Ann Arbor schools blame financial woes on rising costs, staffing hikes, declining enrollment

Ann Arbor’s school district is facing what it calls a “budget challenge” after hiring too many staff members and losing more than 1,000 students since 2020.

Ann Arbor Public Schools received a total of $34.2 million from numerous rounds of federal government handouts during the COVID-19 pandemic, according to the House Fiscal Agency.

But the district is serving fewer students. Ann Arbor Schools had 18,220 full-time students in the 2019-2020 academic year, according to MI School Data. That figure had fallen to 16,926 students enrolled during the 2025-2026 academic year.

The “three main historical factors” that contributed to the district’s current financial situation are a staff increase, the decline in student enrollment, and an increase in operating costs, Ann Arbor Schools said in 2024.

Ann Arbor has added 480 staff members since 2019-2020, 417 of them classified as teachers, according to a March 2024 presentation by the district’s board of education.

The same board presentation stated that revenues increased by $104.5 million from 2014 to 2024, but expenditures increased by $119 million, a $14.5 million gap.

“When the Ann Arbor Public Schools began work on the budget challenge in 2024, we knew it would not be a quick fix,” said Andrew Cluley, director of communications for the district, in an email to Michigan Capitol Confidential.

Cluley noted that the district has increased its fund balance to ensure it is above the state requirement of five percent, but he said more adjustments are needed to meet targets set by the board of education in alignment with best practices.

“As shared in presenting the budget this spring, to ensure AAPS remains financially stable, action is needed on land and building sales; cost control and effective vendor contracts; right sizing staffing; and school and programming consolidation,” he said.

Cluley said staff is reviewing options in all four areas and will present the recommendations to the board when completed.

The district reported that it spent a large portion of $14.2 million of COVID funds on “hiring incentives and retention pay” for staff including administration. It also spent $4.5 million to provide virtual education. The district spent $6.3 million of its COVID-19 money on support services, operations, and additional administration. A smaller pot of money, $1.2 million, went to virtual learning, equipment and other supports including software, transportation and curricula.

The district handed out $13.1 million in increased pay and benefits to employees in 2023. At that time, the district’s fund balance as a percentage of expenditures was 4.06%, below the state-required target of 5%.

The district projected that figure to be 1.96% in 2023-24. The district has not passed a budget for the 2026-2027 academic year, but a proposed budget is available.

Michigan’s Bulletin 1014 reported that Ann Arbor received $14,628 in per pupil funding for all sources in 2019-20. That jumped to $18,957 by 2024-2025, according to the latest bulletin.