If approved, Proposal 1 would modify the allowable uses of the School Aid Fund. Currently, the constitution allows the SAF to support “school districts, higher education and school employees’ retirement systems[.]”[21] Proposal 1 would eliminate the provision allowing for payments to higher education, but add new language that would authorize SAF revenue to support “public community colleges, public career and technical education programs, scholarships for students attending either public community colleges or public career and technical education programs.”[22]
This provision may have practical effects for the state budget. The majority of state payments to institutions of higher education — public universities — comes from the state’s General Fund, while only a small portion comes from the SAF. Since fiscal year 2012, state universities have received about $200 million annually from the SAF, roughly 13 percent of their total appropriations.[23]
The overall impact on the state budget may be minimal, however, because General Fund revenue also partially funds the SAF. There has been an increase in General Fund support for the SAF in recent years. In fiscal year 2013, $282 million was appropriated to the SAF from the General Fund, but this appropriation has decreased since.[24] See Graphic 1 for details.
Graphic 1: General Fund Support of School Aid Fund and Higher Education Funding, 2012-2015
Source: “School Aid Funding History” (Michigan Senate Fiscal Agency, March 13, 2015), http://perma.cc/CB9F-KSS2 (accessed March 16, 2015); Marilyn Peterson, Michigan House Fiscal Agency Analyst, email correspondence with James Hohman, Feb. 2, 2015.
As shown in the graphic above, with a constitutional prohibition against spending SAF revenue on public universities, the state budget could replace a portion of the $204.5 million SAF dollars in its budget with the $33.7 million from the General Fund that ends up in the SAF.[*]
But as a constitutional change, the state would no longer have the option of spending school aid revenue on public universities. During the 2012 election, Gov. Snyder was criticized for spending SAF revenue for purposes other than supporting public school districts.[25] Gov. Granholm also used the same revenue to subsidize community colleges in 2010.[26]
Indeed, Proposal 1 would still allow community colleges to receive SAF revenue. They received $364.7 million from this fund in fiscal year 2015.[27] Proposal 1 would also allow the SAF to support a series of programs that it currently does not fund directly. These include “public and career technical education programs, scholarships for students attending either public community colleges or public career and technical education programs.”[28] It is unclear whether a public university could operate one of these programs or accept scholarship money for one of these programs, and thus still receive funding from the SAF.
[*] For fiscal year 2015, the Michigan Legislature substantially reduced General Fund support for the SAF in an attempt to fill a budget hole resulting from a business tax credit program. Kyle Feldscher, “Bill Taking Money from School Aid Fund to Balance Budget Deficit Passes Michigan House,” MLive.com, Feb. 18, 2015, http://perma.cc/3SWD-A58R (accessed March 16, 2015).