Published Online: November 21, 2007
Published in Print: November 28, 2007, as Michigan Fiscal Woes, Minimal Funding Hike May Pressure Schools

Capitol Recap

Michigan Fiscal Woes, Minimal Funding Hike May Pressure Schools

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Schools in economically troubled Michigan will have to make do with a bare increase in state funding this year after lawmakers sacrificed a larger boost to settling a protracted budget battle.

Gov. Jennifer M. Granholm, a Democrat, proposed a 2.5 percent hike for schools last winter, but legislators cut that to 1 percent as they sought to keep the state from veering into a second government shutdown this fall. The governor approved the school aid bill early this month.

“There is no way of making the [economic] picture a pretty one,” said Tom White, the executive director of Michigan School Business Officials, noting that Michigan has the nation’s highest unemployment rate, at 7.7 percent, and is losing population. “It’s a tough time.”

Gov. Jennifer M. Granholm
17 Democrats
21 Republicans
58 Democrats
52 Republicans
1.7 million

Still, he added, with layoffs and more efficiencies, “schools are hanging on pretty well.”

The state had faced a projected $1.75 billion shortfall in the fiscal year that started Oct. 1. The compromise struck to balance the $43 billion state budget included, along with holding the K-12 spending increase to 1 percent, a reduction in the proposed increase for colleges and universities, cuts to health and social services, and tax hikes, including an income-tax increase.

Republicans, who control the Senate but not the House, gave up some cuts they favored and bowed to some tax increases only after winning approval of a bill that might help school districts find an alternative to the health-insurance company set up by the Michigan Education Association, the state’s largest teachers’ union.

Under the measure, which the GOP had pushed for years, the Michigan Education Special Services Association and other companies that seek to administer health-insurance pools will have to make their claims data public, giving competitors a better chance of bidding at a lower price.

Proponents say more robust competition could save districts some 10 percent on insurance costs, but the MEA and Democratic leaders dispute that conclusion.

“It was part of the overall budget compromise, but not something that, by and large, we found favorable,” said Greg Bird, a spokesman for Speaker of the House Andy Dillon, a Democrat. “We couldn’t find proof that it would save any state dollars in the future.”

Democrats in the legislature have generally had strong backing from the teachers’ union, an affiliate of the National Education Association.

Pensions and Consolidation

The measure, approved in September, also alters the rules that govern teacher pensions. Under the law, newly hired school employees will have to work 25 years—15 years longer than under the current system—to earn maximum health-insurance benefits after they retire. They will also have to contribute a modest amount more to the state pension system.

The K-12 education budget Gov. Granholm signed Nov. 9 sends $12.3 billion in state money to local school districts. The current per-pupil allotment will rise for each district by anywhere from $48 to $96 over last year’s amount, which was a minimum of $7,108.

From 2000 until this year, state aid grew each year by an across-the-board amount. Twice during that time, the legislature added “equity payments” to bring low-funded districts closer to high-funded ones. This year, it decided to put the per-pupil spending on a sliding scale, with districts spending at the lower end receiving greater amounts of aid and districts spending at the upper end receiving lesser amounts.

Many education officials and their representative groups, such as the school boards’ and business officials’ associations, are calling for a long-term fix for Michigan’s school funding problems.

“We want the best for all the kids in the state of Michigan, of course,” said Patricia A.Koeze, the superintendent of the 7,800-student West Ottawa district. “But it’s difficult when you are not on a level playing field.”

She explained that although her district received the maximum increase of $96 per pupil this year, its spending per pupil remains close to the state minimum.

The superintendent said that since the state devised its latest school aid system in 1994, the demographics—and needs—of her district have changed. The 1994 formula had the aim of more nearly equalizing spending across districts, but a gap of more than $5,000 remains between the highest- and lowest-funded districts.

“We’ve had plant closures and jobs leaving our area, and how we were when [school finance] Proposal A passed in the early ’90s is not how we are now, … and I think that’s something the state needs to look at,” Ms. Koeze said.

Vol. 27, Issue 13, Page 17

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