Economic Development, Government, and Human Resources

Study: Michigan ranks last in school funding growth

January 24, 2019
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LANSING — No state has squeezed school spending more in recent decades than Michigan, education researchers say in a study — which attributes the tightening to tax cuts and notes a corresponding drop in student achievement.

When adjusted for inflation, the state's total education revenue in 2015 was 82 percent of what it was in 1995 - shortly after voters passed a law that lowered property taxes, boosted the state sales tax and narrowed funding inequities across K-12 districts. The overhaul largely shifted the power to fund schools from local communities to the state government.

"No other state is close to a decline of this magnitude," says the report, which was written by professor David Arsen and two doctoral students at the university's College of Education.

Michigan's per-pupil spending declined by 15 percent over the same 20-year period when modified for inflation, which ranked 48th among 50 states.

The study says Michigan and the federal government have substantially raised expectations for student performance over the past 15 years, while Michigan students' achievement on standardized tests has slipped relative to other states. The state has never calibrated funding levels so that students can meet the new standards, according to the report.

"Michigan's public school system is at a crossroads. It is not performing well," the study says. "In contrast to 1993, Michigan's tax rates and student performance now fall well below the national average. These unsatisfactory educational outcomes now constitute the primary catalyst for changes in funding policy."

The report's release comes as pressure grows for new Gov. Gretchen Whitmer, a Democrat, and the Republican-led Legislature to address education funding. A year ago, a collaborative of education, business and foundation leaders released a study calculating the base cost to educate students at $9,590 and calling for additional funding. The current minimum state grant is under $8,000.

During the recent lame-duck session, then-Gov. Rick Snyder and GOP lawmakers upset education groups by effectively shifting a windfall in online sales tax revenue from schools to roads and environmental cleanup.

"This simply has to change because our students deserve better," said Farmington Public Schools Superintendent George Heitsch, president of the Tri-County Alliance for Public Education, which represents districts in Oakland, Macomb and Wayne counties. He said school funding has not kept up with the rate of inflation or the increased cost of services, so "it should be no wonder" why the state ranks in the bottom tier in math and reading.

The study says while Michigan is the national leader in "educational belt-tightening," it is in the middle of the pack in per-pupil funding levels, at 25th. The authors, however, dispute suggestions that the state's middling status means funding is not a reason for its drop in student achievement - "because it neglects the harmful consequences of sustained reductions in resources on organizational performance."

The report concludes that Michigan's "plunge" in school funding is not because the state is poorer, particularly in the wake of a recession. It says the "fundamental reason" is because the percentage of personal income devoted to taxes is down to "substantially below" the national average after tax cuts, tax breaks and a reliance on revenue sources that have not grown with the economy.

Whitmer will propose her first budget in March. During the campaign, she said the state's "one-size-fits-all" school-finance system is "broken." She proposed weighting the base per-pupil grant to factor in higher costs to teach certain students - an idea embraced in the study. Her other proposals included re-examining unspecified targeted tax breaks and no longer diverting school aid funds to higher education.

According to MSU's report, there are:

— disparities in the condition of school buildings because construction remains a local responsibility.

— disadvantages for charter schools that cannot levy property taxes to cover their building rent.

— strong incentives for schools to scrimp on services for students with disabilities.

The study says policymakers should consider lifting a cap on property tax increases, extending the sales tax to include entertainment and services, making the flat income tax a graduated one, re-exploring the merits of tax deductions and credits, and restoring local districts' ability to boost taxes. Any proposed tax increases would face resistance in the Republican-controlled Legislature.

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