Michigan Public Schools $19.7 Billion In Debt

Michigan’s public schools have racked up $19.7 billion in long-term debt — mostly due to construction costs — but aided by the state of Michigan, which loans the districts money to make bond payments the districts couldn’t otherwise afford to make.

Michigan schools also owe the state $1 billion from loans the state has given districts to help pay their bond payments as part of the Michigan School Bond Qualification and Loan Program.

The nearly $20 billion in long-term debt owed by schools is more than the $12 billion the state of Michigan’s budgets for public schools in one year.

The state ranks 5^th nationally in per-student amount of long-term debt. Michigan has $13,000 per-student in long-term debt, according to 2008-09 figures from the National Center for Education Statistics, the latest year data is available. On average, the U.S. has $8,400 per student in long-term debt.

"Taxpayers should be concerned with the amount of debt that Michigan school districts are accumulating,” said Michael Van Beek, the education policy director at the Mackinac Center for Public Policy. “If these trends continue, they'll be on the hook for decades to come for school loans from decades before.”

Most of the long-term debt is due to capital costs incurred from construction.

For example, the Chippewa Valley School District has been borrowing money from the state of Michigan for 45 years and owes $120 million, according to Terry Stanton, spokesman for the state treasury department. Chippewa Valley levies residents 7.65 mills to pay part of its bond debt and borrows the rest from the state, Stanton said.

Chippewa Valley has grown from 9,450 students in 1992 to 16,284 in 2012. In the last 20 years, the district stated it has added eight school buildings, an alternative education center and an early childhood center.

But Van Beek notes that the trend in Michigan is for shrinking districts. There were 1.64 million students in the state in 2001-02. That has dropped to 1.43 million in 2012.

Van Beek notes there's also a built-in hazard of the state’s loan program — schools have to ask for at least 7 mills to qualify for the loan.

“It enables school districts to take out bonds for which they know they can’t pay the bond payments on,” Van Beek said. “It encourages schools to continue to build new buildings and to take out loans that they aren’t able to support.”

~~~~~

See also:

Teacher Contract Analysis

Coverage of School District Claiming Cuts

Helpful Facts About Michigan's Public Sector