Proposed Constitutional amendment would equalize education funding

Rep. Kevin Elsenheimer (R-Bellaire) proposed an amendment to the Michigan Constitution this week which would require per-pupil funding for K-12 schools be made equal statewide within 11 years. Even though the school funding system created by Proposal A in 1994 was aimed in part at closing the spending gap between wealthier and poorer districts, the gap was not closed completely and school systems which were spending more than the maximum allowance amount determined in 1994 (including Ann Arbor) have been allowed to levy local taxes to cover the difference. These “hold harmless” millages, as they were called, have been frozen at the same dollar-per-pupil amount since 1994, so their real value has declined. The “floor” for per-pupil funding has been raised over the years, bringing all districts up to the adjusted base level (the “basic” foundation allowance), but districts spending more than the “basic” have had their allowances changed in lockstep. Once a district reaches the “basic” funding level, in other words, their relative spending level is frozen with regard to other districts. When these gaps are combined with “hold-harmless” funding, some districts continue to have a considerably larger per-pupil spending allowance.

For instance, the “basic” foundation allowance originally set for FY07 was $7,085 per pupil. This is what the Milan Area Schools were budgeted to receive this year (before an additional $23 per pupil “equity payment” for districts receiving less than $7,150). A large number of districts around the state, primarily rural districts and small, declining urban areas, receive funding at this level. Ann Arbor Public Schools could spend a total of $9,620 per pupil this year, which includes the $1,234 “hold harmless” amount we have been allowed to collect in local taxes since 1994. (Total funding = “maximum” state allowance payment of $8,386 + locally collected “hold harmless” funds of $1,234.) At the other end of the spectrum, Bloomfield Hills schools had a foundation allowance of $12,340 per pupil this year, including $3,954 in “hold harmless” revenues.

While the proposed amendment mandates that all districts receive the same per-pupil allowance, it makes no mention of how this would be accomplished. The state School Aid Fund is currently struggling with a $377 million shortfall, caused by a drop in revenues from the sales tax and other similar taxes which rise and fall with the economy. To make funding equal in a way that does not slash spending in higher-spending districts, a dramatic increase in revenues would be required. In the current climate, with the Senate majority dead set against any new taxes, it is hard to imagine that this amendment would not cause great pain for wealthier districts. This would be equivalent to slicing the existing budget pie more equally – some would get more, and a few would get much less. If new revenues become available, making the pie larger, then perhaps the goal of funding equity could be reached without eroding any child’s school.

To follow the progress of this proposal see this tracking page on the Michigan Legislature site.

The text of the resolution as introduced is shown below; text that would be removed from the constitution is shown struck-through, and new language is shown in bold.

February 20, 2007, Introduced by Reps. Elsenheimer, Walker, Emmons, Meltzer, Booher, Rick Jones, Sheltrown, Hansen, McDowell, Opsommer, Moore, Schuitmaker, Shaffer, Calley, Proos, Gillard, Byrnes, Huizenga, Wenke, Meekhof, Hoogendyk, Pearce, Stahl, Palsrok and Casperson and referred to the Committee on Education.

A joint resolution proposing an amendment to the state constitution of 1963, by amending section 11 of article IX, to require that all local school districts receive the same amount of total state and local per pupil revenue for school operating purposes.

Resolved by the Senate and House of Representatives of the state of Michigan, That the following amendment to the state constitution of 1963, to require that all local school districts receive the same amount of total state and local per pupil revenue for school operating purposes, is proposed, agreed to, and submitted to the people of the state:

Sec. 11. There shall be established a state school aid fund which shall be used exclusively for aid to school districts, higher education, and school employees’ retirement systems, as provided by law. Sixty percent of all taxes imposed at a rate of 4% on retailers on taxable sales at retail of tangible personal property, 100% of the proceeds of the sales and use taxes imposed at the additional rate of 2% provided for in section 8 of this article, and other tax revenues provided by law, shall be dedicated to this fund. Payments from this fund shall be made in full on a scheduled basis, as provided by law.

Beginning Subject to the next paragraph of this section, beginning in the 1995-96 state fiscal year and each state fiscal year after 1995-96, the state shall guarantee that the total state and local per pupil revenue for school operating purposes for each local school district shall not be less than the 1994-95 total state and local per pupil revenue for school operating purposes for that local school district, as adjusted for consolidations, annexations, or other boundary changes. However, this guarantee does not apply in a year in which the local school district levies a millage rate for school district operating purposes less than it levied in 1994.

Not later than the 2018-2019 state fiscal year that begins October 1, 2018, the state shall provide a system of state funding for local school districts that ensures that all local school districts receive the same amount of total state and local per pupil revenue for school operating purposes.

Resolved further, That the foregoing amendment shall be submitted to the people of the state at the next general election in the manner provided by law.


Article shows funding problems sharpening equity debate

An article appeared today on the MLive web site from the Booth Newspapers’ Lansing bureau about the equity debate. (The AANews is part of Booth, but I don’t think it ran in today’s issue.) It describes how the current funding shortages are driving part of the equity debate, and it has a decent explanation of how funding levels to school districts has changed since proposal A (lower-spending districts have risen much faster but still lag the higher-spending districts). Our own Dr. Todd Roberts is quoted as saying that Ann Arbor supports equity, but not at the expense of higher-spending districts; he says AAPS is working on the state level to expand the pie available to everyone.

The article is here:


"Equity" is the rallying cry

The byword is “equity,” but the reality is somewhat different for districts that have seen the benefits brought to them by Proposal A come to an end. Unfortunately, some citizens have reacted to the school funding crisis by focusing on protecting their own slice of the pie rather than working to make sure the whole education funding pie is stable and has a chance to grow for everyone.

This proposed amendment is one part of a broader movement of (mostly upstate) school districts to narrow the differences in per-pupil funding statewide. Citizens for Equity, based in Traverse City, is associated with the proposed amendment and is focusing their campaign on the perceived unfairness in unequal school funding. (You can see their web site at citizensforequity [dot] org.)

They are calling for increased “equity payments” (such as the $23 per pupil given to districts near the foundation allowance floor this year), and for low-spending districts to be “held harmless” if mid-year prorations (cuts) are necessary. (Rep. Elsenheimer proposes this specifically in a January letter to Gov. Granholm.) Presumably, higher spending districts, such as Ann Arbor, would have to absorb all of the cuts.

But even those very sympathetic to the idea of equity in school funding may be troubled by their arguments. Citizens for Equity’s position document decries the fact that while Proposal A succeeded in lowering property taxes, it did little to reduce inequalities among districts. More specifically, their web site claims that these remaining differences result from the political power of Southeast Michigan school districts (where the higher-spending districts are concentrated). But, in fact, Proposal A did dramatically raise the “floor” for low-spending districts, while putting a lid on higher spending school systems. (See the fiscal analyses listed on this page in our site.

Moreover, the remaining differences in per pupil spending reflect differences in how much districts were spending in 1994 when Proposal A was passed, not some sort of pernicious influence on the part of Southeast Michigan school districts. The extra, “hold harmless” amounts that high-spending districts are allowed to collect come purely from local taxes (not through the state formula at all) and have been frozen since 1994 without any adjustment for inflation. As we’ve seen elsewhere, the real value of AAPS’s foundation allowance has fallen nearly every year since 1994 once inflation is taken into account.

It seems to me that what is really going on here is that some districts are finally beginning to realize the problems with Proposal A: that it promised to equalize spending and cut taxes all at the same time. For the first ten years after Proposal A, low-spending districts saw their per-pupil funds increase rapidly as districts whose spending was below the “basic” allowance had their funding levels increased at twice the rate of other districts. But, several years ago, the “floor” (minimum allowance) was brought up to match the basic allowance – and since then every district has gotten the same dollar per pupil increase (and cut), with the exception of the special equity payments. That also means that these districts have not been able to cushion the blow of the two rounds of mid-year cuts since 2003, or the prospect of one this year, any better than any other district.

But rather calling for changes in Proposal A, Citizens for Equity and others who use the same arguments appear to be complaining that they’re stuck in the same boat as everyone else. They want to be protected from mid-year cuts, and to have the state accelerate equity payments for the low-spending districts, but nowhere do they say where the money will come from. At the expense of schools in places like Ann Arbor? Apparently. Citizens for Equity scrupulously avoids talking about new revenue, evidently wanting to hold on to the “have your cake and eat it, too” mindset behind Proposal A.

In an interesting article in the Lansing State Journal, some school officials acknowledged that equity in resources does not necessarily mean equal dollars, and that districts do have legitimate differences in costs. The article also points out the huge amounts of money involved and compares it to other areas of state spending.

There is no question that children in, say, Gaylord are no less deserving of a quality education than those in Ann Arbor. But fighting to get a bigger slice of the pie is obscuring the fact that the pie is shrinking, and we all need to work together to change that.


Equity data - costs and benefits

For instance, in the 2004-5 fiscal year (the last for which detailed data is available), making foundation allowances completely equal – including hold harmless amounts – would have meant a 10% increase in funding to districts at the state minimum (from $6,700 to $7,393). But higher spending districts would have to absorb substantial cuts: Ann Arbor Public Schools, for instance, would have lost 20% of its funding ($9,234 to $7,393).

Using actual operating revenues from 2004-5, equalizing state and local revenue per pupil would mean that about 186 districts and charters, representing 745,000 children, would lose money; 572 districts and charters, with 978,000 pupils, would gain funding. But the benefits are not proportionate to the costs: districts gaining funds would receive an increase of $561 (8%) per pupil on average, while losing districts would have to give up $989 (13%) per pupil on average. Using this data, Ann Arbor would have its per pupil spending cut by 18%. (These figures exclude federal funds, which are not counted as part of the foundation allowance.) (Data from Michigan Department of Education.)

So without new sources of revenue, this kind of “equity” would spread benefits thinly among the beneficiaries, but the costs would be substantial for schools teaching three quarters of a million children.