Grading Michigan Schools
11:50 am
Mon July 16, 2012

Financial Tipping Point

Nov. 5, 2007
In the first of our series called Grading Michigan Schools, we start with a look at the school funding crisis affecting many districts. School administrators say they are running out of money to adequately prepare students for the challenges and opportunities of the future.

These middle school students in Pinckney are participating in a familiar school-day ritual: lunch in the school cafeteria.

But the people serving lunch to the students aren't school employees. They're employees of a private contractor that handles food service for the school district as it tries to reduce its costs. Many districts in Michigan are doing the same thing. They're also cutting corners in dozens of other ways. Administrators from suburban, urban and rural districts, large and small, gave us a list of cuts they've made in the past six years.

"Making sure people turn off the lights when they leave a room." "For athletics, pay to participate." "We've reduced our library time." "Trims or cuts every year. "

Administrators say Proposal A is a big part of why their budgets are so strained. Approved in 1994, Proposal A was a major overhaul of the way Michigan paid for public education. The state became responsible for raising K-12 revenues rather than local school districts. Proposal A shifted the source of the revenues from mostly property taxes to the state sales tax. It also reduced the huge gap in per-pupil spending between the poorest districts in the state and the richest. Bill Rustem is President of Public Sector Consultants.

"Everybody was very happy at the time, it made things more equitable, we were closer to having same amount, and it did reduce amount of property taxes that people were paying for schools. "

But Proposal A also eliminated school districts' authority to go to the voters for extra operating money when things got tight. Many districts were feeling the pinch by 2000. And by 2003 Proposal A was clearly on a collision course with the state's slowing economy. State revenues from the sales tax were going down. Tom White is President of Michigan School Business Officials. He says school administrators were dismayed, some even shocked, by what happened next.

"They took money away from schools in the middle of the school year to the tune of $76 per pupil. "

Since then schools received yearly increases in funding of about one percent or less. There was another mid-year school funding cut last year. Meanwhile, the list for many districts continues to grow.

"We've closed buildings." "We've also closed buildings." "We've closed three elementary buildings, we'll close three more next year."

But it's not just buildings. As revenues shrink, just about everything a school district pays for has gone up. This includes including health care, pensions, payroll, books, supplies, heating and gasoline. Bill Rustem of Public Sector Consultants says it's only going to get worse. He says the biggest worry is pension costs and double digit increases in health care costs for both retired and working teachers.

"If you look down the road, those are issues that are going to continue to plague schools it's the long term costs of both retirement and health."

All but a handful of districts have been making annual budget cuts. But not all districts are in serious trouble. In fact, a majority are doing reasonably well. Some say they've even managed to keep the impact of their cuts out of the classroom. But more and more districts have only to look at their worse-off neighbors to see what could be in store. Twenty-two school districts are currently running a deficit. Tom White says eighty-one more have less than five percent of operating funds set aside for a rainy day.

"Most of them I would consider at financial risk. And that they're edging toward the edge of that cliff."

To add insult to injury, many of the state's largest school districts are facing aggressive competition for their students from charter schools and neighboring districts. Each student leaving the district means a loss of thousands of dollars, and less money to improve education so parents want their children to stay. Many of these most vulnerable districts are in Michigan's largest cities.

"We've eliminated 13 teaching staff." "We've cut down on principals." "We have higher class sizes." "We've even eliminated buying textbooks for a couple of years." "There's nothing left to cut."

But as the problem of school financing worsens, a list of solutions is also springing up. We'll look at many of them during this series. But Bill Rustem of Public Sector Consultants thinks reforms and cost-cutting will only go so far. He says the recent increase in the income tax, and new taxes on services, won't be enough in the long run. He believes taxes will have to be looked at again.

"The longer you put it off the bigger the problem gets."

School administrators agree:
"This can't go on forever." "Because you can only cut so much." "And we don't see an end in sight." "We're at a financial tipping point."

As the drumbeat of relentless school budget cuts continues, school officials say more sacrifices are ahead, affecting everyone from teachers to taxpayers. They say, schools need need more help, to make sure children in the classroom aren't the ones making the biggest sacrifices.