Marking a milestone in Detroit's recovery from insolvency, the state commission that oversees the city's finances today declared the city in substantial compliance with the terms of its exit from municipal bankruptcy — a step toward ending state oversight, the Detroit Free Press reported on Saturday. The declaration came after certification of an audit of the city's 2014-15 budget. Detroit now must get similar approvals of the next two fiscal years before the city can be removed from state oversight as early as 2018, under a state law passed in 2014 that governs how the city must operate. Detroit has posted surpluses in recent years on the city's annual budget of roughly $1 billion, and the Duggan administration also projects a balanced budget for 2016-17. If the city stays within budget, and an audit is certified in 2018, Detroit could end a period of direct oversight and go into a period when the review commission would be mostly dormant. It would mean the city would be free to operate without getting required approval from the review commission on matters including budgets, budget amendments, contracts and labor agreements. Detroit still faces risks in the long term, including a $490-million shortfall in pension funding the city will have to pay in the coming years, in addition to unforeseen events like an economic downturn. If Detroit runs a deficit before 2018, it would restart a three-year period of oversight by the review commission.
