This and other school funding myths are
Education Association and other groups seeking more money for public schools
frequently claim that the current funding system is "unstable." Several factors
may make it appear so, but the reality is that school revenues have proven
Michigan is not
unique in this; over the past century school funding nationwide has advanced in
one direction — up. James Guthrie,
director of Vanderbilt University's Peabody Center for Education Policy
analyzed this trend and found its source in state constitutional provisions,
decentralized administration, employee unions and other special interests, and
the existence of multiple revenue streams.
Rather than attempting to get stubborn unions to yield concessions, districts find it easier to lay off staff and cut programs, furthering the illusion of instability.
factors are at work in Michigan, starting with the state Constitution, which
proclaims that education "shall forever be encouraged." Probably the most
influential factor in recent decades is school employee unions, which have
succeeded in making Michigan's teachers the highest paid in the nation relative
to the population that supports them. In both local school board and
legislative elections, the unions marshal tremendous manpower and financial
resources for candidates who promote their members' interests, and against
those who don't.
Schools here are
also highly decentralized, though most operational funding for 551 local
districts and 57 intermediate school districts is determined by the state's
"foundation allowance" system, under which a large proportion of revenue comes
from state sources instead of local property taxes. Local school officials
sometimes express frustration at the system's limits on their power to increase
millage rates, but it has provided a remarkably steady revenue stream over
In the 1994-1995
academic year, all schools received at least $5,912 per pupil (measured in 2009
dollars) through the state's funding system. By 2009-2010, that minimum had
grown to $7,151. The annualized increase had been even higher when funding
reached an all-time high of $7,751 (in 2009 dollars) in 2001-2002. An
inflation-adjusted 7 percent decline since then is one of the factors that can
make funding seem "unstable." But in real, inflation-adjusted terms, the
minimum per-student funding level from this source is still up 21 percent since
the inception of this system (and other sources — primarily federal money — have helped many districts make up the difference since that peak funding
Prior to 1994, 80 percent of school revenues came
from local property taxes. In a 2004 report, the Senate Fiscal Agency noted the new funding system's
elimination of one source of instability: "(T)he reliance on the often
unpredictable nature of millage elections to determine the districts operating
revenue ... has been virtually eliminated and a more stable source of revenue
That source is an annual state government infusion
of some $11 billion. More than half this amount comes from earmarked income and
sales tax receipts; the rest comes from a six-mill statewide education property
tax, lottery revenue, businesses taxes, tobacco taxes and several other taxes.
While local property tax revenues traditionally
were viewed as very stable, they are expected to decline significantly over the
next several years and probably won't rebound for a decade. The vast majority
of school districts have benefited from the broad base of the taxes that
support the state's contribution to their funding.
Other aspects of the school funding system create
a perception of instability. For instance, a large portion of a district's
funds are tied to enrollment, and conventional districts have experienced a 9.3
percent decline in enrollment over the last seven years.
Furthermore, the fact that local districts must
finalize their budgets by a June 30 deadline, while the state Legislature isn't
required to set its portion of school funding until Oct. 1, generates more
uncertainty. Even worse, "rosy scenario" legislative overestimates of state tax
revenues have forced modest 1 to 3 percent mid-year school aid cuts several
times in recent years. Fortunately, schools have fund balances to make up the
difference and many have been able to use that money to prevent midyear layoffs
or program cuts.
Finally, union contracts that lock in rising labor
costs limit districts' ability to cope with midyear cuts, declining enrollments
and various hard-to-project cost increases. Rather than attempting to get
stubborn unions to yield concessions, districts find it easier to lay off staff
and cut programs, furthering the illusion of instability.
Revenue that is 100 percent predictable and stable
is an impossible dream, for schools or anyone else. Under any possible system,
school funding is ultimately tied to the economic well-being of the state.
Local school officials should focus on managing what they can control — expenses — and refrain from contributing to the myth that they're "victims" of
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.