End of the last illusions

Past commitments to school aid fade away

Updated with final conference report

None of the school aid budget proposals for next year offer significant help to our struggling local school districts. Overall funding is essentially flat, though the dollars are allocated differently in the various proposals. For a detailed breakdown of the final budget and the alternatives as passed by each chamber, please see this companion story.

Nevertheless, the budget bills do outline some major changes in how we fund our schools:

• Use of the School Aid Fund to support community colleges and state universities is now a permanent feature (the final conference report includes intent language to change the name of the SAF to the “Comprehensive Education Fund”);
• The commitment to maintaining the funding stream for K-12 education has been seriously eroded – for example, with the failure to replace earmarked revenue lost when the Michigan Business Tax was ended.
  
  Summary of revenues and spending on K-12 schools, community colleges, and state universities
  
  

  [millions of dollars]	Current year (FY12)	Governor’s proposal (FY13)	House version (FY13)	Senate version (FY13)	Conference report (FY13)
  Revenues
  SAF: beginning balance	$724.7	$125.2	$125.2	$148.2	$194.6
  SAF: revenue estimate (January estimate)	10,876.1 (Revised May)	11,055.0	11,055.0	11,055.0	11,169.5 (May estimate)
  Subtotal: SAF	$11,600.8	$11,180.2	$11,180.2	$11,203.2	$11,364.1
  Grant from regular (General Fund) budget	$78.6	$200.0	$333.0	$296.5	$282.4
  Federal EdJobs funding	4.7	expires	-	-	-
  Federal aid (all tied to specific programs)	1,653.3	1,701.0	1,701.0	1,701.0	1,701.0
  TOTAL REVENUE	$13,337.4	$13,081.2	$13,214.2	$13,200.7	$13,347.5
  percent change from current year		- 1.9%	- 0.9%	- 1.0%	+ 0.1%
  percent change, state-source funding		- 2.6%	- 1.4%	- 1.5%	- 0.3%
  Proposed spending
  Current and Governor’s proposal	$12,746.9	$12,687.0	$12,687.0	$12,687.0	$12,687.0
  House scraps assumed savings for full-day kindergarten		-	50.0	-	20.0 (assumes $30 mill savings)
  Other House & Senate changes		-	79.7	25.6	237.5
  Subtotal: K-12 spending	$12,746.9	$12,687.0	$12,816.7	$12,712.6	$12,944.5
  percent change from current year		- 0.4%	+ 0.6%	- 0.2%	+ 1.6%
  Community Colleges	$195.9	197.6	$197.6	$294.1	$197.6
  Higher Education	200.0	200.5	200.5	200.5	200.5
  Subtotal: Post-Secondary spending	$395.9	$398.1	$398.1	$494.6	$398.1
  TOTAL EDUCATION SPENDING	$13,142.8	$13,085.1	$13,214.8	$13,207.2	$13,342.6
  percent change from current year		- 0.4%	+ 0.6%	+ 0.5%	+ 1.5%
  Source: House & Senate Fiscal Agencies

  
  
  

But one change that has attracted little attention is in some ways the most significant, at least in terms of the message it sends. The final version of the budget (the report from conference committee) also eliminates one key provision in the School Aid Act. This provision, enacted as part of Proposal A, promised to make sure that foundation allowances tracked the revenues available to the School Aid Fund.

Section 20 §12 of the School Aid Act requires that the foundation allowance index, calculated twice a year by the Revenue Estimation Conference, be used to set the minimum increase in the lowest foundation allowance – unless the legislature determines otherwise. The foundation allowance index was calculated by adjusting the increase in expected School Aid Fund revenue by the expected change in the number of pupils. Thus, the minimum foundation allowance would be increased by the expected dollars per pupil available in the next year, if any. According to the May consensus revenue estimation conference, the minimum foundation allowance for FY2012-13 should rise 3.6%, or $246.

Each year, of course, the legislature has set the foundation allowance independently as part of the appropriations process, and this year there will be no change in the foundation allowance. But the text of the law maintained the promise that available money in the School Aid Fund would be distributed to local school districts. Now our lawmakers appear to agree that this promise should be quietly deleted.

As local school districts endure another year of flat funding and increasing obligations to the retirement system and other increased costs (as inflation slowly rises), the issue is not really whether K-12 schools should share the School Aid Fund. The issue is that the revenues committed to the SAF were only designed to support K-12 education – and at that, they have barely kept up with inflation. In the early years of Proposal A, the SAF was supplemented with hundreds of millions of dollars from the general state budget. By the time of the Great Recession, that amount had shrunk to nearly nothing.

Now, colleges and higher education are being funded from the SAF, and while there are once again larger transfers from the GF/GP budget, K-12 schools had to take a half-billion dollar cut last year to make room for post-secondary education. This despite the fact that the SAF would have had a surplus that year.

Layered on top of the rush to expand opportunities for charter schools and now online charters, this year’s “school aid” budget should lay to rest any hope we have that our state government is committed to supporting community-governed public education.