School districts reach deadline to prove financing
Inkster, Buena Vista schools reach deadline; must show financing deals or risk being dissolved
The Buena Vista and Inkster school districts must show state officials they have secured new loans to finance operations or face being dissolved.
Monday at 5 p.m. is the deadline given the fiscally troubled districts by state Treasurer Andy Dillon and state Schools Superintendent Mike Flanagan.
A new law allows the state to disband the districts.
Dillon has said that if the Inkster and Buena Vista districts can't get the financing by Monday afternoon, the state and intermediate school districts in Wayne and Saginaw counties will move forward with dissolving them.
Inkster's business manager has said the district was in talks with Comerica Bank to secure short-term financing to pay off about $800,000 in overdue vendor bills.
Buena Vista Schools
The District has shown unsatisfactory progress in eliminating its deficit. MDE’s approval of the district’s Deficit Elimination Plan (DEP) was rescinded in February, 2013 as a result of the district’s failure to implement strategies to reduce the 2012-2013 deficit to projected levels. The district began the fiscal year with an operating general fund deficit of $1 million but projects the deficit has more than tripled to $3.7 million.
The District projects a pupil count decline of 16-percent for the 2013-2014 school year, which represents a revenue reduction of approximately $540,000.
In a June 12, 2013 communication to the State, the district’s legal counsel stated “the District’s 2013-14 budget will more than likely forecast no operational capacity in 2013-14.” As a result, the Local Emergency Financial Assistance Loan Board authorized a $2 million emergency loan to ensure payment of the District’s 2012 state aid note. This will require debt service payments on that loan in subsequent years and the Emergency Loan precludes the district from participating in
the state aid note pool through the Michigan Department of Treasury.
Inkster Public Schools
The District went into deficit on June 30, 2007, by $1.9 million. The deficit increased to $9.3 million as of June 30, 2010 despite a 76-percent pupil count increase (1,803 to 3,173).
The District’s pupil count has steadily decreased since FY 2010 from 3,173 to 2,292 (28-percent) and the District projects its deficit as of June 30, 2013, to grow to $15.8 million (prior to receipt of an emergency loan to cover the August, 2013 repayment of the district’s 2012 state aid note).
While the emergency loan has the effect of reducing the projected deficit by the amount of the loan (approximately $12 million), the District still maintains the corresponding debt, long term, and must pay debt service on the loan for 30 years. Participation in the Emergency Loan Program effectively eliminates the district from the State Aid Note program borrowing that the district has used for cash flow purposes in the past.
The District’s DEP is based on maintaining the same 1,200 pupil count in grades K-8 in the district as in FY 2013. The district lost an average of 93 pupils per year in grades K-8 from 2009 to 2012. With a foundation of $7,623, a loss of 93 pupils would equate to a revenue reduction of over $700,000 for fiscal year 2013-14.
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