After Adding It All Up, Does Money Actually Matter?

The complexity of Michigan’s school funding system, relying on a variety of revenue streams, multiple funding formulas and statutorily defined and targeted grants and programs, has been the focus of this series. Stepping back and looking at how all of these pieces work, one can make a good case that there is not one system that funds public schools in Michigan, but rather a number of different programs created over time that have been layered on top of each other.

School funding in Michigan is a result of many different policy decisions made at different levels of government. As a result, there’s no unifying strategy used to fund schools, although certain types of funds have very specific purposes. This makes understanding (let alone improving!) school funding in Michigan a significant challenge for parents, taxpayers and policymakers.

Debates over the adequate level of K-12 funding levels should be informed with meaningful and valid information. A 2016 poll of more than 4,000 American adults found that support for increased funding of “public schools in your district” dropped from 61 to 45 percent when respondents were told how much their district was spending.

The average Michigander struggles with keeping up with how much their local school district is spending, too. The most detailed, comprehensive and accessible accounting of how much money Michigan schools take in and spend comes from the U.S. Census Bureau’s National Public Education Finance Survey.

There are several ways to measure the overall financial picture of Michigan public schools. First, the total dollar intake, which in 2016 was $19.84 billion, or $14,307 for each full-time-equivalent student. These revenues roughly break down as follows:

  • 60 percent comes from dollars collected by the state treasury, most from revenues from the sales tax, income tax and a six-mill, statewide property tax;

  • 27 percent arrives via local taxes, nearly all property-based taxes;

  • 9 percent returns by way of federal tax dollars funneled through Washington, D.C.;

  • The remaining 4 percent is made up of a variety of tuition payments, fees and other local funds.

The second vital measurement is total dollars spent during a given school year. In 2016 traditional school districts, intermediate school districts and public charter schools combined to spend $18.5 billion, or $13,333 per FTE pupil.

A more meaningful way to compare spending changes over time is a look at total current expenditures. These figures reflect primary operational costs and exclude money spent on capital construction projects and interest payments on borrowed funds, as well as adult education and community programs.

Current expenditures in 2016 totaled $16.98 billion, a rate of $12,243 for each full-time student. About 75 percent of traditional districts and 45 percent of charters spend more than $10,000 per student.

Graphic 3: Michigan: Current Expenditures Per FTE Student, 2006-2016 (in 2016 dollars)

Source: Bureau of Labor Statistics, Michigan Department of Education

Adjusted for inflation, Michigan K-12 current per-pupil spending has not changed much over the past decade. Expenditures edged up to their peak in 2009 and 2010, before losing some ground following the recession and the reduction of extra federal “stimulus” funding. From 2014 to 2016, per-pupil spending increased by 3.3 percent in real dollars, approaching 2011 levels of purchasing power.

Michigan public school enrollment also declined by nearly 12 percent over the last decade. The foundation allowance, which provides the majority of resources for school districts and charter schools, is distributed based on how many students a school enrolls. Many districts struggle to manage their fixed costs in these times of declining enrollment. But for each student served, the overall level of funds available has been mostly steady.

Money clearly matters in education, but probably only up until to a point. Resources are needed to retain the services of great teachers and support systems. And certainly, some students will require more resources to educate than others. But most education research suggests that just adding more money to the existing system is unlikely to boost student achievement in any meaningful way.

Part of the reason for this is that it’s hard to prescribe the optimal way schools should spend additional dollars. For instance, they might need to spend it on just meeting the burdens of certain state and federal regulations or on providing their current employees with more generous salaries and benefits. These certainly increase costs, but they don’t necessarily improve instructional quality.

Perhaps additional funds would be used to hire more teachers or other staff, update textbooks and other materials, or provide additional services. Any one of these may help produce better results for students, especially if there is a current deficiency in these areas. But just giving schools more money is unlikely to improve the state’s academic performance. A 2016 Mackinac Center multiyear analysis of building-level data found no connection between higher spending levels and better results on 27 of 28 different tests and other academic measures.

Even the state’s $400,000 Education Finance Study, better known as the “adequacy study,” claimed to have found a modest connection between additional spending and higher test scores. But given the current achievement levels, boosting spending with no other changes wouldn’t amount to much. For example, according to the study, an additional $6 billion would only improve scores so that just half of Michigan third graders are on grade level in reading and just one-third of high school juniors are proficient in math. That’s a hefty bill just to meet these low bars.

Even so, finding $6 billion to generate modest learning gains would require some combination of repurposed state budget dollars and additional taxes on Michigan residents and workers. And even if we did have that extra money, our complex, multilayered, patchwork funding system would make it difficult to figure out the optimal funnel to sink that money into.

A glimpse at the full picture of the state’s school finances should adjust the focus from arguing about the right amount of money to spend on schools to instead figuring out how best to use the resources that are already available. It’s a lot harder to determine how to optimize resources compared to just dumping more money into the system, but a necessary first step is understanding the system as it exists. Only then can we work to figure out how to improve it for the betterment of schools’ number one priority: student achievement.