News Story

How To Make A School District Appear Underfunded: Ignore Big Pieces Of Revenue

Michigan’s public school establishment and friends regularly do it

CORRECTION: The total funding for DeWitt Public Schools was $12,716 per pupil in 2019-20. 

In 2019, DeWitt Public Schools Superintendent John Deiter wrote an op-ed for the Lansing State Journal, saying Michigan public schools needed more money.

Deiter cited an organization called the School Finance Research Collaborative, which is comprised mostly of interests considered friendly to the conventional public school establishment. He wrote:

“The collaborative released their study in January 2018, and they determined that the base cost to educate a child in Michigan is $9,590. ... In DeWitt, we receive the state minimum $7,871 per pupil in our foundation allowance.”

In 2019-20, DeWitt Public Schools received and spent $12,716 per pupil, or 62% more than the figure Deiter cited.

Why the huge gap? When advocates for higher spending in public schools cite spending data, they often cite the “foundation allowance,” a term that excludes federal money, which is a key revenue stream.

Michigan’s public school funding system is complex and confusing, which contributes to a tremendous amount of erroneous and misleading reporting and commentary. Writing that schools are “underfunded” and supporting the assertion by citing just one of the several revenue sources for public education is a regular occurrence.

Excluding some federal funding from reports on schools contributes to inaccurate descriptions of school districts that serve poor communities. Districts serving Michigan’s poorest communities are among the state’s most highly funded, as indicated by the critical metric of per-pupil revenue for operations.

The DeWitt Public Schools district offer an example of the funding system’s complexity. It received a state foundation allowance in 2021 of $8,111 per pupil.

The foundation allowance is based on a formula that combines state money with local school property tax dollars, which is different for every district. The allowance was created by the 1994 Proposal A ballot initiative. The goal of that initiative was to gradually equalize funding between districts with different capacities to raise property taxes, and it does that by increasing state funding to less affluent districts.

For DeWitt schools in 2021, foundation allowance revenue accounts for $3.7 million of the $4.3 million in state dollars received by the district, or 85%. The district received additional state funding for certain categories of spending, such as special education, student lunches and pension expenses.

Public schools also receive federal dollars, which go predominantly to districts serving primarily students from low-income households. Many Michigan school funding studies purposely omit federal money in their analyses.

The result is to paint a false picture of the resources available to school districts, especially ones that serve lower income communities.

Fortunately, accurate numbers are available in the form of an annual school funding report published by the Michigan Department of Education. Unfortunately, the key term and concept used by the report, “general fund,” has different meanings in different areas of state government, and this is the source of good deal of confusion and some misinformation when it comes to school finance.

In Michigan public schools, “general fund” revenue and spending are synonyms for all the money collected from all sources and spent by a school district on its core school operation of providing classroom instruction to K-12 students. Teacher salaries are the largest single expense in school districts’ general fund budgets.

The annual state school funding report documents the local, state and federal funding that support each district’s general fund operations.

The Detroit Public Schools Community District received $12,022 per pupil in local and state funding. By comparison, Grosse Pointe Public Schools, with its richer local property tax base, received $13,632 in local and state funding. But Grosse Pointe only received $381 per student in federal dollars last year, and Detroit received $4,042 in federal dollars for each student. When the state, local and federal dollars are all included, Detroit is seen to be the more highly funded school district.

In total funding – not just General Fund revenue - the Detroit Public Schools Community District received $16,322 per pupil in revenue in 2019-20. This number includes all local, state and federal dollars the district received.

Grosse Pointe received $15,707 per pupil in total funding.

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.