School Funding: Lack of Money or Lack of Money Management?

School Funding Far Outpaces Inflation and State Agency General Fund Spending

In 1994, Michigan citizens approved a constitutional amendment that dramatically altered the way public schools are funded.  Known as Proposal A, the amendment delivered much-needed tax relief to overburdened property owners in exchange for a sales-tax increase—and a significant shift in control of the education purse-strings from the local to the state level.

Now, seven years later, some officials are saying it's time to let districts again tap local property owners for more school taxes.  Do these officials have a case, or are schools missing opportunities to better use the resources they already have?

First, a brief history lesson is in order.  Prior to 1994, Michigan's property tax burden was 35 percent above the national average, thanks in large part to irregular millage elections that depressed turnout and ensured narrow special interests would always get the tax increases they wanted.  Proposal A cut property taxes by one-third, but increased sales and use taxes by 50 percent.  It also dedicated 4.2 cents of the now 6-cent sales tax to the state School Aid Fund and established a minimum "foundation grant"—a per-pupil allotment allocated by the state to schools based on their enrollment.

Public school funding, meanwhile, has become a top state priority.  Revenues for public schooling since 1995 have increased by more than 50 percent, from $4,200 to $6,500 per student—double the inflation rate.  The National Education Association says Michigan outspends 43 other states in this area. 

Nevertheless, some school officials claim that a dearth of dollars resulting from Proposal A is forcing them to lay off teachers, close schools, and cut student programs.  Paul Bosquette, a school board member in Wayne County's Redford Union School District, says that a lack of "proper funding" is to blame for his district's $1.3-million deficit. 

Is Bosquette right?  It's hard to think so when per-pupil revenues in Redford Union are up nearly 40 percent since 1994.  Redford's—and other districts'—problem is not so much a lack of revenue but rather that large amounts of education dollars continue to be consumed by unreasonable collective bargaining agreements, costly non-instructional services, and inefficient management practices.  (The National Center for Education Statistics reports that Michigan ranks below only two other states in the percentage of education dollars it spends on bureaucracy vs. classroom instruction.)  The result is that no amount of taxpayer money is ever deemed to be "enough" to fund public schools.

Redford officials know how to cut unnecessary costs and fix the district's financial problems; they're just unwilling to make the tough decisions necessary to do it.   Earlier this year, the Mackinac Center for Public Policy met with officials to discuss their options—including competitively bidding out performance of non-instructional services to private firms.   The officials agreed that quality services at significant cost savings were readily available.  But they also know the powerful school employee union, the Michigan Education Association, opposes any move that would lessen its annual revenue stream of over $700 million in dues and premiums from school employees and districts.  The result: Criticize Proposal A, because that's politically easier than risking a highly public union protest.

Others complain that Proposal A hurts districts facing declining enrollment.  Holland Public Schools claims that Proposal A helped force the closure of a popular elementary school.  Officials there argue that a loss of students, without a corresponding reduction in "fixed" costs, is causing financial troubles—even though Holland receives over $2,000 more per student in 2001 than it did in 1994.  In other words, Holland's budget is $10 million larger than it was before Proposal A, while at the same time the district has to educate fewer students.

Declining enrollment does make certain budgetary decisions difficult, but what enterprise is immune to fluctuations in the marketplace?  Every operation—including schools—must consider and plan for future changes in its customer base.  This is simple economic reality.  The fact is that most districts—including many that have received smaller funding increases than have Redford and Holland—are able to balance their budgets.  Trenton Public Schools, for example, has not felt it necessary to ask for a single tax increase in over 30 years. 

Our schools need to learn the same lesson parents hope their children will learn: You can't spend all your money irresponsibly and expect your allowance to increase.


(Former teacher Matthew J. Brouillette is director of education policy with the Mackinac Center for Public Policy.  Permission to reprint in whole or in part is hereby granted, provided the author and his affiliation are cited.)

Proposal A of 1994 dramatically altered the way Michigan public schools are funded, and now many districts are complaining about a lack of money to meet their budgetary needs. But school revenues are up from pre-Proposal A levels, raising the question, "Are there things that districts can do more efficiently in order to better use the resources they already have?"

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