How School Funding Works

Discussions about school funding can create more confusion than clarity. Each state has its own intricacies and peculiarities. Michigan is no exception. Funding flows down from different sources, often based on different formulas and intended for different purposes. There’s no one unified system that controls school funding — rather, schools rely on a number of systems layered on top of each to supply them with resources.

This publication presents a brief overview of some of the key components of Michigan’s school funding system, if it can be called that. The goal is to provide a general understanding of how tax dollars reach schools and what they are intended for.

Each chapter focuses on a different funding component, including the foundation allowance, state funding through categorical grants, the financing and role of intermediate school districts, special education funding, revenue for building construction and maintenance, and, finally, how federal funds work.

While the Michigan Legislature debates how much funds to devote to schools every year and certain components may change over time, a lot of the key elements mostly stay the same. So, even though the figures might change from year to year, the concepts described in what follows will remain useful into the future.