Fewer Kids Statewide Does Not Mean Less Money For Schools

State dollars 'follow the student,' but overall school tax collections not tied to enrollment

Sen. Jim Stamas, R-Midland, was featured in a recent Midland Daily News article discussing funding for Michigan’s public schools.

“The state population is still decreasing so there are not as many kids in a lot of schools,” Stamas told the newspaper. "So, even though the state is putting more dollars in, the schools are seeing fewer kids. When you have fewer kids you have a decrease in dollars."

ForTheRecord says: The senator’s lack of precision ended up painting a false picture of how Michigan school funding actually works. While most of the state money for schools is allocated to districts on per student basis, it is collected on a “per taxpayer” basis that has nothing to do with the number of students in the state or in a particular district.

Most of the money Michigan public schools get from the state comes as a per pupil sum called the “foundation allowance.” The amount varies by district and is determined using a complicated formula that combines local and state tax dollars. The foundation allowance provides about 80 percent of the state money that schools receive.

Though this particular pot of money is distributed to districts on the basis of enrollment, the overall tax collection system that funds public education in Michigan is not linked to enrollment in any way. Also, while per pupil foundation allowances have grown slowly since 2010-11, total public school funding has grown much more rapidly. Overall school funding levels have risen even as student enrollment numbers have gone down.

Money collected for Michigan public schools is all deposited in a state School Aid Fund. It comes from more than 10 taxes, including sales tax, income tax, a state education property tax, tobacco and casino taxes, and money from the state lottery.

The amount collected by those taxes and earmarked to schools has increased from $12.1 billion in 2015-16 to a projected $13.0 billion in 2017-18, according to the House Fiscal Agency.

The biggest revenue producer for the School Aid Fund is the state sales tax, which is not dependent on the number of children attending Michigan schools. The sale tax contributed $5.3 billion to public education in 2015-16, an amount that is projected to increase to $5.8 billion in the current fiscal year.

Stamas was correct that the amount of foundation allowance money a particular district gets in a given year will be lower or higher depending on its enrollment. That’s what “money follows the student” actually means. But total school funding and the amount of the per student state foundation allowance have been rising for most of this decade.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.