News Story

Less Than A Year After Bailout, Detroit Schools Again Scramble to Stay Afloat

District sold property and left open teacher slots vacant to cover overspending

In June 2016, the newly reconstituted Detroit public school district received a $617 million bailout from the Michigan Legislature, wiping some $415 million in accumulated debt from its books. The full bailout amount included a projected interest expense and an additional $150 million grant to the district for so-called transition costs.

But by the end of that same year, the “new” school district had to leave 300 vacant positions unfilled, sell $10 million in property, and use a one-time transfer of $15.7 million left on the “old” district’s books to keep from racking up another round of deficits and debt. That’s according to documents received from the Detroit school district in response to a Freedom of Information Act request, along with reports from the Michigan Department of Treasury.

The state bailout placed the district under the oversight of the Financial Review Commission, created in 2014 to oversee municipal finances after the city of Detroit’s own state bailout and a trip to federal bankruptcy court.

In May, Detroit school officials filed a report with the commission indicating the district would have overspent its revenue in 2017 if not for “one-time transfers,” “one-time asset sales” and “underspending in personnel-related expenses.”

Not filling the vacant positions saved the district about $36 million in the 2016-17 school year. The district also collected just over $10 million from the sale of 33 properties in 2016 and early 2017. The largest of these was a $6 million sale of a radio station the district owned, WRCJ-FM.

Having taken these and some other steps, the school district had a positive fund balance in May of $40.3 million, rather than being in debt again.