Nick Krieger (@nckrieger):
If you’re in the business of reporting the news in Michigan, I have a favor to ask: Could you maybe stop referring to the Michigan Senate and Michigan House of Representatives proposals to break up and reorganize the Detroit Public Schools as “$715 million bailout” plans?
Neither the Senate plan (SB 710) nor the House plan (HB 5384) is really a “$715 million bailout” for the Detroit Public Schools. Under either plan, the state would pay the local share of Detroit’s foundation allowance. This local share is currently funded with the revenue generated by DPS’s levy of 18 operating mills on non-homestead property—currently about $71 million per year.
Under either legislative proposal, the authority to levy the 18-mill school operating tax would shift to the qualifying district (the “Old DPS”), which would use the property-tax revenue to pay down the district’s operating debt of $715 million ($515 million in current operating debt plus at least another $200 million in bonded debt that the district would be forced to assume under the legislation). Neither plan would appropriate a dime from the state treasury to pay down any of this debt.
Because the local portion of the district’s foundation allowance is presently about $71 million per year, it’s convenient to think of the legislation as eventually costing the state $715 million over 10 years. But remember that the total amount required to satisfy the local portion of Detroit’s foundation allowance would fluctuate with enrollment, and may well decrease in future years. In other words, while the state would pay $71 million in the first year, there is no guarantee that this would continue for 10 years. It is merely a coincidence that the local share of the district’s foundation allowance, presently $71 million, is approximately equal to 10 percent of the total operating debt of $715 million that the Old DPS would be required to pay off under the bills.
In sum, although both plans would certainly provide state funding to satisfy the local portion of the Detroit foundation allowance, it is far from certain that the state would actually end up paying $715 million to DPS.