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A year after almost lapsing into insolvency, Detroit’s home county is showing signs of a turnaround, Bloomberg News reported today. Wayne County has cut retiree health care bills, reduced pension benefits and lowered labor costs, turning once chronic deficits into surpluses. The improvements have caught the eye of rating companies, with Fitch Ratings last month raising it four levels to BB+ — one step below investment grade — and Moody’s Investors Service and S&P Global Ratings improving their outlooks. The nascent financial recovery shows the county of about 1.8 million residents is finding a way to adjust to the population declines and debt that pushed Detroit, its largest city, into bankruptcy three years ago. When the fiscal year ends in September, the government expects to have $67.6 million on hand, compared with a deficit of $146 million in 2013.

There is a battle playing out between the Michigan Senate and House over how to make sure Detroit Public Schools doesn’t go into bankruptcy, WXYX.com reported yesterday. The Michigan Senate in March passed bills that would provide Detroit Public Schools about $700 million to address debt and restructure into a new district, but the House never moved on them. The House then in May passed its own legislation worth just over $500 million. The legislation also threw out some union contracts, allowed uncertified teachers to work in Detroit, and delayed electing a school board. The Senate refused to act on the House bills. So, on June 1, the House pulled their legislation out of the Senate, and went to work rewriting it. New legislation being drafted keeps some aspects of both previous plans in the House and Senate. It would split Detroit Public Schools into two districts. One would exist to pay off the existing debt. The other would exist to educate kids. It would pay off the district’s estimated $467 million in operating debt with Tobacco Settlement funds.

Retired Bankruptcy Judge Steven Rhodes is so confident lawmakers will pass a plan to avoid bankruptcy by Detroit Public Schools, that he is not working on a plan B just in case that does not happen by July 1, Fox2Detroit.com reported yesterday. Judge Rhodes on the potential bankruptcy asserts, "This is not going to happen. I discount that possibility." Rhodes believes that the House Republicans are "committed to a solution" and he views the passage of their plan as "a statement they are committed to DPS." Having said that, he again endorsed the senate GOP plan which contains more money for the embattled district and the Detroit Education Commission and without that he concludes it would be "challenging" to solve the problem. He also favors a new school board election this year, not in 2018 as is proposed in the house plan. And he backs state oversight of the state dollars that would flow into the schools, if lawmakers make a deal before the July 1 deadline.

Moody’s Investors Service said that the deteriorating finances of Detroit’s public schools may result in a bankruptcy filing if Michigan lawmakers don’t agree on a rescue package within the next two months, Bloomberg News reported yesterday. The state’s House of Representatives last week approved a plan to restructure the cash-strapped district that has “stark” differences with the package approved by the Senate in March, Moody’s said in a report yesterday. The school system, which is rated Caa1, seven steps below investment grade, will soon run out of money. The $50 million of emergency funding that the state appropriated in April is supposed to last only through June. “The legislature now has less than two months to compromise on a reform package or the district’s financial position will possibly force a bankruptcy filing,” Moody’s said in the report. “Failure to implement a solution increases risks to all of the district’s bondholders.”