Local Revenue

Even though state government began shouldering a large portion of school funding after voters passed Proposal A in 1994, districts in Michigan still receive thousands of dollars per pupil from locally raised and distributed revenues. Major sources of this local revenue include nonhomestead property taxes (limited to 18 mills), primarily used for operating expenses; local property taxes for sinking funds and debt-service payments, exclusively used for capital expenses; and in certain districts, “hold-harmless” millages, primarily used for operating purposes.[*], [†]

From 2004 to 2010, Michigan school districts’ local revenue per pupil increased on average in each of the four major locales (see Graphic 4). City districts on average received about 35 percent more from local sources in 2010 than in 2004, while town and rural districts realized per-pupil local funding increases of 32 percent on average. In 2004, suburban districts on average received the most local revenue per pupil, but by 2008, city districts on average surpassed them and in 2010 received $3,771 per pupil — $187 more than suburban districts.

Local revenue for Detroit Public Schools (the only district in the large city subgroup) increased by 67 percent over this seven-year period, by far the largest of any of the 12 locale subgroups.[‡] However, DPS received the least ($2,555) of the subgroups in per-pupil local revenue in 2010, just as it had in 2004 ($1,531). The midsize suburban subgroup, which had the highest per-pupil local revenue ($3,765) in 2004, was the only locale subgroup where this funding decreased from 2004 to 2010, falling by 3 percent.[§]

Overall, differences in per-pupil local revenue between the four major locales decreased from 2004 to 2010. In 2004, the per-pupil local funding gap between the highest and lowest groups — suburban and rural, respectively — was $696; by 2010, the local funding gap between the highest and lowest groups — city and rural, respectively — was $480 per pupil.[¶]

Interestingly, these findings “reverse” when the 12 subgroups are considered. The remote rural subgroup received the most per-pupil local funding ($5,036) in 2010, and DPS, the large city school district, the least ($2,555). Moreover, the local funding gap between highest and lowest subgroups actually increased from $2,234 per pupil in 2004 to $2,481 per pupil in 2010.

Graphic 4: School District Revenue per Pupil From Local Sources by
Locale Group, Michigan, Fiscal Years 2004-2010

Graphic 4: School District Revenue per Pupil From Local
Sources by Locale Group, Michigan, Fiscal Years 2004-2010 - click to enlarge

Source: Local Education Agency Universe Survey; Michigan Department of Education, Data for National Public Education Financial Survey

[*] NCES provides a list of revenues that should be reported as local in the NPEFS. Ibid., I-4, I-5. Not all of the revenues included there may apply in Michigan.

[†] For a detailed discussion of these taxes, see Olson and LaFaive, A Michigan School Money Primer: For Policymakers, School Officials, Media and Residents (Midland, MI: Mackinac Center for Public Policy, 2007), 23-31. The state’s 6 mill property tax, known as the “state education tax,” is not included under local revenues. Michael Van Beek, phone interview with Glenda Rader, assistant director, Michigan Department of Education, May 20, 2011.

[‡] See Appendix B, Graphic 29. This increase is partly due to DPS’ having lost a significant number of students, yet still receiving local property tax revenues that are not tied to pupil enrollment.

[§] See Appendix B, Graphic 29.

[¶] Due to rounding, the 2004 difference of $696 dollars differs slightly from the figure that would be calculated from Graphic 3.