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Judge rules against Detroit school district in lawsuit over tax revenue

March 3, 2026

A Michigan judge ruled that Detroit Public Schools cannot continue collecting operating tax revenue to accelerate debt repayment, forcing the Detroit Public Schools Community District to seek voter approval for collecting this millage by July 2027 or face a $120 million budget deficit. The dispute stems from a 2016 legislative restructuring that split DPS into two entities—one for operations and one solely for debt collection—with the state filling funding gaps through tobacco settlement money. District officials had wanted to use operating revenue to pay off remaining debts faster and save taxpayers $326 million in interest, but the Treasury Department and judge determined existing state law prohibits using operating millage for non-operating debt.

Who is affected

  • Detroit Public Schools Community District (DPSCD) students, staff, and administrators
  • Detroit Public Schools (the debt-collecting entity)
  • Detroit residents and property taxpayers
  • Superintendent Nikolai Vitti and the DPSCD school board
  • Michigan Department of Treasury
  • Detroit voters who will decide on ballot measures

What action is being taken

  • DPSCD is appealing the Court of Claims' decision
  • The district is preparing to place a ballot measure before voters in the May election asking for authorization to collect the operating millage
  • The school board is considering a $1.4 million contract with a public affairs firm to educate voters about the operating millage
  • DPS continues to collect debt millages to pay off remaining loans

Why it matters

  • This ruling has significant financial implications for Detroit's public school system, potentially creating a $120 million deficit if the district cannot secure voter approval to collect operating millage by July 2027. The decision affects how Detroit handles its $1.3 billion in remaining capital debt and impacts the timeline for debt repayment, which currently extends to around 2040. The outcome will determine whether Detroit can maintain its current education funding levels and whether taxpayers might save $326 million in interest costs through accelerated debt repayment, while also testing voter understanding of a complex tax collection arrangement where approval would not increase tax rates but merely shift which entity collects existing taxes.

What's next

  • The district will place a ballot measure on the May 2025 election asking voters to authorize DPSCD to collect the operating millage
  • If the May ballot measure fails, the district will add it to the November 2025 ballot
  • If the November measure also fails, the district may hold a special election in May 2027 at a cost of $1-2 million
  • The district awaits a decision on its appeal of the court ruling
  • Voter approval must be obtained by July 1, 2027, to avoid the $120 million deficit

Read full article from source: bridgedetroit.com