Education Funding
7:29 am
Mon August 1, 2011

State budget director questions school aid earmarks

The amount of money Michigan has to spend in its general fund for everything from prisons to health care dropped by nearly 25 percent over the past four fiscal years amid the recession and shrinking tax revenues. Yet the state's school aid fund remained relatively healthy, protected by earmarks for public schools.

State budget director John Nixon thinks those earmarks merit another look.

"It's not that I'm saying we need to cut the school aid fund ... (but) a lot of this stuff was put in place 15, 20 years ago when Michigan looked totally different," he said during a recent interview with The Associated Press. "We just need to strip things down and say, `This is the money we're bringing in, this is where it's going. Is it lining up appropriately?"'

Nearly three-quarters of the sales tax collected annually goes to the $13.3 billion school aid fund, as well as nearly a fourth of the income tax revenue, 42 percent of cigarette tax revenue and a third of the money raised by the use tax and the Michigan Business Tax. The school aid fund also receives all of the money raised through a statewide 6-mill education property tax, the real estate transfer tax, the state casino wagering tax and the net proceeds from lottery sales.

Dan DeGrow was a Republican senator leading the charge to put aside money for public schools throughout the 1990s and now heads the St. Clair County Regional Educational Service Agency. He said Friday that GOP Gov. Rick Snyder and the Republican-controlled Legislature basically erased the concept of earmarking money for K-12 education when they took $396 million from the school aid fund and gave it to universities and community colleges in the budget that begins Oct. 1.

"When the dam broke, it broke in a pretty big way," DeGrow said.

The move drew strong criticism from school officials and Democratic lawmakers, who argued that school aid fund revenue traditionally had been restricted to K-12 schools since Proposal A was passed in 1994 as a way to stabilize and equalize school funding.

Some Democratic lawmakers have floated a proposal to put a constitutional amendment on the ballot guaranteeing that all the money in the school aid fund go to K-12 schools. But the guarantee would be meaningless if the earmarks sending money to the school aid fund were abolished or changed.

School districts already are watching nervously as a substantial business tax cut takes effect Jan. 1. As business tax revenue drops over the next two years, school aid revenue will sink by more than $660 million annually, according to the nonpartisan House Fiscal Agency. Coupled with the loss of federal funds, the school aid fund is expected to bring in $1 billion less in the upcoming fiscal year.

Snyder has said he plans to use some of the general fund money to make up the revenue lost to the school aid fund, but hasn't said what the amount would be. The school aid fund currently takes in $7.8 billion and is expected to take in about $42 million more next year, according to the House Fiscal Agency.

Nixon moved his wife and six children from Utah to Michigan earlier this year and sends the four school-aged ones to Okemos Public Schools near Lansing. He said he isn't trying to pick a fight over the level at which public schools should be funded.

"Sixty percent of our taxing goes to the school aid fund, which is great. ... We should fund schools adequately," he said. "I tell people, `I moved here for the job opportunity. My wife moved here to put our kids in Michigan schools."'

Yet at a time when the general fund is struggling to keep up with paying the costs of health care for low-income residents and transportation revenues aren't enough to slow the deterioration of roads and bridges, Nixon questions if the state should continue guaranteeing schools the lion's share of tax revenue.

"I'm not saying we shouldn't fund schools," he said. But "we're in a new dynamic."

DeGrow last year headed a study committee for the incoming Snyder administration that suggested a long list of changes that could improve schools. But the recommendation also strongly urged that school spending not be cut, which Snyder and Nixon ignored. The state's minimum per-pupil foundation allowance for public schools will drop to $6,846 from $7,316 this fall, although some districts will get up to $200 more for pensions and as a reward for looking at cost-cutting measures.

DeGrow wonders if school districts' bottom lines will shrink even further in future years if the Snyder administration is considering moving more money once targeted for K-12 schools to other programs.

"John and I would have a philosophical difference. He would say, `Why would you earmark money for schools?' and I would say, `Because that's the most important thing we do,"' DeGrow said. "We put aside money for roads. Are kids as important as roads?"