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School Aid budgets: no good news

Budgets as they emerged from each chamber are a mixed bag for schools

Both houses of the State Legislature passed their own versions of the K-12 School Aid budget this past week, and the political horse-trading can now begin. While the versions are quite similar, there are important differences that will affect how schools are funded and how much Michigan is able to expand its preschool programs targeted to low-income families. The total amount of proposed spending, however, does not exceed the Gov. Snyder's proposal, and in fact the Senate version comes in some $10 million lower than that.

Both versions of the budgets also include items that worry many supporters of local public education. Provisions requiring districts to permit and pay for students to take online courses from nearly any vendor are reminiscent of "Oxford report" proposals to "unbundle" public education, making local districts a thing of the past. Money earmarked for technology-driven student-centered instruction is seen as a "gift" to the financially troubled and controversial Education Achievement Authority, which the governor and legislative leaders hope to build into a state authority to take over "failing" schools.

As things stand, local school districts can expect a net cut of between $2 and $52 per pupil, though the details vary considerably. Final versions of the budget will not be ready until after the May consensus revenue estimation conference, when top state economists make tax revenue projections for the coming year.

Key changes

One of the main differences between the two budgets as they emerged from the respective Appropriations Committees was that the Senate version gave school districts a substantial increase in per-pupil funding, but at the cost of eliminating funds targeted to help districts with their mandatory retirement system costs. The House retained the governor's provision. For many districts, this change would have meant a net cut of at least $50 per pupil, on top of other cuts in the budget. The proposed foundation allowance increase would have given $100 per pupil to the lowest funded districts and $50 per pupil to those at the top (under what is called the 2x formula, where districts in between those levels get a proportional increase). However, the retirement cost assistance averaged about $100 per pupil for all districts, making this proposal at best a wash and at worst a significant cut for local districts.

The Senate probably had several motives for this: an increase to base per-pupil funding certainly sounds better in news stories than the same amount distributed as pension cost assistance, even if the impact were the same. But the beneficiaries of the alternative were also different: charter schools, which as a rule do not participate in the state pension system, would receive extra funding under the original Senate version, while local districts would have no gain or a real loss.

Opposition to this approach came from an unlikely source: Sen. Patrick Colbeck (R-Canton), who is not typically seen as a defender of local public school districts. Sen. Colbeck had introduced an amendment in the Appropriations committee to reverse this change in the Senate version of the budget, restoring the Governor's original proposal, though that amendment failed in committee. He offered a similar amendment on the floor of the Senate, and this time - with both Republican and Democratic votes - the amendment prevailed. After the vote, Sen. Colbeck told Gongwer News Service:

"It essentially restores fairness to the distribution of incremental funds. There's been a lot of talk about the pursuit of equal foundation allowances across the board. Well that doesn't necessarily equate to fairness because a lot of the districts, especially the districts I represent, actually pay a higher amount of taxes that go towards that distribution," Mr. Colbeck said.

Another Colbeck amendment did add to the official foundation allowance, giving districts a permanent increase of between $9 and $18 per pupil using the 2x formula. This increase was in lieu of the "one time" equity payment to lower funded districts proposed by the governor that would have brought them all up to $7,000 per pupil (from the current $6,966) but not changed funding above that level.

In contrast, the House version of the budget has always retained the pension cost assistance proposed by Gov. Snyder. The House also kept the "one time" equity payment to lower-funded districts, but increased it to $50 per pupil, bringing the state minimum to $7,016.

Items that disappeared

In order to cover the cost of some of these changes, the House and Senate eliminated other targeted funding proposed by the governor. This year, districts that meet a sufficient number of so-called "best practices" receive an additional $52 per pupil - and most districts were able to qualify for these funds. The governor proposed reducing that amount to $16 per pupil next year, a net $36 cut for most districts. Both houses remove this funding, though only the Senate scrapped the line item entirely. That would mean a cut of $52 per pupil to most districts.

The House also scaled back the governor's proposed increases to the Great Start Readiness Program, a state program that helps pay for preschool for low-income families. Gov. Snyder had originally proposed to increase funding for GSRP by $65 million in each of the next two years. This increase would have made some 16,000 new half-day slots available as well as increased the payment to providers for the first time in some years. The House bill reduces the overall increase in funding, creating only 9,900 new slots and increasing the provider payment by a much smaller amount.

Items of concern

"Vouchers for Vendors": Some items remain in the budget which, while they do not have much of an effect on spending, cause worry to supporters of community-governed public education. Perhaps the most obvious is a new online learning initiative, included in section 21f of both bills. This provision requires that local school districts allow students to take up to two fully online classes each semester, and pay for them out of their per pupil funding. While the district can offer the courses themselves, they may not block students from taking classes from other online providers (usually for-profit companies) as long as they are on a central list. That list simply registers programs and does not screen them for content or quality.

Sometimes dubbed as "vouchers for vendors," opponents see this provision as a way of sneaking vouchers in through the back door. Legislation passed last year removed most limits on the number of fully online charter school programs. The two operating in Michigan so far are both run by private, for-profit corporations, as are most organizations in this line. What especially concerns opponents of this section is that local school districts are not able to refuse to pay for a course or to give academic credit for it. In the governor's proposal, there is also no regulation of how much such a course could cost. Budgets as they emerged from the legislature did make some changes, including limits on the cost of the courses (House version), and allowing the local (paying) district to decide if a course was completed before paying (Senate version). However, in all cases, the online vendor decides whether and how to award credit for the class, which the local district must accept.

This kind of "a la carte" school program was originally championed in the now infamous "Oxford report," drafted at the direction of voucher advocate Richard McLellan. Similar proposals were included in the recently discovered "skunk works" group proposal for inexpensive "value" schools that would depend heavily on online distance learning with teachers handling large numbers of students.

"EAA slush fund": The governor's proposal included an odd line item - $8 million for districts using technology to deliver "student centered" instruction. While student-centered teaching is widely practices, using computer-based systems to deliver it has so far been a hallmark of the Education Achievement Authority, the controversial entity currently managing twelve former Detroit public schools. Legislation to make the EAA a permanent state entity, with the power to take over poorly-performing schools, is still pending in the legislature after furious efforts to pass a similar bill late last year.

The EAA has had to ask for funding advances from the state - and apparently also from DPS - despite its considerable outside private funding. EAA opponents see this $8 million line item as another indirect effort to prop up a failing and poorly managed program which, if codified in law, would represent a threat to locally-governed public schools across Michigan. The budget bills as they emerged from each chamber retained this provision, but with some changes.


Governor's proposal:

  • Districts at minimum funding level: + $34 equity payment - $36 best practices cut = net loss of $2 per pupil
  • Districts above $7,000 per pupil: - $36 best practices cut = net loss of $36 per pupil

Senate plan:

  • Districts at minimum funding: + $18 permanent increase - $52 best practices eliminated = net loss of $34 per pupil
  • Districts at state maximum funding: + $9 permanent increase - $52 best practices eliminated = net loss of $43 per pupil

House plan

  • Districts at minimum funding level: + $50 equity payment (one time) - $52 best practices cut = net loss of $2 per pupil
  • Districts above $7,016 per pupil: - $52 best practices cut = net loss of $52 per pupil

Largest changes from the current year

  • Cost of the retirement system rate cap for districts: state portion increases $243 million to $403 million (though this still comes out of the School Aid Fund and would otherwise have been given to districts which would need to pay the increased costs themselves).
  • Increase in Great Start spending, by up to $65 million for a total of up to $175 million.
  • Cuts to "best practices" funding, from $80 million to $25 million or less.
  • Increases in the state obligation to fund special education, by $19.5 million to $662.5 million
Provision Current Governor's proposal Senate passed House passed
Foundation allowance (per-pupil funding)

[Districts that were above the state maximum in 1994 are still allowed to levy that precise amount per pupil locally. Charter schools receive the same amount as the district where they are located, up to the maximum.]
State maximum ("basic"): $8,019
Minimum: $6,966
Charter school maximum: $7,110
Maximum ("basic") and minimum remain the same officially, but there is a one-time payment (up to $34) to districts under $7,000 that brings them up to that level for FY 2014. Makes a permanent increase of $18 to the minimum ($6,984) and $9 to the maximum ($8,028) with districts in between getting a proportional increase.

Charter maximum is $7,128
Same as Governor, except the one-time payment is up to $50 to bring all districts up to $7,016
Retirement system costs offset (MPSERS) Uses $155 million to help districts pay their mandatory contributions to the retirement system. Averages $100 per pupil, but varies according to payroll. Continues with the current spending After a floor amendment, the Senate version also continues this spending Same as Governor
"Best practices"
(incl. bid out one non-instructional service; participate in schools of choice; offers online or blended classes to students; etc.)
Added payments of $52 per pupil for districts that six of eight specified criteria Reduces funding so that payments would be $16 per pupil for meeting 7 of 8 criteria. Eliminates this entirely Cuts funding to a "placeholder" but otherwise keeps language.
Technology infrastructure grants $50 million available as grants to districts to prepare for online or computer testing Reduces funding to $13.5 million Eliminates this entirely Keeps current funding, with more limited uses.
"Performance grants" $30 million to fund grants up to $100 per pupil for meeting test score growth targets ($30 for math grades 3-8; $30 for reading grades 3-8; $40 for 4-yr growth targets in high school) Keeps current program and funding Increases funding to $46.4 million to fully fund these grants for all qualifying districts. Adds intent to require FY2015 payments to be based on computer adaptive test score growth in FY 2014. Increases funding to $46.4 million to fully fund the grants.
New "student centric" grants New - appears to be a way to give more money to the EAA Funds with $8 million, with various conditions Same as governor, but limits any one grant to $1 million Same as governor, but cuts funds to $7 million
New computer adaptive testing funds     $18 million to support computer adaptive testing for all students. Not included
Great Start Readiness Program (preschool) $109.6 million to operate GSRP programs aimed at low-income children Increases funding by $65 million to add up to 16,000 more half-day program slots and increase payment for each slot from $3,400 (where it has been for some years) to $3,625 Agrees with governor on funding levels. Reduces increase to $38 million and only increases payment by $100, creating only 9,900 new slots. Adds tighter income restrictions.
MPSERS rate cap $130 million to pay for retirement costs above the levels set in the 2012 MPSERS restructuring $253.3 million from School Aid Fund (current revenues) and $100 million from the MPSERS reserve fund (set aside from SAF over previous two years) Same as governor Same as governor
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