House K-12 budget shell game

While the overall spending level of the House and Senate budgets appears to be the same, the documents represent radically different priorities for funding public schools. The Senate bill reflects the work done by members of both parties over the last few legislative sessions, but with certain tweaks which reflect the priorities of the Senate Democratic majority. The House bill, in contrast, is a radical departure from the shape education budget bills have had for over a decade and reflects - sometimes openly, sometimes obscurely - the priorities of the House GOP majority. (Insert chart here)

The differences between the approaches of the two chambers starts with how the bills themselves were handled. The Senate bill followed the normal procedure for budget measures: hearings before an appropriations subcommittee that focuses on the K-12 budget, more consideration before the full Appropriations Committee, and finally floor debates and amendments by the full Senate before final passage.

Immediate passage

The House version(s) have a different history. An earlier, placeholder, version was passed in March with essentially no discussion. This version only funded a handful of mandatory programs, and was meant to be a signal that the House GOP majority was ready to play hardball. Their actual budget proposal was unveiled on the morning of June 11, approved in the traditional perfunctory manner and sent to the full committee, whereupon it went to the House floor, where it was fast-tracked for a floor vote and made official, all before the House adjourned that afternoon. In both cases, the speed with which the bills were moved gives evidence of the House leadership’s desire to avoid any public discussion or debate on the measures before final passage. Subcommittee chair Rep. Tim Kelly (R-Saginaw Twp.) described the budget as a “shock” to a “failed system” of public education.

A budget shows your priorities

To start with, the House budget mirrors some of the Trump Administration’s priorities by prohibiting districts from engaging what they refer to as “woke” policies.

• The bill specifies a 20% penalty in a district’s “discretionary” foundation allowance funding (the portion above what they received in 1994) if a district does any of the following: use a curriculum which includes what the bill defines as race or gender “stereotyping”; using state funding for “DEI” initiatives; allows transgender girls to participate in girls’ sports; or provides multi-stall unisex bathrooms. It also claims biological definitions of sex are “immutable.” [See box]

It’s notable that neither subcommittee chair Kelly (in his summary of the bill), nor op-ed pieces by supporters published since, make mention of these striking provisions.

Roll up, see the show

A critical feature of the House budget bill is that the substantial per-pupil payments on offer to districts that accept their conditions take the place of what had been nearly $1.3 billion in funding targeted for specific purposes (so-called “categorical” funding). The targeted spending the House intends to “roll up” into general per-pupil funding, estimated at $1,975 per pupil on average, includes:

• universal school breakfast and lunch;
• assistance for isolated school districts and transportation funding to cover the increased cost of busing students in rural districts;
• funds to equalize the yield per mill of special education millages, and incentives to pass such millages
• school-based health centers and hearing, vision and dental screening;
• block grants for ISD early childhood programs;
• targeted health and other aid to Flint public schools in response to the water emergency;
• funding for struggling districts working with the MI Dept. of Education to transform their schools using the “partnership model” program;
• fund for early literacy coaches and added instructional time;
• Grants for English language learners;
• support for career & tech education programs and CTE millage equalization;
• school mental health and support services funding, and mental health and safety grants;
• funds to assist student teachers to pay for their education;
• assistance to districts for the cost of mandatory state tests and related benchmark assessments.

This funding, rather than being directed to where it is most needed, would be averaged out over all local school districts and charter schools in the state. Defenders say this gives local school officials flexibility to spend the money how they wish; opponents argue that the funds were targeted to address specific issues, and spreading the funds equally does not reflect different needs.

Not all categorical funding provisions were removed, however. Notably, the House budget retains the provisions to concentrate Section 31a “at risk” funding in districts with higher percentages of low income students, using the “Opportunity Index” introduced two years ago. However, the House cuts spending on that provision by nearly $45 million, ironically just a bit more than the amount the bill earmarks for new grants to private schools.

A piece of the action

In a move that will redistribute millions of dollars from local public school districts to charter schools, the House budget cuts some $800 million of state assistance to districts which must pay into the public school employee retirement system (MPSERS). The bill accomplishes this primarily by reversing previous legislation which lowered the maximum amount districts would be required to contribute to the system’s unfunded liability, moving $600 million from targeted aid to participating districts to the average per-pupil funding. (All “traditional” public school districts must participate and contribute a percentage of their payroll to MPSERS, which represents a substantial share of district revenue. While a few charter schools choose to participate in MPSERS, the vast majority do not and thus were not receiving this assistance.)

Equally important, the House bill spends down $1 billion in reserve funds which had been created for various purposes, leaving only $210 million in the “rainy day” fund. This alone represents one third of the seemingly generous per pupil payments to districts and charters, but which cannot be continued in FY2027. This amount represents some $725 of the average $1,975 per pupil payment bonus offered to districts.

Funny math

As you might guess, the “benefits” of the House bill are not shared equally (let alone equitably). Our analysis, based on House Fiscal Agency estimates, indicates that local school districts would see a enrollment-weighted average increase of $1,624 in the House’s reorganization of spending, while charter schools would receive $2,269 on average, a $645 difference. Moreover, nearly all of that “increase” for local school districts represents funds that they already had access to, in the categorical and MPSERS funding:

$  417 - House increase in the foundation allowance
$1,975 - House average “extra” payment
------
$2,392
	Of which
	$  655 is from the “rolled up” categoricals which districts were already getting
	$  725 is from stripping nearly all the reserve funds in the SAF
	$  858 is from reducing assistance for MPSERS costs
	------
	$2,238 which represents all but $154 of the “increase"

Just the projected growth of the School Aid Fund for next year would have allowed a $282 per pupil increase, so on net the House bill actually reduces potential funding.

In short, the House budget shifts money around and draws down reserve funds, all to create a showy headline of per-pupil payments of $12,000 per pupil (up from $9,608 this year). But of that nearly $2,400 “increase,” almost none of it is new money: it represents shifts in previously targeted funding, cuts in assistance for district retirement system obligations, and the drawing down of nearly all the reserves held in the School Aid Fund. The actual net increase of $154 is only a bit more than half the expected growth in School Aid Fund revenues for next year. Why? A clue might be found in the House higher education budget, where some $1 billion in costs would be shifted from the General Fund budget over to the School Aid Fund. Is this to make room for a road funding package in the GF budget? We will soon see.