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Mich. Resolves Debate on Spec. Ed. Funding

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Michigan lawmakers ended weeks of debate over a special education lawsuit and funding of programs for at-risk students by passing a rare two-year budget last week that lays the foundation for more than $1 billion in new school aid.

The broad spending plan raised fiscal 1998 state school aid by more than $500 million over the $8.9 billion K-12 budget passed last summer.

And in a highly unusual action, the legislature also passed a $9.7 billion K-12 school budget for fiscal 1999, eight months ahead of schedule. Lawmakers could come back next year to tinker with the spending plan further.

Three bills made up the broad spending plan, which the legislature passed before it recessed on Nov. 13. Gov. John Engler, a Republican, is expected to sign the bills, which his office helped negotiate.

"The plan may be complicated, but the bottom line is simple--it's a win-win proposal because Michigan wins when our children win," Mr. Engler said in a written statement.

'Bird in Hand'

Despite the relatively little public advice that went into the accelerated budget process for 1999, there were few complaints from education lobbyists.

State at a Glance: Michigan

Population: 9.6 million

Governor: John Engler (R)

State Superintendent: Arthur E. Ellis

Number of K-12 students: 1.7 million

Number of K-12 schools: 3,426

Fiscal 1998 K-12 budget: $9.4 billion

"We were supportive in the final analysis," said Nancy Stanley, the legislative liaison for the Michigan Association of School Administrators. "Basically, it's a balanced proposal."

The upheaval in the typical budget process began in August, when the state supreme court decided a 17-year-old lawsuit by ruling that the state had underfunded 84 districts for state-mandated special education costs. The court ordered Michigan to pay the districts $212 million.

Mr. Engler and legislators also decided to pay $768 million to nearly 500 nonlitigant districts in order to avoid future lawsuits.

In the first of many efforts to find the money, the governor vetoed $252 million for education programs for at-risk students. He then proposed selling state bonds to come up with the remaining funds. Democrats in the House demanded that the at-risk funds be restored and proposed paying the nonlitigant districts with state surplus dollars. ("Mich. Spec. Ed. Decision Spurs Funding Vetoes," Sept. 3, 1997.)

A compromise was hammered out in private by Sen. Dan L. DeGrow, the Republican chairman of the Senate appropriations committee; Rep. Robert L. Emerson, the Democratic chairman of the House appropriations committee; and Mark A. Murray, Mr. Engler's budget director.

Sen. Dan L. DeGrow

Under their plan, $212 million would be paid next April 15 to the 84 plaintiff districts. The money would come from the state's so-called rainy day, or surplus, fund. There would be no restriction on how the districts use the money.

Payments to nearly 500 nonplaintiff districts would begin Nov. 15, 1998, and, depending on how much they are owed, would be made over 10 years. The payments would range from $70,000 to $20 million, depending on the size of a district's special education population. Half of the money would come from state bonds; half would come from state revenue surpluses.

To receive the money, the districts would have to agree not to sue the state over the special education issue. And, in general, they would be required to use the funds for non-operating expenses, such as debt retirement or technology purchases.

"Most, if not all of them, will do this," said Tony Derezinski, the director of government relations for the Michigan School Boards Association. "This is a bird in the hand. It's a way we can get the payment."

More on Budgets

The remaining budget items represent a somewhat mixed bag for schools, although most analysts say that their fiscal impact would be either neutral or positive for most districts. For starters, lawmakers don't want the state to be sued again, so they raised fiscal 1998 special education spending by $66.7 million, to $723 million. The number would rise by $50 million in fiscal 1999.

Rep. Robert L. Emerson

And lawmakers restored $250 million in at-risk education funding for fiscal 1998, while raising spending for the initiative to $260 million in the following fiscal year.

Local schools were hurting without the funds, part of which they expected to get early last month. Some districts were considering layoffs and service reductions if the state aid was not in their next payment from the state on Nov. 20.

The budget bill also would raise the minimum per-pupil state aid in fiscal 1998 from $5,124 to $5,170. But there would be no increase in fiscal 1999. And that worries some.

"That scares you because you wonder if they can do it again in the future," Mr. Derezinski said. "You also lose future increments, so, in effect, it's a permanent loss."

Elaine Madigan Mills, a finance specialist with the state department of education, said that the freeze in per-pupil state grants would not be felt in most districts. That is because, she said, the budget plan reduces district contributions for teacher retirement by 3.5 percent--a savings of nearly $500 million in fiscal 1998 and 1999.

And districts would begin to see another advantage when they begin preparing their budgets for the 1998-99 school year. "We've never had a two-year budget like this," Ms. Stanley said. "School districts can anticipate what they'll get in the coming year."

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