Disinvestment, structural flaws driving school funding crisis

The State Board of Education is responsible for ensuring that Michigan’s public schools are providing a high-quality education for the state’s youth. Part of that responsibility includes advocating for sufficient and stable funding.

A recent analysis conducted by researchers at Michigan State University’s Education Policy Center, on behalf of the Board, describes a near “perfect storm” of long-term disinvestment, demographic shifts, and structural flaws in school organization that now combine to send 55 school districts into deficit, and force many more to cut teachers, gut programs, and in some cases close schools.

Twenty years ago, Michigan enacted Proposal A, a public school finance model designed to reduce funding gaps between districts. Proposal A’s architects sought to provide a floor of adequate funding to be flexibly used by existing schools, creating a minimum amount of funds to follow each student. However, as the MSU study concludes, much has changed in the last two decades, and the funding model no longer works with the educational structure that exists today.

According to the report, adjusted for inflation, Michigan’s K-12 funding has declined 12 percent since 2004 as taxes dedicated to education have been eliminated and the School Aid Fund, once reserved for K-12, is now used to pay for higher education and pre-school. In addition, dedicated at-risk student funding has been capped since 2009 and failed to keep pace with the growing number of eligible students.

At the same time, Michigan’s schools have seen enrollments drop 10 percent. In recent years, 70 percent of traditional public schools and 37 percent of charters have experienced declining enrollment. This is due to population trends, including outmigration and fewer births, as well as the proliferation of new charter and cyber charter schools, and expanded schools of choice.

Coupled with the declining enrollment is an increase in new schools. Michigan has experienced tremendous growth in charter schools, with 277 charter schools in operation in FY2013, enrolling over 8.5% of Michigan K-12 students. Last year, nearly 30 new charter schools opened, despite a continued decline in overall student head count.

Finally, ballooning pension costs and limited state support for buildings and technology have contributed to declining school budgets. Taken together, these factors mean that many Michigan school districts have experienced a 25 – 30 percent funding decline over recent years.

The first step in addressing these issues is to understand the nature of the problems contributing to Michigan’s school finance crisis. Only a handful of districts are in distress because of poor or corrupt management, or because they won’t make hard choices. Almost all school districts are in distress due to a combination of disinvestment, enrollment declines, and structural issues in how we currently organize and fund education. That’s why members of the State Board of Education are working with educational and political leaders to identify the key issues, and design effective responses to better support all students and the educators we count on to teach them.

John Austin is President, and Casandra Ulbrich Vice-President of the Michigan State Board of Education

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Thu, 10/24/2013 - 9:14am
The problem with this argument is it fails to reference Michigan's loss of income over the Lost Decade, which is the very source of educational tax dollars. According to the most recent US Census data on education spending, http://www.census.gov/govs/school/, Michigan ranks in the top 10 of all states in K-12 spending per $1,000 of personal income. Michigan is most askew with national averages in employee benefits, where we rank 5th in benefits spending per $1,000 of disposable income - 44% above the national average. The discomfort felt in this state is the logical fallout from a massive loss of wealth and tax base. Any system, including Proposal A, would have yielded similar results.
Thu, 10/24/2013 - 10:53am
I'm afraid that this simply is not the case. Census and other data on school spending suffer from the same problem: Michigan includes state pension system costs in the K-12 school budget, while other states fund it separately. US Dept. of Education data that takes this and other differences into account shows that Michigan has dropped from 7th in per pupil spending to 26th in the last 20 years. Moreover, state and local-source education spending as a share of state personal income has actually fallen in the last 12 years - in other words, we are dedicating less of our economic output to K-12 education in good times or bad. (It's worth noting that Michigan personal income, even excluding transfer payments, declined in only one year: 2009. The problem is not so much economic growth, but the way in which it is distributed. School aid is primarily dependent on the sales tax, which is very regressive because it only covers retail sales.) School funding was not keeping up with inflation even before the recession, and a large part of the reason was that sales tax revenue was not tracking with the growth in the economy - which was in services, not retail trade. Most recently, the end of the Michigan Business Tax abruptly ended the $750 million earmark which that tax contributed to the School Aid Fund. This funding was not replaced. These are choices made in tax policy, not the impersonal workings of the economy.
Tue, 10/29/2013 - 10:03pm
I agree with your comment addressing declining compensation in our country,... what about mine?
Thu, 10/24/2013 - 12:48pm
Let me see if I get it. Enrollment overall has declined 10%. Funding has declined 12% adjusting for inflation. That makes a 2% shortfall. Pensions have ballooned. I am supposed to take as a given we have a funding crisis?
Thu, 10/24/2013 - 9:50pm
You are misreading the numbers. Enrollment decline of 10% means you lost 10/100 students. The per student funding left with them. The per student rate also dropped 12%, so you lost that as well. The charter schools moved some students out of the public sector, taking those per student dollars with them. That is three cuts which add together - not subtract.
Fri, 10/25/2013 - 10:29pm
Rob, Help, I didn't find in the article where the funding rate per pupil was reduced by an additionla 12%. "According to the report, adjusted for inflation, Michigan’s K-12 funding has declined 12 percent since 2004" Do you have access to information that wasn't included in the article?
Charles Richards
Thu, 10/24/2013 - 3:15pm
The authors say, " Almost all school districts are in distress due to a combination of disinvestment, enrollment declines, and structural issues in how we currently organize and fund education." By "disinvestment" and "structural issues" they mean that revenue falls short of costs; they don't breakdown the shortfalls into cost increases and revenue cuts. I would like to know what proportion each accounts for. Otherwise, this just amounts to a call for a blank check for higher funding. As for "enrollment declines", do they expect districts to receive the same funding for fewer students? Almost anyone can accomplish a goal with sufficient resources; it takes capable managers to use resources efficiently.
Thu, 10/24/2013 - 5:27pm
I see that once again, "ballooning Pension costs" has made the list. What you fail to point out is just WHO is getting those "large" pensions. It certainly is NOT the teachers or lesser education employees. Those cost are derived from the higher paid positions of Administration offices, Superintendents, Assistant Superintendents, Administrators like Accountants, HR Managers, etc. These folks also commonly "double dip" when it comes to pensions. They retire from one district, then go to a new job at another (or the same) district and collect a salary as well as the pension. It's the problem of "double dipping" that needs to be curtailed. This same thing is happening in politics. They collect a pension for retiring from their political position and then get another job in the political arena as a board member of a large corporation and collect again. Let's take Dan DeGrow for instance.. he collects a pension from Michigan as a retired Representative. He currently works for RESA (in St. Clair County) at an exorbitant salary and when he leaves that he will be qualified for a pension from the Michigan Education Retirement Fund (along with Social Security). Is this right? No, he should only be able to collect one pension from Michigan!
Wayne O'Brien
Thu, 10/24/2013 - 8:47pm
I would feel more heartened if the first paragraph had explained how the State Board of Education advocates for the widest knowledge and wisdom discernable from the top educationally performing countries in the world in an effort to establish emulatable plans and far reaching goals. Camparable in size to Finland, Michigan could proceed with similarly successful and sweeping changes to educational programming at all levels.....creating a statewide educational system that citizens would value sufficiently to fund, rather than the system we have now which citizens seem to have little quarrel with de-funding. Finland made certain that only students from the top 10 percent of their classes would be accepted into colleges of education for teacher training. Why not try this successful approach in Michigan? In Finland, spending on sports is not coupled with educational spending. Educational earmarks are for teaching and learning. Why not try this successful approach in Michigan? In Finland, students are instantly provided with the extra help that they need, when and where they need it....they estimate that as many as 80% have received some special help before graduation.....without stigma or extra spending.....usually two teachers with master's degrees are in each classroom at all times.....students are not left behind by the Finns and they do not have a dropout problem. Should we be concerned because the Finns are of "one culture".....and that is why they are so successful? Or should we be concerned that this is an easy way to defend "exceptional" egos? I hope that the State Board of Education will begin advocating for sufficiently dynamic change underpinned by statewide citizen engagement and based on proven educational models of world-wide success.
Thu, 10/24/2013 - 9:36pm
It is disappointing that there is now wonder about how and why the financing for schools was changed. From a time when every request for more money for the schools to now when many and repeated requests for more money and even renewals are turned down. Could it be that along with the explosion of charter schools that the taxpayers blind faith in the schools (from state thru local systems, administrations, staffing) has been at best erroded? Could it be that the people whose money is being spent by the schools are now expecting value for their money? This article makes no mention of the learning quality of the students, of the preparedness those competing K-12 have, of the value our communities are recieving for their money. If no one is interested in describing the value we shold be expecting from our schools and they aren't willing to help the public measure how well local schools are doing in achieving that success/value then why should anyone be surprised that the spending is being curtailed. When I spend my money on me I look for value and if I don;t get it I don;t spend it, or I don;t return to that store. Why should my tax dollars or anyone's tax dollars be treated differently? When businesses don't provide fair value they fail because they lose customers. Democracy works and customer vote with their spending. Why doesn't that apply to education? Why should the people who are spending on education be able to measure the value they are recieiving and stop or cut back their spending when the value declines?
John S.
Thu, 10/24/2013 - 11:07pm
As usual, reading the report, it looks like pension and health care costs under the old defined benefit plan are the main "spending" problem. It offers retirement benefits at age 55 with 30 years of service (1.5% per annum)? For some retirees, the old defined benefit plan must fund 30+ years of retirement and retiree health care benefits to boot. What were people thinking back in the day? School funding problem? The governor has raised taxes on retirees. He's reduced taxes for his friends in business. It's past time to tax services. Put wax in the ears and do the dirty deed. The things that impact educational performance, unfortunately, don't have all that much to do with what people want to talk about all the time--it's not classroom sizes, charter schools or public schools, inequities in school funding, etc. Better things to look at? How about stable and competent administration, experienced and capable teachers, stable curriculum, hard work (homework!), parental involvement, and high standards. About 80% of the variance in school district performance on MEAP can be explained by variation in the wealth of the school districts--wealthier parents tend to be brighter, their incomes are higher and they can afford to live in wealthier districts, and intelligence is partially heritable.
Thu, 10/24/2013 - 11:15pm
Whether it is a 2% shortfall or a 12% shortfall over that time period is irrelevant to the discussion. A shortfall over that lengthy of a time period in an industry that has no ability to control the unfunded mandates made upon it by the legislature, no control over legacy costs, no control over what students and families do when they are not in school, and the mandate to educate all students is certainly likely to drive many schools into debt. The fact that charter schools have expanded is overplayed in much of the media. Where businesses see an opportunity to tap into a 14 billion dollar industry, businesses will certainly venture. That has not had an appreciable upward influence on student scores, but I'm withholding my final judgment on the experiment until we can get accurate data on the "bang for the buck" - including major donor/business support dollars for those charter schools and the level of parental involvement that was concomitant with the change (see Muskegon Heights Schools and the $14 million in debt that was used as a reason to close the public school district, and was then forgiven by our legislature once the charter was in place and was busily being supported by parents who were not as supportive of the original public schools). Notice that the citizens of the well-funded and successful school districts are not clamoring for more charter schools in their communities. The vast majority of those schools have students who come from families with a history of success in school, and they demand the same from their children, while setting those children up to succeed through a plethora of activities and interventions when needed. It's worth noting that nearly 100% of the difference in educational achievement between an underprivileged 6th grade student and students from a more privileged environment can be accounted for by the lack of support in the summer months (nearly a 2 grade difference in reading level). We don't see people clamoring for year-round school in response to that, but rather for more control over teachers, schools, school choice, etc. In the Detroit area, where I have taught for 11 years in private schools and 11 years in public schools, the major difference has been in parental involvement and funding. While the private schools have increased their funding through tuition and donations that raise the per-pupil funding to well over $20,000 per student, the pubic schools have seen the aforementioned decrease of either 2% or 12%, and now spend from roughly half to two-thirds of their private school competitors, who rarely spend the giant sums of money that public schools spend on special education or government mandates . So much for consumers getting the best value for their money, Duane. My school spends well over 20K per year for administrative support and staff time for state and federal school accreditation. Additionally, the cost for educating 6 severely autistic students at the level required by law in our school was over $300,000 per year for the teacher and 5-6 parapros (with benefits), while the 120 gifted students in the same grade levels were taught for roughly 2.5x that amount by the six teachers they saw each day (yes, 20 times the students for 2.5x the price). Private schools are not generally in that situation, and it is part of what is "breaking" our remaining public schools. You are left to decide the morality of the laws that mandate piles of government paperwork and mandate how to care for one group of students while completely ignoring other students (When I checked a while back, in Illinois, both groups are in special ed and are well-funded). We'll see what happens, but I can tell you that I am a better teacher now than I was after years in the private schools, yet I was able to teach more in less time while in the private schools due to the atmosphere that was created through the cooperation between the parents, students, and faculty of the school, coupled with the lack of distractions found in those schools. Fund the public schools at the same level as those private schools, and/or unfetter our hands to level the playing field, and I guarantee you that with the dedicated professionals I see in my daily life, we will massively improve our "all-important scores" in a very short time.
Marie Weaver
Fri, 10/25/2013 - 4:39pm
Make increased funding for public schools a state priority and insist that Charter School teachers and cyber teachers participate in the established MSPERS pension plan.
Sat, 10/26/2013 - 3:41am
Where in private industry can you expect to retire at 55 after working 30 years and receive full health care benefits? Only as a teacher or state employee! Because we are living longer, we are paying teachers (and state employees) who are not working for more years than they worked. That, in my opinion, is unsustainable!. I think we need to increase the working years and the retirement age to amounts we can afford!
Carim Calkins
Sun, 10/27/2013 - 8:12pm
You are correct. That is why the legislature passed laws over the years reducing the "full" aspects of the benefits and have also mandated that we put 3% of our gross income into a fund that will pay for the health care we receive after retirement. I was not pleased to see my benefits reduced and my cost go up, but it was the right thing to do and should help to make the program sustainable. We should be angry at the actuaries and politicians who assisted in the setup and management of the entire retirement healthcare system over the years prior to the changes that we made a couple of years ago. BTW - up until the changes were made, there was no well-written and clear promise that MPSERS retired school personnel would actually get the healthcare benefits in retirement, so the actions of Gov Snyder and the legislature did codify the system into law when they changed things to the new system I mentioned. (I'm pretty sure I have my facts straight on this, still a ways off from retirement, and the newest teachers may have yet another system). Anybody have more info?
Sun, 10/27/2013 - 9:34am
Michigan is a large and diverse state that is well-served by a system of county government with only 83 units. Meanwhile we still have over 500 school districts?! Sooner or later the education establishment needs to wake up and smell the coffee: time to solve the problem of declining enrollment, excessive administrative overhead & duplication of non-instructional services. Indiana has about half the number school districts we do and in other states school districts are organized by county.
R. Karl Burnett
Tue, 10/29/2013 - 9:45pm
I believe John is being far too etiquette, he is 101% right in identifying the intrinsic and extrinsic elements in the dire predicament our public education system in Michigan (and probably everywhere else) without listing one very important primary item. I do not believe that there are legislators, nor citizens who really hate teachers, police officers, autoworkers, firefighters or any other hard working everyday Americans. I do believe that as an industry having a unionized workforce, they are all simply victims of one much greater force. I believe the U.S. Chamber of Commerce, and Wall Street have been working very hard since the creation of the New Deal, and subsequently things like the John Birch Society, and Tea Party, the goal is simply for there to be a "Union-Free-America?" Those well organized think-tanks full of PHD's aren't just fooling around. They know how to instill fear in others, cause for them to suspect others always, and have them wish to take away from others in a futile attempt to hold their own ground. Until we all realize we need to coalize, and direct our energy towards driving a stake in the ground designed to preserve our strong middle-class society, we will just continue to see the public sector dwindle away just as we have seen the private sector do these last several decades. During this administration all we have seen is to threaten everyone, and in the end forgive those born before 1947, those putting out fires, and fighting crime avoiding losing important constituencies. The strong middle class and it's higher standard of living are fated to fade away. Sadly, Americans forgot long ago how to put the greater good in front of what's in it for them! Until that changes, our way of living in this country will continue to be in peril. Give me a call, John?