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Which Districts Get into Financial Trouble and Why: Michigans Story

September 2015

David Arsen, Thomas A. DeLuca, Yongmei Ni, Michael Bates


The article argues that the majority financial trouble from failing school districts is not caused by poor management, but rather by decreased funding, school choice policies and high cost special needs students which are “inadequately reimbursed by the state”. It continues on that a downward spiral exists because when students leave schools, they receive less funding, and when schools receive less funding conditions deteriorate causing more students to leave.

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Policy Implications

This article can be useful in helping determine causes for financial stress in school districts. Indications that many aspects of school financial failure are external to the districts management approach can be especially useful in deciding when an emergency manager should step in. The downward spiral of student un-enrollment from public schools can also be examined to craft better policy for school funding.

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