Budget strugges continue; Senate cuts $413 million from K-12 schools next year

Rushing to get budget bills passed before adjourning for the July 4th recess, the state Senate on 24 June passed its version of the K-12 school aid budget bill. Senators made only minor changes to the amended bill reported from the Appropriations Committee and voted along party lines to approve a budget that includes some $413 million in cuts to schools, including a $110 per pupil cut to local school districts and the near-elimination of several early childhood and school-readiness programs. Efforts on the floor of the Senate to rescind those cuts were rebuffed by the majority. The measure now goes to conference committee, where members of the Senate and House will have to hammer out a compromise version.

When the House originally passed the bill ("HB 4447":http://legislature.mi.gov/doc.aspx?2009-HB-4447), it used a significant amount of Federal stimulus dollars to avoid any cuts in the School Aid budget. (A substantial portion of the federal stimulus money, provided by the American Recovery and Reconstruction Act, or ARRA, is earmarked to prevent cuts in state funding for education.) But while the bill awaited action in the Senate, the May revenue estimation conference underlined how bad Michigan's budget situation is. The consensus estimate put together by the state's top economists indicated that School Aid Fund revenues for _this year_ (fiscal 2009) would be some $425 million less than projected in January. Moreover, projected revenues to the SAF for next year (fiscal 2010) were projected to come in about $730 million less than previously estimated.

As a result, even more of the Federal ARRA funds needed to be used to prevent late cuts during the current year. Both houses of the Legislature have already agreed to a measure which will use $600 million of Federal ARRA funds to avoid a $370 per pupil funding cut at the end of the school year.

The Senate Appropriations committee estimated that some $634 million of Federal ARRA funds remained for fiscal 2010 and beyond. Rather than following the lead of the House, however, the Senate chose to stretch out the Federal money by making cuts to schools for the next two years. In addition to the $110 per pupil cut, a large number of specially earmarked ("categorical") programs were cut or eliminated, including the elimination of early childhood and school-readiness grants, and cuts to the funds offered to districts with declining enrollment. According to projections prepared for Senators, these cuts will avoid a sharper drop-off in FY2010, and bring the budget back into balance by FY2011.

However, these projections make some rather optimistic assumptions about revenue to the School Aid Fund recovering significantly in fiscal 2011, and additional revenue coming from the State Lottery. The Senate leadership seemed to be making all efforts to close the school funding gap without any talk of a revenue increase, which would mean an increase in taxes or fees which support the SAF. (See upcoming article.)

These cuts, if they are approved by a House-Senate conference committee, will force school districts around the state to rewrite the budgets they were legally required to pass by the end of June. The larger uncertainty, however, is whether the Senate's optimism is well-founded, or whether schools must prepare themselves for even larger funding cuts in the future.