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Budget update: Legislature tosses schools a small bone

The Michigan State Legislature approved a final compromise education budget last week, making use of an estimated $140 million in unexpected estimated revenue to make sure that no district saw a net cut per pupil. But despite some of the large numbers being tossed around, the real effect on most students will be almost invisible.

Even after the infusion of an additional $140 million into the school aid budget, school districts will only see very small per-pupil funding increases – that fail to keep up with projected inflation – rather than the cuts previously in the budget. Gov. Snyder’s requested $65 million increase in state-funded preschool programs did receive full funding, however, and some other targeted funding slated for cuts was restored or cut by a lesser amount.

Questionable provisions remain
Also surviving the budget process were $8 million in grants effectively targeted at the EAA, and provisions to require school districts to allow all students in grades 5-12 to take up to two online courses per semester at the district’s expense. This provision has been called “vouchers for vendors” because it will effectively require local districts to pay for courses designed and implemented by private vendors, as long as those courses are on a central list. Districts may refuse to grant academic credit if the course was not completed successfully, but districts must still pay 80% of the cost on enrollment rather than completion. (See our previous action alert here: http://www.miparentsforschools.org/node/202)

“Found” money
The May revenue estimation conference, a twice-yearly meeting of state economists mandated by law, projected that state revenues would be about $480 million higher this year than had been estimated at the January conference. Of that amount, $86 million represented greater than expected revenue to the School Aid Fund; the remainder represents gains in the state General Fund. Legislative leaders and the governor agreed to use $140 million in next year’s school aid budget, relying on projected increases both this year and next.

Aside from full funding for the Great Start Readiness Program, the main changes to the budget were in per pupil funding to districts and retirement costs. The final budget increased the per-pupil funding, or “foundation allowance,” for districts using what is known as the “2x” formula. Under this system, districts at the maximum funding level get half of the increase that districts at the minimum funding level receive. Districts in between get an increase proportional to where they stand between the minimum and maximum.

Just like the good old days
Next year, districts at the minimum will receive an additional $60 increase in their foundation allowance, bringing it to $7,026 – about $75 per pupil less than in the 2006-07 school year. Districts at the maximum (confusingly called the “basic”) will receive an added $30 per pupil in their foundation allowance, bringing it to $8,049 – just a bit over what it was in 2002-03, eleven years earlier.

The added cost of this increase is partially offset by a change in the formula for calculating student enrollment. Currently, schools receive funding based on a blend of 90% of the October count day and 10% of the previous February count. Under the new rules, school enrollment will be determined by using 90% of the October count and 10% of the following February count. While this is supposed to make things mesh with other changes that will track student movements during the year, it also ends up saving the state money next year because overall public school enrollment is expected to continue to decline – meaning next February’s count is likely to be less than the one four months ago.

Playing Santa – and the Grinch
The legislative conference committee (reconciling differences in the budgets passed by the House and Senate) outdid the Governor in giving a bonus to lower-funded districts. The Snyder proposal would have given a one-time “equity payment” of $34 to the lowest funded districts; the final version uses $36 million to give up to $50 per pupil to those districts funded at less than $7,076 per student.

On the other hand, the “MPSERS cost offset” – that is, direct help to districts to lower their mandatory state pension system contributions – was cut by more than a third, reducing assistance to those districts participating in the pension system by 36%. All local public districts must participate in the state pension system; charter schools nearly never do. Thus, this cut reduces funding to local school districts but does not affect charter schools.

The final budget did include $6 million to make sure that every district received a net $5 per pupil increase, despite the cuts to the pension offset support. A surprising number of districts fell at this level.

In keeping with the law that restructured the pension system last year, the state must cap the contributions of local districts at just under 21% of payroll and pick up the rest. This cost exceeds $400 million next year, though it is not a net gain for schools. This money is taken out of the School Aid Fund before per-pupil funding is decided; in years past, this money would have gone to districts, who would then have to pay it back in the full pension contribution. In an ironic move, this money will still be paid out to districts and then immediately taken back for the pension system.

The full picture
Overall, total P-12 spending will increase by 3.1% (or $352 million) over the current year, though inflation is projected to run at 1.9% over the same period. However, the bulk of that increase ($275 million) was eaten up by the state share of mandatory pension payments. The rest was roughly split between increased spending on Great Start and increases in per-pupil funding.

And what about those increases? Well, the average district will see a net 0.8% increase in overall funding – eight tenths of a percent. The most fortunate schools will be getting a 1.57% increase, while the least fortunate will receive a 0.02% bump (two one hundredths of a percent). No district or charter school will receive funding that keeps up with inflation, estimated at 1.9% for the next fiscal year.

When weighted by student enrollment, the average increase per pupil for local public districts is $42.67; the weighted average for charter schools is an increase of $66.13. Almost 360,000 students, nearly 24% of the state’s total, attend districts that will receive the minimum $5 per pupil increase. Included in that total are some names you might, and might not, expect: Rochester, Charlevoix, Flint, Okemos, Forest Hills, Fraser, Warren, Midland, Grosse Pointe, Pontiac, Southfield, Hazel Park, Troy, Farmington, Lake Orion, Walled Lake, Buena Vista, Ann Arbor, Ypsilanti & Willow Run, Dearborn, Livonia, Taylor, and, yes, Detroit Public Schools.

More than half of all students, over 800,000, attend districts that will be receiving less than $60 more per pupil next year. Only 1.5% of all students attend districts that will be receiving an extra $100 or more per pupil, up to the maximum $110.

Rose-colored glasses
After the vote, leaders of the legislative majority were congratulating the state on the increase in support for education. In a TV interview on Mackinac Island, Gov. Snyder defended his budget and claimed that there have been significant increases in education funding during his tenure. How any one can celebrate, when the best we can do does not even keep up with inflation despite a bonus of $140 million in unexpected revenue, is not at all clear to the parents and students of Michigan.

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