How Are Michigan Schools Funded: Kevin Deegan-Krause Explains (video)
(Crystal A. Proxmire, Feb. 18, 2014)
How Michigan schools are funded is a complicated subject, but one that Ferndale School Board Trustee Kevin Deegan-Krause 
hopes to help the public better understand. Deegan-Krause, who is also a political science professor at Wayne State University, gave two presentations on school funding Tuesday – one in Ferndale and one in Pleasant Ridge.
He explained how the amount of funding has decreased, as well as how the funding sources have changed to be more susceptible to the ups and downs of the economy.
In Ferndale, per pupil funding has fallen 15% since 2000, and on top of that the district has suffered due to declining enrollment. Added to the struggle is the fact that pension and healthcare costs are rising faster than inflation, and with fewer employees paying into pension funds, the burden is greater than ever before.
Understanding where money comes from is the first step to thinking of how to solve the budget woes of 
districts like Ferndale and many others across the state.
In 1994, funding mechanisms drastically changed in Michigan. Before Proposal A, most of the funding for schools came from local property taxes. 64% came from local taxes, 32% came from the State, and 4% came from the Federal government.
In 1993 there was growing consensus that the property tax rates in Michigan were too high. So the legislature took a vote that said education could no longer be funded through property tax. This left education funding essentially stripped, with no alternative source of funding in place.
So in 1994 the public had a choice. Prop A was a complex blend of funding mechanisms. If it was not approved, the state would default to a plan created by the legislature. The public passed Prop. A.
With the new funding rules in place, only 18% of funding came from local sources, 78% came from the State, and 4% came from the Federal government, (the Federal government’s share has risen slightly since 2000, but is still the smallest portion) .
The money from the State comes from the School Aid Fund. It goes in through various sources and is then divvied up on a per pupil basis. According to Deegan-Krause, problems arise both in the ways money goes in and ways that the money goes out.
The amount of money going in to the School Aid Fund is not a particularly stable stream. Much of the revenue comes from the state sales tax, which goes down when the economy goes down. Other sources like income tax, real estate transfer tax, and lottery and casino taxes also fluctuate when the economy does.
The amount of money going out can be problematic for local districts. For one thing, the fund is now being tapped for preschool and college funding, which used to come from the State’s general fund. This reduces the amount available for K-12 students.
Another problem is that because of the way Proposal A was written, some schools are capped with their per 
pupil funding (known as a foundational allowance), which others are able to collect significantly more.
There are three ways that districts can tax locally. One is through bonds, which can only go towards investments like infrastructure improvements. Another is by Sinking Funds, which are also investment only and for more short term needs. And the third is by taxing over the state cap under the “hold harmless” provision of Prop A.
“When the state started paying per pupil, it set a maximum amount,” Deegan-Krause said. “But in order not to lose support from all of the districts that were actually, because of their own millages at the time, bringing in more than that per pupil, they decided to let those districts, and there were about 50 of them, they decided to let those districts tax their own populations at a higher level if they wanted to…
“What that means is you have a whole bunch of districts… that because they were above that level in 1994 are still allowed to go above that level. None of the others are. So there’s built-in inequality in school per 
pupil funding because that inequality existed before and because they had to deal with that in order to get the thing passed.”
Ferndale is not a “hold harmless district.” Neither are Madison, Hazel Park, Oak Park or Berkley. Yet the other Oakland County school districts around these lower-income areas are. “All the rest of these are ‘hold harmless,’ sometimes reaching as high as $11,000. Ferndale’s is $7,700. So this is a big difference…as Ferndale is trying to compete with these other school districts around it for test scores, for student enrollment this is what we’re dealing with.”
Several factors have contributed to “fierce competition” among districts. ‘Schools of choice’ means that districts can lure students, and funding, away from other districts. Parents can send their students to other districts and their foundational allowance goes along with them. There is also the fact that Michigan has a large number of charter schools opening up that take money out of the public school systems.
Deegan-Krause 
spoke for over an hour about the details of the legislation that affects school funding, and gave specific numbers for audience members to digest. His presentation is available at http://youtu.be/Ux0r5cB0tAY. The presentation in Pleasant Ridge was also recorded and the link will be added here once it is available.
Because of inequities in funding, Deegan-Krause and other parents, teachers, students, School Board Trustees and administrators are traveling to Lansing on Feb. 19 for a day of lobbying in hopes of encouraging change in the system.
“Our hands are tied,” Deegan-Krause said. “If we want change in how our schools are funded, it has to come from Lansing.”
For previous education funding related stories see:
http://oaklandcounty115.com/2014/02/16/school-funding-discussions-feb-18-advocacy-trip-feb-19-2/
http://oaklandcounty115.com/2014/02/14/jim-odonnells-state-of-the-ferndale-schools-address/
http://oaklandcounty115.com/2014/01/31/education-advocacy-trip-to-lansing-planned-for-feb-19/
http://oaklandcounty115.com/2014/01/20/details-of-uaw-contract-with-ferndale-schools/
http://oaklandcounty115.com/2013/12/11/eaa-expansion-to-be-voted-on/
http://oaklandcounty115.com/2013/12/10/how-michigan-funds-schools/