district needs to deal with special education.

“Both present significant financial risk going forward,” he said. “Yes, we absolutely need to fill the 300 positions that were provided for in the budget and the 500 other unfilled positions that would be paid for by Federal Grants.”

The district is also receiving extra money this year from the Wayne County RESA property tax hike passed last November. The state review commission says the increased tax levy will give Detroit schools an extra $17 million each year.