Improving the School Finance System in Michigan

Improving the School Finance System in Michigan

A Review of Proposal A

Airess Stewart
Oakland University

Introduction
A Review of Proposal A

Every year, school districts throughout the state look to find ways to plan effectively to

meet the needs of all learners. Many times they are faced with the challenge of not having

enough money to do so. Prior to 1994, districts were heavily reliant on local taxes to support

them. Then in 1994, Proposal A, Michigan school finance reform was created. There were a

few intended objectives to transform school funding such as: increase state share of revenue,

assure a minimum per pupil revenue for districts, achieve equity for students and reduce property

taxes.

As an educational leader, it is important to know how our schools are funded in order to

advocate for resources and supports needed for our students. In this paper I will discuss the

benefits and challenges schools have experienced with Proposal A. In addition, I will provide

recommendations to improve Proposal A for the future to ensure success for all students to be

college and/or career ready.

Foundation Allowance

A foundation allowance was developed to ensure that all schools were receiving a

minimum base amount per pupil in each district from the state. At the same time, local taxes

were reduced, which will be addressed later in this paper. These two changes shifted more of the

revenue from local to state. Those schools that were already receiving the minimum per pupil

were given a smaller portion while districts under the amount received up to double. As a result,

the gap between the high revenue and low revenue districts have narrowed. Throughout the

years, adjustments were made to compensate for schools meeting the minimum per pupil at the

time of development. However, there continues to be a discrepancy of the per pupil dollars that

are available for basic programs and services between districts. Some of this is due to some
A Review of Proposal A

districts that have higher local revenue due to higher property taxes and districts that have less

local funds tend to have a greater “at-risk” population. One of the greatest challenges with per

pupil allocation is the decline of pupil enrollment for many districts which has reduced the

amount of funding a district receives. Schools typically plan the budget for the following year in

the spring. Currently they have to project their per pupil allocation for the following year based

on enrollment trends. I will use an example from a review of the 2017-18 Budget Report for

Farmington Public Schools to discuss this topic. Farmington had over 12,000 students in 2009 to

slightly over 9,000 students in 2016. This was a decrease of 3,000 students in 5 years. Recent

projections continue to estimate a decline for the next 3 years. As the district prepares for the

amount of funding for the following year, in terms of resources (programs and personnel) this

information needs to heavily considered, especially if they will be receiving less in the upcoming

year, because there may be some resources that cannot be sustained. In addition, per pupil

funding does not take into account the operating expenditures of the district. Although less

students may be in the district, buildings still need to be maintained and run. Due to

Farmington’s decline in student population and decline in foundation allowance, the district has

closed schools, resulting at times in staff layoffs and the loss of student services. This structure

leaves school districts with a challenge to make difficult decisions and lacks the ability for long

term, proactive planning.

Achieve equity

Although local districts attempt to set aside funds to support the needs of their students

within their budget, sometimes it is not enough because some districts have a higher at-risk

population. In 1994 a new categorical program was created for “at-risk” money to be distributed
A Review of Proposal A

to certain districts meeting the criteria based on the number of students receiving free and

reduced lunch. The amount in this fund has grown since the initial creation due to increasing

need. This additional money is intended to provide districts with funds to purchase resources for

their “at-risk” population. As the requirements for districts to have a multi-tiered system of

support (MTSS) have increased from the state, so has the demand for additional funding from

schools. MTSS is a framework for schools to provide high-quality instruction and interventions

matched to student need in both academic and non-academic areas. It requires continuous and

systematic data collection to monitor effectiveness of the system. Decision making is “need-

driven” to ensure that district resources reach the appropriate students at all appropriate levels to

achieve career and college readiness. In the current structure, there is little required evidence of

research to determine the effects of various programs for certain student populations (i.e.

academic “at-risk”, english language learners, and special education) and for certain

communities (i.e. suburban, urban). Currently the State of Michigan uses achievement data

from state assessments as the sole measure of success in districts.

As an educational leader, it is important to advocate for all students and the

programs/services needed to be successful. I propose for lawmakers to create an equity based

formula for the foundation allowance by using additional criteria for districts such as percentage

of various student populations to include limited English learners, special education, and

academically “at-risk”. Michigan lawmakers need to acknowledge that there are higher costs

connected to some of our student populations. As part of this funding source there should be

accountability measures set in place to ensure that districts are providing the necessary resources

for all students as well as program effectiveness. Additionally, there are differences in the cost

to educate students at different grade levels. High school expenses are higher than elementary
A Review of Proposal A

due to some of the materials that are required to be purchased for classes that have labs or use

more technology. Therefore, another criteria to be added to the equity formula should include

the number of secondary programs within a district to ensure students are career and/or college

ready.

Taxes

Prior to 1994 Michigan’s tax system was imbalanced in comparison to other states, as

stated in A Primer on Michigan School Finance, Kearney and Addonizio (2002) “Michigan

property taxes were 25% higher per capita …..and sales taxes were 30% lower per capita than

the national average” (Pg. 57). Through the years, Michigan was successful in addressing this

imbalance and made the state more comparable to surrounding states. In effort to increase state

share revenue, sales tax was raised from 4% to 6%, with the additional 2% going to schools.

Although the additional 2% from sales tax is set aside for schools, that amount has been

dependent on the economy from year to year. In the mid 2000’s during the time of the recession,

less purchases were being made, causing a decline in the amount of money for schools. The

adjustment of moving school funding to sales tax seems more favorable than property taxes for

most taxpayers because it is less regressive. (Kearney & Addonizio, 2002). However, is a 2%

increase enough? According to the Tax Foundation, Michigan is ranked #38 in sales tax rate in

2018. Michigan may be able to increase the sales tax an additional 1% to make the new rate 7%

and still be comparable to other states.

Prior to Proposal A, local property taxes accounted for two thirds of the revenue for

school districts. Property taxes are calculated by mil, which means 1/1000th of the assessed

value of residential and commercial property. Prior to 1994, local school districts could
A Review of Proposal A

determine the amount of the mills from property taxes, with a maximum amount of 50 mils.

However, the amount varied widely per district with differences between the lowest and highest

district of approximately 36 mils. As mentioned earlier, one objective of Proposal A was to

reduce property taxes. In order to do so, a cap of 6 mils was created for districts to levy from

local property taxes. Taxes are based on the assessed value of a property, however, not all have

the same assessment practices among the different agencies. This inconsistency causes

differences in the way property values are assessed in different communities. To improve the

assessment system, I propose Michigan creates a consistent practice to be used statewide.

To allow for additional local funding, a district can request for bonds to be passed by

local taxpayers for improvements to schools for renovations and technology. However, the

majority of bond issues have been reported to fail, leaving schools with the inability to maintain

their buildings. After reviewing other states resolution to this issue, I have found that many have

a school facilities funds to maintain their schools by providing reimbursements or grants to

support their local infrastructure. I recommend that Michigan lawmakers consider creating a

budget for school facilities for maintenance and improvement efforts by local districts. Funding

allocation should be based on specific criteria similar to Hawaii as documented in the 2017

Infrastructure Report Card “school building age and condition, as well as student demographics,

building health and safety and maintenance need” (Infrastructure Report Card, 2017)

Conclusion

Proposal A was successful in meeting some of the objectives related to school funding

issues such as closing the revenue gap between districts, reducing property taxes and increasing

the state share revenue. Unfortunately, economic fluctuations and pupil enrollment continue to
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have a significant impact on funding sources every year, creating a challenge for long term

planning for districts.

After reviewing Proposal A, I have created some recommendations that may benefit

consideration to improve the funding structure. Areas that would benefit from further review

include the need for equitable allocation of funding for services and programs to meet the needs

of all learners, school maintenance projects, as well as the challenges of a fluctuating economy

and pupil enrollment. Possible solutions to address the needs identified would include creating

criteria for equitable per pupil funding that included consideration for various “at-risk”

populations and acknowledge differences in grade level expenditures. In addition, I propose the

development of a school facilities fund to support maintenance and improvement projects.

Finally, increasing sales tax by 1% will add and creating a consistent property assessment

system state-wide . Society is constantly changing and the way we educate our children will

continue to change as well. It is essential that state funds match the needs of our learners and

revising the financial system in Michigan will help ensure that all of our students are ready for

career and/or college success.

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7
A Review of Proposal A

References

Kearney, C. P., & Addonizio, M. (2002). A primer on Michigan school finance. Detroit, MI:
Wayne State University Press.

Farmington Public Schools (2017). 2017-18 Budget Summary and Related Information.
Retrieved from
https://www.farmington.k12.mi.us/cms/lib/MI01808718/Centricity/Domain/65/Budget%20Binde
r%202017-18.pdf

Bmcvicar@mlive.com, B. M. (2017, June 29). Michigan's school funding system 'fundamentally

broken,' say backers of new education finance study. Retrieved March 11, 2018, from
http://www.mlive.com/news/index.ssf/2017/06/michigans_school_funding_syste.html

Oosting, J. (2016, June 28). Study: Michigan school funding getting 'more unequal'. Retrieved
March 11, 2018, from http://www.detroitnews.com/story/news/politics/2016/06/28/michigan-
school-funding-unequal/86477080/

Staff, A. (2017, June 27). How Your State Funds School Construction. Retrieved March 11,
2018, from https://www.infrastructurereportcard.org/how-your-state-funds-school-construction/

Walczak, J., & Drenkard, S. (2018, March 05). State and Local Sales Tax Rates 2018. Retrieved
March 11, 2018, from https://taxfoundation.org/state-and-local-sales-tax-rates-2018/
A Review of Proposal A