Payment Sections

The general and special education allowances and grants reviewed above are calculated under the sections of the State School Aid Act cited there, but in most instances, the monies are actually allocated from three other sections of the State School Aid Act.

This dual basis in the statute is reflected in a district’s state aid financial status report. The first of the report’s two pages shows the amounts paid under “Proposal A Obligation,” “Spec Ed Headlee Obligation” and “Discretionary Payment,” each of which is enumerated below. The second of the report’s two pages, in contrast, shows the amounts paid under “Foundation Grant,” “Special Ed Foundation” and “Special Ed Hold Harmless,” which are discussed in the sections above. As would be expected, the three amounts on the first page sum to the same total as the three amounts on the second page, even though the individual amounts on the first and second pages are different from each other.

  1. The “Proposal A Obligation,” or section 22a payment, is calculated by multiplying the sum of a district’s FTE students in general education (section 20) and special education (sections 51a(2) and 51a(12)) by the district’s 1995 foundation allowance. The product is then reduced by the amount of revenue generated from the maximum possible millage on nonhomestead property in the district.[cxlix] The state’s total Proposal A guarantee allocation in fiscal 2007 was $6,207,000,000.[205]

  2. The “Spec Ed Headlee Obligation” (section 51c) is calculated by multiplying the district’s cost of special education[cl] by 28.6138 percent and the district’s special education transportation cost by 70.4165 percent. These percentages are the same ones used in the 51a(2)(b) calculation above.[cli] The state’s total allocation for the Headlee obligation payment in 2007 is $708,200,000.[206]

    The state’s obligation to provide this special education money is the result of the Michigan Supreme Court’s 1997 decision in Durant v. State of Michigan[clii]. The court ruled that the state government had mandated certain special education services and was required under the Headlee amendment to finance school districts’ compliance with the mandates.

  3. The third allocation made by the state Legislature to schools is the “discretionary payment.” The state’s total allocation for the discretionary payment in fiscal 2007 was $3,584,950,000.[207] This amount represents the “nonmandated payments to districts,”[208] meaning that unlike the Headlee obligation payment and the Proposal A guarantee, this figure is paid at the Legislature’s discretion; it is not required by the courts or the Michigan Constitution. The payment consists of the difference between two figures: the sum of the general education calculations for sections 20 and 20j and the special education calculations under sections 51a(2), 51a(3) and 51a(12); and the sum of the amount paid to guarantee that districts receive the same amount of funding they had when Proposal A took effect (section 22a) and the amount the state was obligated to pay under the Michigan Supreme Court Case Durant v. State of Michigan (section 51c).[209] Essentially, this payment is the source of any annual increases in the districts’ foundation allowances.

[cxlix] MCL § 388.1622a(2)(a). The “maximum possible millage on nonhomestead property” is the same as that discussed earlier: the lesser of 18 mills or the district’s property tax millage for school operating purposes in 1993.

[cl] This cost cannot include the costs reimbursed for providing special education services to students under section 53a.

[cli] See “51a(2)(b) Calculation,” in the previous page, Operating Monies for Special Education.

[clii] For more discussion of the Durant decision, see “Appendix 2: Summary of ‘Durant’ Court Decisions.”