Michigan lawmakers OK 'early warning,' loan bills

By David Eggert
Associated Press

LANSING, Mich. (AP) - About one-fifth of Michigan's 900 school districts and charter schools would be subject to special financial reporting requirements under legislation finalized Tuesday that also would replenish state emergency loan funds for cash-strapped districts and municipalities.

Gov. Rick Snyder is expected to sign the "early warning" bills, which are designed to catch fiscal problems before districts end up under state emergency management.

The main measure would require each district and charter school with a positive fund balance below 5 percent in the two most recent years - 190 districts and charters total - to tell the Michigan Treasury Department the assumptions used when adopting a budget. A fund balance is a district's reserves divided by its spending.

The state treasurer could declare that a potential for "fiscal stress" exists and force districts to submit periodic status reports and ultimately deficit-elimination plans under certain circumstances.

The Republican-controlled Senate, approving the bill 26-9 almost entirely along party lines, also sent Snyder related legislation that would lift caps on loan funds.

A $50 million loan fund for financially troubled districts is nearly empty. The cap would increase to $70 million through September 2018. A $35 million loan cap for municipalities would rise to $48 million.

Pontiac Public Schools and Benton Harbor Area Schools, which are operating under state oversight, have expressed interest in requesting loans.

Rep. Daniela Garcia, a Holland Republican who is sponsoring of one of the bills, said the early warning system would "help our communities before it's too late."

"Treasury experts will help assess schools and provide tools needed to revive them based on the specific needs of each local community," she said in a statement. "Districts must recognize that substantial changes need to be made to best serve Michigan students and families."

Democrats criticized a provision that would prohibit Detroit's state-run district from applying for loans. The Republican governor separately is lobbying the GOP-led Legislature to address the district's debt, though that debate is unlikely to be resolved until the fall at the earliest.

"It's separate and unequal treatment and it cannot last if we are going to have a thriving school district in the city of Detroit," said Sen. Coleman Young II, D-Detroit.

The financial reporting rules are expected to affect approximately 140 of Michigan's 541 traditional districts initially and about 50 of 302 charter schools. The state also has 57 intermediate districts and a state-run entity for some low-performing Detroit schools.

Published: Thu, Jul 02, 2015

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