Judge Rules Against Detroit School District in Tax Revenue Lawsuit

District loses fight to use operating millage to pay off capital debt faster, must now seek voter approval to collect the tax.

Mar. 3, 2026 at 5:15am

Got story updates? Submit your updates here. ›

A state judge has ruled against the Detroit Public Schools Community District (DPSCD) in its lawsuit against the Michigan Department of Treasury over collecting operating tax revenue. The ruling means DPSCD will have to ask voters to allow it to collect a local operating millage, which had been collected by the previous Detroit Public Schools district. DPSCD will also lose some state funding as a result.

Why it matters

The ruling is a setback for DPSCD, which had argued that using operating revenue to pay off its remaining $1.3 billion in capital debt and $355 million in state revolving fund debt faster would save taxpayers millions in interest costs. The district now faces a $120 million budget deficit if it cannot get voter approval to collect the operating millage.

The details

Judge Christopher P. Yates ruled that state law does not allow DPSCD to use operating revenue to pay off non-operating debt. The Treasury Department had argued that DPS could no longer collect the operating millage once its emergency loan was paid off. DPSCD sued the state after the two sides failed to reach an agreement, but the court sided with the state, saying there was no legal way to allow the district's request.

  • In 2016, lawmakers created a new district, DPSCD, to resolve a debt crisis in the previous Detroit Public Schools district.
  • In late 2024, DPSCD ran into a disagreement with the Treasury Department over using operating revenue to speed up payment of its remaining capital and revolving fund debt.
  • In February 2025, the court denied DPSCD's request for a preliminary injunction to require the state to continue making payments to the district and allow DPS to keep collecting the operating millage.
  • In March 2026, Judge Yates issued a summary judgment ruling against DPSCD in the lawsuit.
  • DPSCD must now get voter approval to collect the operating millage by July 1, 2027.

The players

Detroit Public Schools Community District (DPSCD)

The new school district created in 2016 to take over day-to-day school operations in Detroit, while the previous Detroit Public Schools district (DPS) remained only to collect tax revenue to pay off its existing $3.2 billion debt.

Michigan Department of Treasury

The state agency that disagreed with DPSCD's plan to use operating revenue to pay off its capital and revolving fund debt faster.

Judge Christopher P. Yates

The state judge who issued the summary judgment ruling against DPSCD in the lawsuit.

Nikolai Vitti

The superintendent of DPSCD who said the district must now get voter approval to collect the operating millage by July 1, 2027 or face a $120 million budget deficit.

Got photos? Submit your photos here. ›

What they’re saying

“If we don't, then by that summer, as we roll into the next school year, we would have a $120 million deficit.”

— Nikolai Vitti, Superintendent, Detroit Public Schools Community District

What’s next

The Detroit Public Schools Community District plans to appeal the Court of Claims' decision. In the meantime, the district will have to put a measure on the ballot asking voters to authorize DPSCD to collect the operating millage. If that ballot measure fails, the district may have to pay $1 million to $2 million to hold a special election in May 2027.

The takeaway

This ruling is a setback for DPSCD's efforts to pay off its remaining debt faster and save taxpayers millions in interest costs. The district now faces a significant budget deficit if it cannot get voter approval to collect the operating millage, highlighting the ongoing financial challenges facing Detroit's public schools.