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The Center for Public School Renewal

Note: Published in slightly different form as "State Aid Fix Could Limit Teacher Cuts" by The Detroit News, April 11, 2004.

Original Title:
The School Budget Blues
by Barry McGhan

It's the domino effect. An economic downturn leads to lower tax revenues. Lost revenue forces cuts throughout state government. Schools lose because much of their funding now comes from the state rather than local property taxes, via Proposal A, passed in 1994. Districts balance their budgets by cutting programs and personnel. Detroit Schools, for example, recently announced their intention to cut 3,200 jobs.

Almost everyone suffers, some more than others. According to a November, 2003 Michigan State University report ("Michigan School Finance Under Proposal A: State Control, Local Consequences"), districts like Detroit and Flint and other low-income areas are the hardest hit. They're clobbered by a double whammy – a decline in state funding (the so-called per-pupil "foundation allowance") – and declining enrollments. Suburban and most rural districts have also seen a decline in the real value of their allowances, but their enrollments have increased or held steady. Only a single whammy for them, or in some high growth districts, no whammy at all.

The legislature seems to have done best by rural districts. They've received dramatic increases in their foundation allowances since 1994 and, when enrollment declines in a rural district, it also gets "transitional" support to help it weather the downsizing. The lack of transitional support for low-income urban districts could be simple inattention to communities with few Republican constituents. Or, perhaps it was just cheaper to help a few small rural districts ease their shrinkage.

What steps might be taken to improve things for schools? The MSU report recommends raising the state education property tax by a third and earmarking all those revenues for the School Aid Fund. This would relieve the general fund of the need to make up the current shortfall in school aid and take schools out of competition for funds with other state functions, like prisons.

This may be a worthy proposal, but seems as likely to happen as pigs to fly. The report also suggests that the legislature provide transitional support to all declining-enrollment districts – surely an important equity issue. Since the legislature couldn't even tolerate a small delay in cutting the state sales tax rate a few months ago, this will probably take more airborne porkers.

A third recommendation in the report is that the legislature should "ensure that the basis for distributing revenues to schools and school districts reflects the actual cost of educating different students." That is, the state should determine the possibly different costs involved in educating, for example, regular vs. special education students, elementary vs. high school students, and cost of living differences around the state. These differences would then become part of a weighted foundation allowance that schools receive for each student – giving to each according to need.

This is half of a good idea.

Making a rough estimate of the costs of educating different kinds of students still won't settle how much is actually spent on them, given the existing system for distributing funds. Now, a district receives funds from the state and then decides what to send to each of its schools, in terms of personnel and materials. For example, districts can take a substantial portion of elementary school students' foundation allowance and spend it on more expensive secondary school students. The missing half in this cost-based funding proposal is knowing what happens to the money after it arrives in a district.

The best way around this is to have the state send the money to the schools rather than the district – a proposal recently made for California schools. In turn, teachers and principals in those schools would be empowered to spend the money as efficiently and effectively as they could, thus determining an actual rather than estimated cost per student. Over time, this change in school governance would answer critics' questions about waste and inefficiency in school bureaucracies. In troubled economic times it would give the folks actually working in schools some control over their own destinies, rather than waiting for the axe to fall from "downtown." Schools would have the opportunity to create their own rainy day funds, so that future downturns might be softened.

This change, easy to describe, will be difficult to implement. All who benefit from the traditional governance structure will resist it. A lot of conventional thinking will have to go out the window. But that's just what happened when Proposal A passed 10 years ago. A remarkable bi-partisan effort led to a school funding change which the MSU report rightly calls a "decidedly positive" transformation of Michigan's public school system.

Will the children of Michigan have to wait another ten years for politicians to summon the courage to act on their behalf?

 

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