MSU: Michigan ‘dead last’ in funding growth for K-12 schools

After adjusting for inflation, tax revenue generated for the state’s K-12 system in 2015 was roughly 85 percent the amount in 1995, and “no other state is close to a decline of this magnitude,” the report's authors said.

Lansing — Michigan ranks “dead last” among all states in revenue growth for K-12 schools since voters approved property tax and finance Proposal A in 1994, according to a new report by researchers at Michigan State University.

After adjusting for inflation, tax revenue generated for the state’s K-12 system in 2015 was roughly 85 percent the amount in 1995, and “no other state is close to a decline of this magnitude,” the report's authors said.

Michigan’s per-pupil funding revenue dropped by 15 percent over the same period, ranking 48th out of 50 states, according to the report.

While lawmakers have used School Aid Fund revenues to plug other budget holes since 2010, MSU education policy professor David Arsen and two doctoral students concluded the “fundamental cause” of the education revenue shortfall is the state’s “declining tax effort,” including tax cuts, breaks and a cap on annual property tax growth that has slowed a recovery from the Great Recession that peaked in 2008.

Michigan was among the states worst hit by the recession as its manufacturing industry went into a spiral. Local education revenue fell sharply in 1995 but had increased steadily until the Great Recession depressed property tax values and local collections. State funding fell by 38 percent between 2002 and 2015, according to the report.

The MSU findings are another blow to an increasingly dire educational outlook for Michigan. According to analyses of national testing data, Michigan students are performing among the bottom 10 percent of states.

Researchers generally agreed with a 2018 adequacy study that estimated it would cost $9,590 to educate a typical Michigan student to meet performance standards. The state is poised to spend $8,409 per pupil this year under the 2019 budget signed by former Gov. Rick Snyder, which increased that rate and overall K-12 spending.

“Michigan has tried to improve schools on the cheap, focusing on more accountability and school choice,” Arsen said in a statement. “To make those policies effective, they have to be matched with adequate funding. We have been kidding ourselves to think we can move forward while cutting funding for schools."

MSU researchers estimate Michigan would need roughly $3.6 billion in additional revenue to meet recommendations of the adequacy study, including additional funding for students in poverty, non-native English speakers and special education students.

Authors identified possible avenues for boosting K-12 funding, such as lifting the value cap on property tax, extending the state’s sales tax to services, imposing additional taxes on beer and wine or moving to a graduated income tax with higher rates for wealthier residents.

Arsen and colleagues also recommend additional base funding for special education students, state funding for transportation and employee retirement costs above 4.6 percent of wages and universal pre-school funded at $14,155 per student.

“Citizens will support providing additional funding to schools if they know how the money will be spent, and they believe the revenues have been raised fairly,” Arsen said. “Providing those resources to schools is well within reach of the state in our current economy. This is what’s necessary to establish the foundation for the important work of teaching and learning.”

Ben DeGrow, director of education policy at the Mackinac Center for Public Policy, a free market think tank, questioned the MSU report. He noted recent funding increases and questioned state spending decisions. 

“It downplays the effects of Michigan's one-state recession, the years-long trend of real funding increases, and the bureaucracies that are absorbing disproportionate shares of these extra dollars," he said.

Michigan’s School Aid Fund budget allocations have risen from $8 billion in 1995 to more than $14.7 billion in fiscal year 2019, according to figures from the non-partisan House Fiscal Agency that are not adjusted for inflation. Spending dipped slightly between 2010 and 2012 but has increased each year since.

DeGrow argued MSU researchers used "unconventional and unrealistic methods to paint a misleading picture of the state of education funding in Michigan," noting Arsen calculated inflation using a federal price deflator for state and local government purchases instead of the more common consumer price index.

Amber McCann, a spokeswoman for Republican Senate Majority Leader Mike Shirkey , noted that "school funding has steadily increased by billions of dollars over the past several years while student enrollment has steadily declined." 

"The report ... offers some information worth reviewing but does not necessarily tell the entire story when it comes to state spending on public education," she said.

Michigan overhauled its education finance system under a 1993 plan backed by then-Gov. John Engler and approved by voters the following year, creating a new taxation system that heavily relies on state sales tax revenue rather than local property taxes. But local communities are still able to supplement state funding through property tax increases.

Michigan’s education funding also has been affected by a decade-long reduction in economic output that was exacerbated by the Great Recession of 2008-09, affecting sales tax revenues for education aid.

The state gross domestic product hit $431 billion in 2005 and fell for four straight years to reach $363 billion in 2009, according to the U.S. Bureau of Economic Analysis. Michigan’s economic activity started growing after this, but it didn’t climb back to the 2005 level of economic output until reaching $430 billion in 2016.

Peter Spadafore, associate executive director for the Michigan Association of Superintendents and Administrators, said the report’s findings were no surprise.

“The idea that funding is adequate and resources need to be stretched is a misnomer and misleading,” Spadafore said on Wednesday. “We are not appropriately funding education when it comes to considering student needs.”

Constant tax policy changes at the state level erode the state’s ability to adequately fund K-12 education, he said, while expenses go up and inflation must be factored in as well.

“We are not raising adequate revenues” for education, Spadafore said. “State lawmakers have to get serious about ways to add more revenue to the state’s general fund and school fund.”

Other states are making strong investments in education, Spadafore said, while Michigan is not.

“In the last week of lame duck, $180 million in K-12 was shifted to environmental cleanup and roads. Those are worthy causes, but you can’t have it both ways,” he said.

State Sen. Lana Theis, a Brighton Republican taking over as the new chair of the Senate Education Committee, said Wednesday afternoon that she had not yet reviewed the MSU report so could not discuss its findings. But she noted that Michigan’s K-12 system has suffered from declining enrollment figures.

“We’re losing significant numbers of students every year, and that’s a huge problem,” Theis said. “The kinds of costs that are associated with teaching children don’t disappear as the child disappears.”

Spending on K-12 education is “one aspect of the equation” but “not the end-all be-all” when it comes to improving performance, she said. “We do need to look at funding, absolutely, but I don’t know what that looks like.”

Democratic Gov. Gretchen Whitmer is set to unveil her first budget proposal in March. She's not discussing specifics until then, but Detroit Superintendent Nikolai Vitti said he hopes she takes a different approach to public education than her predecessors. 

“Simply put, you invest in what matters, in what you believe has potential. You invest in what you believe will create dividends," he said. "Lansing leadership over the past decade clearly did not believe in K-12 traditional public education. A lack of investment in K-12 yielded one of the worst educational performance records in the country over the same time. It will be essential that our new governor changes this trend to demonstrate a clear shift from the irresponsibility of previous leaders.”

Interim State Superintendent Sheila Alles responded to the MSU report by noting that there are "a multitude of important priorities in Michigan that need additional funding — and the highest priority, I believe, is education."

The new report also has other educators calling for action from the state.

Robert McCann, executive director of the Tri-County Alliance for Public Education, said Michigan must make a significant investment in its K-12 schools for them to meet performance standards and implement the needed programs that will achieve success both in and out of the classroom.

The alliance is comprised of superintendents from every district in Macomb, Oakland and Wayne counties.

“Lawmakers need to stop hiding behind talking points that claim they are investing in our schools when the reality is our funding hasn’t even kept up with the rate of inflation, let alone the increased cost of the services we are being asked to provide our students,” said George Heitsch, TCA president and superintendent of Farmington Schools.

“When you see the numbers from this report showing the drastic funding cuts that have been forced on our schools in recent years, it should be no wonder why our state ranks at the bottom in reading and math proficiency," Heitsch said.

The release of the new report should be a wake-up call for legislators as it confirms what many parents, students and educators already knew: Michigan’s K-12 funding is in crisis, Heitsch said.

“It was infuriating to watch our Legislature push through another long-term cut to K-12 funding during lame duck in December while report after report continues to show the crisis school budgets are already in across the state,” Heitsch said.

“I hope this report sends a message to the new Legislature that we can’t continue to ignore this problem and we stand ready to work with Governor Whitmer and legislative leaders on a solution that truly reinvests in our schools and our students once again.”