Show me the money

Mackinac Center book explains how Michigan pays for K-12 public schools

More than $19 billion — at last count — makes its way from taxpayers to Michigan public schools each year, according to a new book published by the Mackinac Center for Public Policy that explains public school financing.

At 180 pages, "A Michigan School Money Primer," is a comprehensive overview of the system of state, federal, local and intermediate district tax revenues that pays for public schooling, as well as the state and local school budgeting processes that determine how the money is allocated and spent. The primer also explains how the state constitution and various Michigan statutes, as well as court decisions, affect school financing.

"Our desire was to produce an accurate, thorough and objective overview for anyone involved or interested in how public school dollars are raised, channeled and spent," said Ryan S. Olson, director of education policy at the Mackinac Center. He, along with Michael D. LaFaive, the center’s director of fiscal policy, coauthored the book. The primer is designed both for readers who know little about school finance but would like to learn more, and for those already familiar with the system who would like a broader understanding of it, Olson said.

The primer opens with an introduction to more than 25 revenue sources that channel money to Michigan school districts, explaining those as well known as the local property tax to those as little known as housing project service fees. The Michigan Lottery, for example, contributed about $688 million to the Michigan School Aid fund in 2006, or about 5.5 percent of the $12 billion School Aid Fund that year.

In the next section, the authors explain how state legislators disburse money to local and intermediate school districts and charter public schools, and the process used to determine the "foundation allowance," or how much each school district will receive per pupil each year. In addition, it explains the "categorical funding" earmarked for specific purposes such as special education or transportation.

Since 1994, the way in which Michigan’s public schools are financed has been largely guided by Proposal A, a voter-approved constitutional amendment that reduced the reliance of most school districts on local property taxes and increased their reliance on state sales and property taxes. Today, most public schools receive the majority of their funding on a per-pupil basis from the state, meaning that enrollment changes can — and often do — have a significant effect on each district’s budget.

Finally, the primer explains how local school districts develop budgets and account for their spending. School districts are required to prepare an annual budget that shows the previous year’s expenditures and the coming year’s estimated expenditures, as well as an estimate of revenues for the coming year and the amount of any surplus or deficit from the past year or anticipated in the current year, among other items.

The primer "explains and simplifies what, to the outsider, can too often appear to be a complex and arcane school funding process."

Nearly 9,000 copies of the primer were sent to school district superintendents, school board members, state legislators, public libraries and reporters. In conjunction with the primer, the Mackinac Center has compiled school finance data from the Michigan Department of Education into an interactive Web database. The database may be accessed through the center’s Web site and used to create reports, perform comparisons between local school districts, sort districts by varied revenue and spending categories, and more.

"It is difficult and time consuming to teach reporters how to deal with audits, budgets and millages. Thanks to the Primer, my job just got easier," said Oscoda Press Editor Holly Nelson in an e-mail to LaFaive.

The primer "explains and simplifies what, to the outsider, can too often appear to be a complex and arcane school funding process," said Michael Williamson, former deputy superintendent for the Michigan Department of Education.

The "Michigan School Money Primer" is a companion publication to the Mackinac Center’s "Collective Bargaining Primer," released earlier this year, and "A School Privatization Primer," released in June. (See related story, this issue.) The Mackinac Center also is publisher of Michigan Education Report.

The primer acknowledges the help of 20 state and local education officials, including a number of school finance administrators and Michigan Department of Education analysts. 6

The school finance database is at