What every parent should know about school funding...but was afraid to ask!

Michigan is different...

In most states, school funding is a local matter, decided by voters in a school district. But since Michigan voters approved the package of laws and amendments to the state constitution known as "Proposal A" in 1994, things work very differently here.

Our schools' funding is decided in Lansing

Each year, the State Legislature decides how much money will be spent on schools, and adjusts the formula that tells each school district what they can spend per student on operating the schools.

We can't choose to spend more on running our schools

With a couple of narrow exceptions, local voters cannot decide to raise taxes to help run the schools. We're expected to pass a tax on commercial property that's limited by state law, but no more. This tax makes up our local contribution to the per-pupil spending we're allowed; the state covers the rest using funds from sales tax, the income tax, and a few other sources.

Districts like Ann Arbor get to raise a little bit more

Some school systems, like Ann Arbor, that were already spending more than the state formula allowed in 1994 were permitted to collect the difference. For us, this was $1,234 per pupil, and it hasn't changed since 1994. Called the "hold harmless" millage, the tax rate required to collect this money has gone down as property values have risen over the years.

School funding has not kept up with costs

Overall spending on schools in Michigan has barely kept ahead of inflation since 1994, even though key costs - like health care and energy - have risen faster. Ann Arbor's per-pupil "allowance" has fallen by 11% since 1994 after adjusting for inflation, partly because the "hold harmless" amount is never adjusted and doesn't go as far now as it did in 1994. As a result, our schools have been cutting their budgets for may years running.

Spending on buildings is separate

One thing voters can do is to approve millages for building projects and repair funds ("sinking funds"). We did this in 2004 to build a new high school and to make major updates in every school in the district and again in 2008 to continue the building updates and for technology purchases. The sinking fund helps the district keep up with regular repairs. State law sharply limits what the sinking fund can be used for, and none of these "capital" funds can be used to pay salaries or run our schools.

What does this mean?

It means that there is only so much we can do on our own. That's why it's so important to make sure we provide the resources we can control such as passing operating millages when they come up for renewals, as the community recently did in 2008, and supporting sinking funds to assist the schools in covering scheduled repairs and renovations to our aging school buildings. The sinking fund also allows us to commit more of our operating budget to teaching kids. Private giving, to schools and the Educational Foundation, will also be an important way for our community to make sure we have great schools. It's up to all of us to make sure we keep the excellent schools that have made Ann Arbor such a great place to live.

What is the "foundation allowance"?

The foundation allowance is the amount per pupil that we are allowed to spend to run the schools. This number is set by a state formula, which is determined each year by the state Legislature. Basically, it's the amount we were spending in 1993, plus or minus changes in state funding since then.

We collect 18 mils of tax on commercial property, plus tax on homestead property that's enough to generate just $1,234 per pupil. This is our local contribution to the foundation allowance. (A "mil" is one dollar of tax for every $1,000 of taxable value.) The state makes up the rest, using proceeds from the sales tax, the income tax, a state education property tax, and some other items. In general, we send more to the State then we get back. How much they give us depends on what the Legislature decides to spend. The state won't make up the difference if we choose not to collect the local portion of the allowance.

Not every school district gets the same increase every year (if there is one). In the first years of Proposal A, districts that had been spending much less than average per pupil were given double increases to help catch up. That process ended in 2001, but in 2007 the Legislature decided to set the bar higher and give districts that spend the least the largest portion of any spending increase. As one of the traditionally higher-spending districts, Ann Arbor will be getting the minimum increase offered to schools. If you combine this with the fact that the "hold harmless" amount has not changed since 1994, it helps explain why our schools are in a funding crunch.

Building A Foundation Allowance