News Story

Financial Disaster for School Districts Hasn’t Come

Number of districts in deficit stands at lowest in 15 years

Four years ago, then-State Superintendent of Public Instruction Mike Flanagan told the Michigan Legislature that school districts were “spiraling into financial disaster,” according to a March 6, 2015, Detroit Free Press story. Flanagan said that fixing the problem required enrollment stability, which could mean imposing a moratorium on any new charter schools.

Back in 2013, statewide media outlets had reported that a record-high 55 school districts were in deficit, which means they spent more than they collected during the school year and borrowed to close the gap. Flanagan predicted that there could be 100 school districts in deficit “before long.”

That never happened, however. In fact, the number of districts in deficit now is likely to equal the lowest total since 1988-89, according to a report released this month by the Michigan Department of Education.

There were 17 school districts that ended the 2017-18 school year in deficit. That is the lowest number since 15 districts were in deficit in 2003-04. Moreover, the March 2019 report projects that seven of those 17 districts were on track to eliminate their deficits by November 2018. The department won’t verify until June whether that actually happened.

If the projection is correct and there are just 10 school districts operating in a deficit condition, it would tie the lowest number since the 1989-90 school year, the earliest year included in department records. There were 25 school districts in deficit in 1989-90, and the number fell to a low of 10 districts in 2002-03, when Michigan’s “lost decade” of economic woe was taking hold.

Comparisons of district numbers over time are slightly complicated because the state now includes in its definition of school districts something that did not exist in 1988 — charter schools. The state identified 619 school districts in 1988-89 and about 900 in 2017-18. That increase is attributable to the growth of public charter schools, of which there were about 300 in 2017-18. Like a conventional school district, a charter school can go into deficit.

A narrative of a school funding landscape in crisis had been a theme in state news reporting, but it slipped out of the news as fewer and fewer districts overspent their revenues. Most media outlets have stopped reporting on the Education Department’s quarterly report that contains deficit information.

A big reason for the turnaround is the steady increase in funding for K-12 schools, which began early in the current decade.

Total state dollars (not including local and federal) for K-12 schools have increased from $10.8 billion in 2010-11 to $13.1 billion in 2018-19, according to the Senate Fiscal Agency. That’s about an $800 million annual increase when adjusted for inflation.

The 17 districts in deficit include: Distinctive College Prep, Gwinn Area Community Schools, Maple Valley Schools, Michigan Online School, Mt. Clemens Community School District, Vanderbilt Area Schools, Bay City Academy, Beecher Community School District, Detroit Public School Academy, Pontiac City School District, South Lake Schools, Benton Harbor Area Schools, Hazel Park City School District, Pinckney Community Schools, Suttons Bay Public Schools, Macomb Academy and Highland Park City Schools.