Michigan Lawmakers Approve Financial Rescue of Detroit’s Schools

  • Plan provides $617 million and splits district in two
  • Schools were to set to run out of money at end of June

Michigan lawmakers approved a financial rescue of Detroit’s public schools, saving the district from potential bankruptcy.

The Republican-controlled legislature late Wednesday gave final approval to a fix that will provide about $617 million to distressed district. To put it on a more secure footing, the system will be broken into two -- one that will pay off old debts and another that will run the schools. About $467 million will cover accumulated deficits and $150 million will flow to the new entity. The measure now goes to Governor Rick Synder, who supports it.

The deal came just as the schools were poised to run out of money at the end of the month. The district has been struggling with the same population slump that helped push Detroit into the bankruptcy in 2013, making it the largest city ever to cut its debts in court.

If a rescue from the state hadn’t come together, the school system may have also resorted to Chapter 9, according to Moody’s Investors Service. The district’s revenue has dropped as enrollment has plummeted 65 percent since 2006.

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