DALLAS — Michigan lawmakers finalized a controversial Detroit Public Schools restructuring package that is supposed to rescue the struggling system from insolvency.
The action came in a whirlwind of activity late Wednesday in which lawmakers also approved a state budget and funding for Flint's water contamination crisis.
Detroit Public Schools will end the school year next week certain that doors will reopen for the fall and that bills will be paid after Republican majorities passed a $617 million package without any Democratic votes. In the Senate, the main bill was approved on a 19-18 vote late Wednesday followed by a 55-54 vote in House a short time later.
The bill now heads to Michigan Gov. Rick Snyder who intends to sign what he called "unprecedented investment for the education of Detroit children" into law.
"The debt will be repaid, the emergency managers no longer necessary. Bankruptcy won't hang in the balance," Snyder said in a statement.
The legislative package represents a compromise between House and Senate versions reached after negotiations among key Republican lawmakers and the Republican governor's administration.
"At the end of the day any solution for DPS must have the support of both the Senate and House and this latest plan represents a realistic compromise that will put the district on a path for the future," said Senate Majority Leader Arlan Meekhof, R-West Olive.
"It was a very difficult process to work though as there were strong positions and feelings on both sides but ultimately Republican votes came together in both chambers to pass the bills. It is important we were able to get this," said Speaker of the House Kevin Cotter, R-Mt. Pleasant.
Snyder launched the effort last year. Without legislative action, he warned Detroit Public Schools was headed toward bankruptcy with the state likely on the hook for much of the district's bonded debt.
"We were asked to pay off debt and return control and it does both of those things," Cotter said of the final version.
Under the plan, the state will pay off $467 million of accumulated DPS operating debt. A new, debt-free school system will be established with an additional $150 million provided to cover transitional operating costs.
The new Detroit Community District will own assets and operate the schools. Both the old school district and the new community school district will be subject to oversight by the same financial review commission in place for Detroit following its 2014 emergency from Chapter 9.
The legislation leaves out a proposed commission strongly advocated by Detroit Mayor Mike Duggan and Democrats to regulate traditional and charter school locations in the city. Instead, it calls for six-member advisory council that will be in charge of developing siting and transportation recommendations for the new community school district. The council will be comprised of three representatives from traditional public schools and three representatives from charter schools.
The legislation implements an A through F accountability system for all traditional and charter schools in the district starting in the 2017-2018 school year. The state School Reform Office will be responsible for schools that receive an "F" for three consecutive years and will have the authority to close persistently failing schools.
Michigan House Democrats said in a statement ahead of Wednesday night's vote that the plan fails to put in place the reforms needed to ensure DPS will recover from its financial crisis.
"House Republicans are playing games with the Detroit Public Schools, and the children of Detroit are the ones who will lose," said House Democratic Leader Tim Greimel, D-Auburn Hills. "House Republicans are forcing the closure of public schools while allowing failing charter schools to proliferate. Republicans are making it clear who they serve: charter school operators, not children."
Democrats were angry because the original Senate proposal that included the commission had been reached through bipartisan negotiations.
"By throwing money at the Detroit Public Schools without enacting needed reforms, Republicans are wasting taxpayer dollars. We can't support a plan like this," Greimel said.
"What happened here today is a shame," said Rep. Sherry Gay-Dagnogo, D-Detroit. "It's an embarrassment that this plan was voted out of the House."
Democrats in both chambers have also questioned the dollar amount allocated to fund the new district. A Senate Fiscal Agency report circulated earlier in the week showed that the $617 million reform package, which allocates $150 million for starting up the new district, is about $88 million shy of what the district needs to get back on track.
"Future budgets and legislators would have to determine whether the net costs not covered by the $617.0 million in tobacco settlement dollars would be funded from the school aid fund, the general fund, or some other state support," the report said.
DPS transition manager Steven Rhodes has repeatedly told lawmakers that $200 million is the minimum amount the district needs.
DPS's debt includes $1.5 billion of unlimited-tax general obligation bonds, $199 million in borrowing from the state's School Loan Revolving Fund, and $259 million in limited-tax GO debt paid by district operating revenues, rather than a dedicated debt service levy. Unpaid pension and retirement obligation as well as proposed transitional operating costs, not to exceed 3% of the taxable value of district, will also go to the old district.
Lawmakers also approved a $54.9 billion fiscal year 2017 budget on Wednesday night that includes the $48.7 million needed to get DPS through the end of this school year. Lawmakers passed the general spending bill for the fiscal year starting Oct. 1 by 71-37 in the House and 26-11 in the Senate. The education bill passed the House in a 74-34 and 20-17 in the Senate.
Only $41 million of the $234 million allocated to Flint in the wake of its water contamination crisis was appropriated in fiscal 2017 budget lawmakers finalized Wednesday night. The rest of the money is being allocated through supplemental appropriations to the current budget in order to get money to the city more quickly. The current-year funding was also approved Wednesday, state budget officials said.
The budget adds $150 million for K-12 public education for a total of nearly $12.1 billion in state funding. That's an increase of $1.4 billion since fiscal year 2011.
"For the sixth straight year, Michigan has completed a balanced, fiscally responsible budget months ahead of schedule," said Snyder. "This budget provides significant resources for Flint's recovery while continuing to pay off debt, save money for our future, and make needed investments in critical areas."
