Panic Over: Number of School Districts in Deficit Plummets

The state Department of Education reports that the number of Michigan school districts expected to finish the current school year with a budget deficit may be the lowest in nine years.

The state could have as few as 23 school districts in deficit when the books close on the current school year in June, according to the department's most recent list. A deficit means that the district spent more for operations than the amount of direct and indirect tax revenue it received to cover those costs.

The signs of financial stability come at a time when Republicans and Democrats are embroiled in a debate about how much money is needed to educate students, assuming no major changes are made to how school systems operate. One estimate of this amount will come from a controversial (and tardy) school adequacy study authorized at the end of 2014 in a bid to get the votes of Democratic legislators for a major tax increase.

The growing stability has also been underplayed by media sources, which in recent years have played up stories of official panic over speculation that many more school budgets may fall out of balance. In June 2013, Michigan public schools superintendent Mike Flanagan warned legislators more than 100 school districts would be in deficit “before long.” Some pundits joined the chorus, saying the number of districts with deficits was certain to increase.

But in a March report, the Department of Education projects that the number of school districts with a deficit will drop from 41 to 24 by June, the fewest since 2006-07 when 23 school districts were in deficit. It should be noted that the state had 552 traditional school districts in 2006-07 and 540 in 2015-16 and 299 and 302 charter schools, respectively. Charter schools are considered school districts for official purposes, including the March report on deficit spending. Three of them are on the list of districts with a projected deficit.

“A healthy trend toward greater fiscal responsibility would be encouraging to see,” said Ben DeGrow, the director of education policy for the Mackinac Center for Public Policy. “The further we get from the recession, the fewer districts can justify patterns of overspending that hurt students and communities in the long run. Let’s hope the projection turns out to be correct, and that the trend continues.”