The Detroit News
March 9, 2023
Detroit — Financial mismanagement, staggering budget deficits, and state intervention defined Michigan’s largest school district for a decade starting in 2008.
But for the last five budget years, the Detroit Public Schools Community District and its board have worked to shed that reputation, delivering balanced budgets, amassing a growing surplus and making on-time debt payments. The district is now poised to pay off its legacy debt a year ahead of the timeline dictated by state bailout legislation passed in 2016.
While growth in the district’s 2021 and 2022 budgets was in part due to the infusion of federal COVID funds awarded to the district, which will total $1.2 billion over fours years and must be spent by September 2024, annual budgets for the prior three years were balanced without it.
The district will have to balance its budget solely on recurring revenue starting again in fiscal 2024. That’s something Detroit Superintendent Nikolai Vitti says he can do.
“We will be fine as a district and are prepared to balance our budget next year without COVID funding,” Vitti said. “We knew this day would come and are ready to make the necessary budgetary changes to protect student achievement.”
The district plans to eliminate at least 100 central office and school-based administration positions in the coming budget, including assistant principals at smaller schools, the superintendent said Thursday. Some hourly employee groups might need to shift their job responsibilities to maintain employment, Vitti said.
But the district has no plans to lay off teachers or reduce the number it hires to make up the funding gap, he said, noting that summer school programming that was funded through federal COVID aid will be discontinued.
Keeping the budget balanced in the next few years also depends on adding students. Detroit’s three-year budget projection estimates the district won’t fall into debt if enrollment returns to 50,400 students by 2025. The district is projected to run a $27.5 million deficit in 2025 if enrollment is around 47,000 students.
Vitti, Detroit’s superintendent since 2017 and the first educator to run the district since the state takeover took effect in 2009, has led its multiyear financial recovery effort. But he credits the school board with focusing on the district’s strategic plan — preparing students for careers/college, investing in teachers and using resources wisely — and saying no to anything that did not promote those goals.
“As a superintendent and board team, we have been very intentional and disciplined with that focus,” Vitti said this month. “It’s about persistence in the reform. For me, I didn’t get into this for a quick turnaround. It was all about creating systemic change that is sustainable.”
Business leaders said the district of around 48,000 students and 106 schools has finally earned props for its multiyear financial turnaround, despite past fiscal struggles, a succession of state-installed emergency managers, massive enrollment losses and corruption within its principal ranks.
“It (the recovery) begins and ends with a strong superintendent and a strong board, and having those in tandem isn’t something we have seen in a long, long time,” said Greg Handel, vice president at the Detroit Regional Chamber, which administers the Detroit Promise Scholarship, which has helped thousands of Detroit high school graduates attend college for free. “The broad business community understands the challenges Dr. Vitti took on. He is doing the right things, and it’s really, really hard work.”
How Detroit Schools Balanced Budgets
Vitti started his work in the district a year after a group of Detroit students sued the state in 2016, alleging that a lack of books, classrooms without teachers, poor building conditions and extreme temperatures deprived them access to literacy in their public schools.
In 2018, Vitti learned it would cost $500 million to address the district’s inoperable boilers, corroded plumbing fixtures, missing ceiling tiles in classrooms, exterior walls with cracks, roof leaks and a host of other problems.
Vitti and the board got to work balancing budgets and slashing expenses. Among the moves made were cutting some central office positions and discretionary spending; reducing in-person training, staff travel and conference expenses; and converting a range of contracted services into district-provided services. They also addressed the educational needs of students by placing master teachers across the district, adding art or music to every school and employing a full teaching staff. The district is using $700 million in federal stimulus aid to address its aging facilities.
The Detroit district’s improving financial health stems from balanced budgets, growing year-end reserves and a “healthy-cash” position, said Craig Thiel of the nonprofit Citizens Research Council of Michigan.
In spite of massive disruptions from the global COVID-19 pandemic and nearly six years after a major financial restructuring and a $617 million state bailout, the Detroit district continues its financial recovery unabated, Thiel said.
“The district is hitting all of its state-mandated financial requirements and thriving while doing it — balancing their budgets and growing their surpluses and reserves,” Thiel said. “There is no doubt the previous running of the district resulted in a lot less money going into the classroom because it was going to pay past debt and bad decision making.”
The district in 2020 focused its resources on raising starting teacher salaries to more than $51,000 a year, the highest in the state at the time. Its improving financial picture meant it was released from state oversight in 2020 by the Detroit Financial Review Commission, which had direct, day-to-day financial and operational oversight of the school system.
The district finished fiscal year 2022 with $200 million in surplus from $1.2 billion in revenues and $1 billion in expenses.
The five-year forecast for the district calls for balanced budgets where annual revenues exceed expenses and produce budget surpluses every year, ranging from a projected $651 million in 2023 to $375 million in 2027.
New financial forecasts show the district’s legacy debts will be retired in 2026, about 10 years after it went through a state-financed restructuring — one year earlier than expected under the bailout legislation.
The Detroit chamber’s Handel said steady enrollment — after decades of declines — has also allowed the district to reach financial stability. The district had about 50,400 students before the pandemic hit in March 2020, with another 30,000 students attending charter schools in the city.
That number slipped to 47,000 in the next two years, during the pandemic.
“They had to overcome a lot chronic absenteeism, and they had to put processes and resources in to address other things. Progress has been slow and steady,” Handel said. “If you look at enrollment trends over the last five years, it has held pretty steady. That is because Vitti and the board have been responsive to needs of the district.”
Gov. Gretchen Whitmer said she is thrilled to see the progress in Detroit under Vitti’s leadership.
“Thanks in part to Dr. Vitti’s advocacy, we’ve made record investments in education year over year, including delivering the highest per-pupil funding so that schools in Detroit and across the state can keep delivering for students and their families,” Whitmer said in an email. “I know that we will continue working together to put students, teachers, and parents first.”
According to 2023 budget documents, the district’s three-year balanced budget projection is based on projections that student enrollment will return to 50,400 students by 2025. If enrollment stays constant at 47,000, students, then the district will have a deficit of $27.5 million in 2025.
What Comes After COVID Funds End
Looking ahead to when COVID funding dries up, Vitti said that besides cutting some administrative jobs, some hourly employee groups might also need to shift their job responsibilities to maintain employment. One example would be for hourly employees to move into unfilled jobs across the district, such as cafeteria workers, substitute teachers and para-professionals for pre-kindergarten classes.
Vitti also sees the need to increase teacher salaries again for the next school year, 2023-24.
“We don’t have a union agreement, but we have to do it from a necessity point of view to remain fully staffed. If we don’t continue to do that, we could have 200-250 vacancies. That would disrupt student achievement. We are looking to do that for next school year. We have to build it in the budget.”
For some residents, the district’s history of financial mismanagement and the actions of some of its former leaders — including 12 district officials convicted in 2016 in a $2.7 million kickback scheme with a Detroit Public Schools vendor — have not been forgotten.
While the district posts its financial reports online — as it is required to do by law — Detroit resident and community activist Helen Moore said online documents are hard to read for many in the community. She has requested paper copies to study so she can see where the money is going.
“We have to follow it and keep in touch. The info is so meager and not understandable to most people,” Moore said. “They don’t give us copies like the old days so we can study it.”
Moore, a regular attendee and public commenter at Board of Education meetings, has watched her city’s school district decline during decades of state and local mismanagement and said the money still must be watched.
“It’s a lot of money,” said Moore, 86.
Vitti said the work to repair decades of mismanagement and create a school district answerable to the taxpayers has earned him trust in the community. But there is more work to be done.
“It took so long to get to this point, the memory of DPS over the last 20 has been negative. That was what was planted in people’s minds,” Vitti said.
“I don’t think business leaders and public officials wake up — anymore — worried about the DPS day-to-day management. I think they trust the school board and they trust me to make decisions that are in the best interest of the children. We have established that over the last five years.”