Deficit District Information
A district is considered to have a deficit fund balance if it has adopted a deficit budget or incurred an operating deficit as evidenced by the following:
1) Its total General Fund balance is negative, or projected to be negative at the end of the current fiscal year; or,
2) Other funds have negative fund balances or projected negative fund balances that are greater than the General Fund balance.
Requirements and Deficit Elimination Plan Template
Section 1220 of the Revised School Code (MCL 380.1220) requires deficit districts to submit a Deficit Elimination Plan (DEP) to the Department. Districts are responsible for developing a plan to eliminate the deficit. These plans are approved by the local board of education and then submitted to the Department for approval.
Section 1220 also states that “when approving a deficit elimination plan, the superintendent of public instruction shall establish the period of time within which” a school must eliminate its deficit. The Department expects that when a DEP is submitted for approval, it represents the school’s best effort at eliminating the deficit. During our review, the length of each plan is considered for reasonableness.
Please note that Section 4 of the Local Financial Stability and Choice Act (MCL 141.1544) provides that the state financial authority shall conduct a preliminary review to determine the existence of financial stress if a school submits a DEP that eliminates the deficit over a period exceeding five years.
Section 1220 of the Revised School Code (MCL 380.1220) requires the Department to submit quarterly reports on deficit districts to the standing committees of the legislature responsible for K-12 education legislation. The state superintendent is required to publicly present these reports to the appropriations subcommittees of the legislature responsible for K-12 school aid appropriations.