K-12 Budget Update: Saving face, at a cost

Well, they cut a deal. In return for a nebulous agreement on a "framework" for shifting new public school employees entirely to a 401k-style retirement plan, Gov. Snyder was allowed to rejoin negotiations over the budget. Literally the same day, a House/Senate conference committee passed a "compromise" version of the School Aid budget for fiscal 2018. As you might expect, it's a mixed bag.

I put "compromise" in quotes because, of course, this budget isn't a compromise among all the groups supporting our schools. It's a compromise forged by the majority leadership of the House and Senate designed to get enough votes to pass. As such, it includes elements of the bills passed by each chamber. Alternative perspectives - such as those of parents - were not welcome.

The biggest news - and also the most confusing - is that Gov. Snyder and legislative leaders agreed on a "tentative framework" under which the state school pension system, MPSERS, would be phased out but not closed. Apparently, future hires would face higher costs if they opt in to the hybrid pension system, but would receive higher employer matching if they choose a straight 401k account. This avoids formal closure of the pension plan, which would automatically trigger huge added costs to cover its future obligations under current accounting rules.

However, no details of this arrangement are available, and until they are, we can have no idea of the eventual costs of this plan. At the moment, it looks like a way to kick the can (and the costs) down the road and until after the next elections while saving face today. One thing does seem certain: whatever the costs are, they will be borne by our schools and children alone (taken solely from the School Aid Fund) and not shared evenly across the state.

Otherwise, the school aid budget has few surprises. Some key features:

• Districts will receive an increase between $60 and $120 using the 2x formula (where lower-funded districts receive the larger amount).
• Funding for "at-risk" pupils (under Section 31a) will be increased, though less than sought by the Governor. Eligibility will be expanded to all economically disadvantaged students, and for the first time districts with higher funding will be eligible for the funding, though at much lower levels.
• Funding for the State School Reform Office (the state's school takeover arm) was eliminated in the conference report. Funding for the Dept. of Education's alternative "partnership" programs was left to be decided at a later date.
• A $100 million line item to help pay down retirement system expenses, taken off the top before per-pupil funding is determined, was retained in the conference report. The Senate had proposed scrapping it and using it to increase foundation allowances, giving a huge benefit to charter schools and leaving many districts actually worse off in the end.
• Requires the state Dept. of Education to bid out and adopt a state summative test for math and English language arts in grades 3-7 that takes no longer than 3 hours. Also requires MDE to bid out and identify at least two computer adaptive tests in math and ELA that provide results within 48 hours.

The budget reflects the fact that all state funding for community colleges - the full $398 million, up from the partial $260 million this year - will be paid from the School Aid Fund. When combined with partial support of the state university budget, higher education expenses take almost $634 million from the School Aid Fund before K-12 spending is decided.

The conference report also sets aside $295 million of SAF funds (and a smaller amount from the state's general fund) to pay for the initial costs of changing the school employee retirement system. This essentially exhausts the balance expected to be left in the School Aid Fund at the end of this year.

The Governor proposed some interesting measures, most of which were struck out by the legislature, such as:

• reducing cyber charter funding to 80% of standard levels;
• a cap on "shared time" programs where public school employees offer non-core classes in private schools;
• a $50 per pupil bonus for high school students to reflect the higher costs of those programs;
• provisions to help districts with declining enrollment;
• funding for a voluntary school drinking water testing program; and
• funding to finish training for participants in teacher evaluation systems.

Instead, the legislature retained some items cut by the Governor and added some of their own:

• set aside $2.5 million to develop a statewide "value added growth and projection analytics" system;
• restored most of the funding for an online "algebra tool" championed by the House subcommittee chair (who was flown to Florida by the only company able to win the contract);
• restored $2.5 million intended to reimburse private schools for complying with "state mandates";
• required that a particular preschool curriculum (published by a for-profit company) be approved by MDE for use in Great Start programs.

The conference report also included House proposals to penalize school districts which sue the state in court (regardless of the outcome) and to withhold 5% of state aid if a district negotiates a contract which includes certain prohibited subjects (even though those provisions would not be enforceable under current law).

Generally speaking, however, you won't hear much about these other provisions - especially those which were cut or protected from the Governor's cuts. And that is on purpose, because that is how the game is played.