The state's top economists met on Tuesday, and delivered the not-so-good news: state tax revenue, including school aid funding, was going to be lower than we thought, by almost $175 million this year and $160 million in the next year. Since the state budget has to be balanced, the proposed budgets for next year have to be "adjusted" accordingly.
But, wait - aren't we in a recovery? That depends. On the one hand, employment is up, manufacturing is up, the state economy is growing, and even income tax receipts are up (since people are making more). On the other hand, sales tax revenue is faltering, and it makes up the largest chunk of the School Aid Fund. Why? Retail sales are down, and gas prices are down. We don't tax services, which is where the growth is. On top of that, the corporate income tax revenue was slowing, and was going to be smaller than the tax credits handed out to large businesses under previous agreements.
Here's the bottom line: state revenues are almost $10 billion under the limit set by the state constitution's Headlee Amendment - the lowest ever since the provision was passed in the 1970s. So while the state's economy may be growing, we don't see much of it in the budget - including school aid. Our state has spent a shrinking percentage of our Michigan's economy on K-12 education over the last decade, in good times and bad. We are slowly starving the very school systems that help fuel our economic growth.
You may remember that proposals for next year's school aid budget were upbeat - districts would receive $60 to $120 extra per pupil, and at-risk funding was being expanded. It's an election year, so the Legislature will try hard not to disappoint voters. But something will have to give, since the School Aid Fund will be short $41 million under current projections - and that includes using up leftover balances from this year. Will it be the millions earmarked by the House and Senate for "reimbursing" private schools for things like background checks, keeping vaccine records, and fire drills? How about the odd little grants to lawmakers' pet organizations for programs no one asked for? The hole in the general state budget is even larger, so that can't come to the rescue. We will soon see.
Finally, some useful perspective: the law which remade our state school funding system in 1994 (Proposal A) also included a provision requiring economists to calculate the amount per-pupil funding should change given revenue and student counts. On Tuesday, the top state economists reported that the minimum per-pupil funding should increase by $245, more than double the maximum increase included in the current budget bills. So even by the standards of those who drafted Proposal A, we are falling behind. And none of these calculations and negotiations seek to answer the most important question of all: what do our schools need to provide a quality education for all children?