Michigan's method for funding public education
changed significantly when voters approved Proposal A in 1994. The nearly 400
pages of laws directing the state's school funding mechanism can be complex and
convoluted. A key component of the system is the per-student "foundation
allowance," and two common myths pertain to it.
year the Legislature establishes a "basic" foundation allowance ($7,151 per
student in the 2009-2010 school year), which many incorrectly assume is a state
grant to each district. It's not a grant, but one part of a complicated formula
that limits per-pupil funding disparities across districts.
Total per-pupil revenue in 2008 was $12,825, well above those “basic” and “maximum” foundation allowances.
each school district uses the number generated for it under the foundation
allowance formula to estimate its annual operating revenue, many believe the
figure represents the total amount per student that each school will have to
spend for the year.
In reality, the
school aid grant each district receives from the state only represents one
portion of each district's total annual operating revenue. Official figures
indicate that in 2009-2010, total state spending under the foundation allowance
formula was equivalent to $5,730 for each Michigan student. But districts do
not necessarily get this particular sum; instead they receive different amounts
based on the formula.
The rest of each
school district's annual operating revenue comes from an 18-mill property tax
on the district's nonhomestead property (i.e. commercial, industrial, etc.).
The amount this raises in a particular district varies, and the amount is also
included in the foundation grant formula. The combined revenue from this tax
and the state school aid grant represents the total amount the school will have
to spend for operations under the Proposal A funding mechanism.
Schools also get
operations funding that is totally unrelated to that mechanism (such as
"categorical" grants described below), and other non-operational revenue from
millages levied to pay debt service on long term capital investments like new
school buildings. In 2008, the latest year for which data are available,
average school district revenue from all sources for all purposes was $12,825
per pupil — significantly more than the foundation allowance (though, again,
the actual amount varies for each district).
The above is a
highly simplified description of how the Proposal A foundation grant system
works. The reality is much more complicated. For example, the "basic"
foundation allowance is actually a cap, or the maximum amount of state school
aid grant money to any district when all the other factors in the Proposal A
formula are calculated. Most districts get less than the "basic."
formula includes several other factors, including how much the district raised
and spent prior to Proposal A's passage in 1994, there is another figure called
the "maximum foundation grant" ($8,433 in 2009-2010). Although the "basic" and
the "maximum" figures are different, they still represent the same thing: caps
on a school's maximum state school aid grant under the foundation allowance
and easier to understand, schools get other money from the state which is not
determined under the foundation grant formula. In 2009-2010, the Legislature
approved 40 different types of supplementary "categorical grants." These are
distributed based on myriad factors ("categories"), including districts'
special education and "at-risk" student populations, location, enrollment
trends and local tax base.
come from the federal government and are distributed through targeted grants.
Most of these are prescribed by the federal No Child Left Behind Act and the
Individuals with Disabilities Education Act. Money from 19 different federal
programs is apportioned by the Legislature, but schools also may qualify for
separate funding directly from Washington through a host of other grant
In addition to
the 18-mill nonhomestead property tax discussed above, there are also separate
"local" revenues from millages levied by regular and intermediate school
districts. Most of the former go to pay for capital expenditures (buildings and
land), with the ISD levying taxes for special and vocational education, plus
general operating expenditures.
Department of Education reports that total public school revenues in 2008 were
comprised of 54 percent state sources, 37 percent local sources and 8 percent
When all of
these revenue streams are included, total per-pupil revenues are substantially
higher than the amount allotted through foundation allowance or state
categorical grants. As mentioned, total per-pupil revenue in 2008 was $12,825,
well above those "basic" and "maximum" foundation allowances.
As can be seen,
the foundation allowance is just one part of the complex school funding system
in Michigan. Not surprisingly, it's easy for taxpayers — and even school
officials and legislators — to misunderstand how it works.
Michael Van Beek
is director of education policy at the Mackinac Center for Public Policy, a
research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is
hereby granted, provided that the author and the Center are properly cited.