Although Spring hasn’t sprung yet in Lansing, the Governor’s FY2019-20 budget was released with some rays of sunshine for the School Aid Fund (SAF). We have posted several documents on our webpage dedicated to the School Aid Fund FY2019-20 Budget.  We have also included an interactive map which allows you to see the individual funding proposal as it relates to your local school district.

More Money for K-12

Yes, and No. Projections of the estimated balance sheet that were prepared after the January Consensus Revenue Estimating Conference (CREC), looked like the balance sheet was getting back on target after two years of structural deficits. The expenditure side was “carried over” from the prior year, with no change in the foundation allowance, but it did include MPSERS cost increases and proposed student losses. In the end, it was estimated that the SAF would have nearly $263 million unallocated funding available for FY2019-20, but only $75 million was available to spend if we wanted to be structurally sound on a fiscal year basis.
 
The Governor’s proposal does provide increased K-12 funding, including a foundation allowance increase of $120 to $180 per pupil (using a 1.5X formula), and increases in At-Risk funding (now referred to as Economically Disadvantaged), Special Education reimbursements, and funding for CTE programs and Great Start Readiness Programs.  The funding will be allocated on a “needs” basis, using some of the concepts developed by the School Finance Research Collaborative over the last few years.  

The increase in the foundation would push the minimum foundation to $8,051 and the maximum to $8,529 for FY2019-20. This effectively reduces the funding gap between the minimum and state maximum to $478 per pupil. Cyber schools would be limited to 80% of the foundation grant as otherwise calculated. ISDs would receive a 3.5 percent increase.

At-Risk/Economically Disadvantaged would see a 20% increase, however, the allocations among districts will change based on the pupils they serve. Special Education cost reimbursement would be increased by an estimated 4 percent, from 28.61 to 32.61 percent.  The overall proposed changes will allocate in additional $507 million to the K-12/ISD/PSA side of the education budget.

To answer the question of Is this “new” money,? part of the proposed spending plan includes an increase in the funding for community colleges which would come directly from the SAF, but the funding for state universities of over $500 million has been eliminated from the SAF in this proposal.  Funding for universities has been moved to the General Fund/General Purpose (GF/GP) Budget, therefore freeing up those funds to be reallocated for other SAF purposes, namely K-12/ISD/PSA funding.

NEW - SECTION 28

The proposal includes new language to allocate funding based on a weighted per pupil educational funding model that provides for a per-pupil base amount for all districts and adds weights for additional resources to higher-need pupils who require special education services, are academically at risk, or are receiving Career and Technical Education (CTE) programming.  

Funds for At-Risk (Economically Disadvantaged), Special Education reimbursement and Career and Technical education would be allocated using this model (also mentioned above).

NO NEW TAXES?

After the dust settles on the proposal, we’ll get a better idea of how much of the SAF budget proposal changes will take hold. To “Fix the Damn Roads,” the Governor has proposed a total fuel tax hike of $.45 per gallon that would be implemented incrementally over the next budget year. This provides $2.5 billion in new funding that would be used to support infrastructure and to support other areas of the state budget. 

One of the hotly contested issues with the increase in the fuel tax could impact SAF funding.  Currently, the 6% sales tax is charged on fuel. Many of the opponents to the increased fuel tax have called for an end to the “diversion” of the sales tax to focus fuel taxes on transportation related expenditures. This may make some sense, but without replacement revenue for the programs that depend on sales tax revenue, including the SAF and GF/GP, it could have a devastating impact on those budget areas.

RETIREMENT FUNDING AND RATES

The funding that has been allocated for MPSERS related expenditures is maintained and enhanced in this proposal.  Section 147 funding appears to be intact and we’re always happy to see the continued support of the appropriations as we “buy-down” the impact of the unfunded liabilities.  Increases were made in the Section 147 appropriations to adjust for increased costs of the lowering of the retirement actuarial assumptions and for changes in employees and increased employer costs. 

The retirement rates for the coming year were increased to 39.91% with 27.5% paid by the employer for MIP/Basic with health premium subsidy. This is an employer increase of 1.32 percentage points, or a 5% increase in the rate! This will be an increased cost to your district!

WHAT ABOUT COMMUNITY COLLEGES AND UNIVERSITIES?

The Governor’s proposal includes an increase in community college funding of over $12 million, however, those funds would be coming from the GF/GP budget rather than the SAF.  The current year amount of SAF funding of $408 million would be maintained for community colleges.

Universities will see a shift in their funding from SAF to GF/GP.  The full amount that has been funded by the SAF would come from the GF/GP instead for FY2019-20.  That frees up over $500 million in SAF funding to be used for other purposes as described above. 

BOTTOM LINE
   
If we want to “Fix the Damn Roads,” enhance and target funding to schools, and provide for expansion in other areas of the state budget, we’ll need to “Pay the Damn Bill!”

We’ve been told the Administration would like to continue the trend set by Governor Snyder of having the budget finalized in early June before the legislative recess for the summer.  This is something that has been very helpful for districts and we applaud the intent to continue this goal. 

As heard on 760 WJR this morning, remember, this is the first shot at the budget with an aggressive tax hike and funding designed to enhance educational programing.  History tells us, “The Governor proposes, and the legislature disposes!”  We expect that the House and Senate proposals may have some different ideas, and we’re looking forward to seeing those proposals soon.

Stay tuned, it’s just the beginning!  We’ll keep posting documents as we receive them.  We’ll be digging deeper in the bill language and find out the “devil in the details” in the coming days.  For now, things look promising, but remember it’s only the first leg of a long relay race.  We’re off to a good start.

David and Bob