COMMUNITY DISTRICT EDUCATION TRUST FUND

House Bill 5382 (H-1) Committee Substitute

Sponsor:  Rep. Al Pscholka

House Bill 5383 as introduced

Sponsor:  Rep. Amanda Price

Committee:  Appropriations

Complete to 5-2-16

SUMMARY:

House Bills 5382 and 5383 would divert $72.0 million per year, up to a total of $500.0 million, from the state General Fund to replace local 18-mill property tax revenue that will be used instead to pay off debt associated with the Detroit Public Schools (DPS), as described in more detail below.

House Bill 5383 would amend the Michigan Trust Fund Act to create a new Community District Education Trust Fund.  The State Treasurer could receive money or other assets from any source for deposit in the fund, would direct the investment of the fund, and would credit to the fund interest and earnings from the fund's investments.  Money in the fund at the close of the fiscal year would remain in the fund and not lapse to the General Fund.  The Department of Treasury would be the administrator of the fund for auditing purposes.

Under the bill, the department could expend money from the fund, upon appropriation, only to offset the absence of local school operating revenue when funding the foundation allowance for a community district organized under Part 5B of the Revised School Code.  Under the provisions of House Bill 5384, DPS would become such a district. 

House Bill 5382 would amend the Income Tax Act of 1967 to provide for $72.0 million per year in revenue currently distributed to the state General Fund to instead be deposited into the new Community District Education Trust Fund created under House Bill 5382.  These deposit would be capped at a total of $500.0 million and would occur each October 1 beginning in 2016.  Of the total annual deposit, $36.0 million would be from individual income tax collections and $36.0 million would be from corporate income tax collections.

House Bill 5382 is tie-barred to House Bill 5383.

FISCAL IMPACT:

The bills would have no net impact on state revenues.  They would reduce the amount of GF/GP revenue available by $72.0 million per year until the cumulative total equals $500.0 million, which would include fiscal years (FYs) 2016-17 through 2022-23.  Those funds would instead be available for appropriation from the Community District Education Trust Fund.

Under the larger package of bills related to DPS being considered (House Bills 5384 and 5387 and Senate Bills 711, 820, and 822), the bills would redirect local revenues in order to pay off debt totaling approximately $500.0 million.  The appropriations from the trust fund are anticipated to be made in the School Aid budget to backfill revenue from Detroit's 18-mill levy that would be utilized to pay down debt over time (by the "old" DPS district) and would, therefore, no longer be available to support the new Detroit community district's foundation allowance.  The estimated total debt would include approximately $467.0 million in accumulated operating deficits as well as $33.0 million to finance start-up costs and cash flow issues for the new district.

                                                                                               Fiscal Analysts:   Kyle I. Jen

                                                                                                                           Bethany Wicksall

■ This analysis was prepared by nonpartisan House Fiscal Agency staff for use by House members in their deliberations, and does not constitute an official statement of legislative intent.