February 12, 2016

Governor Released His Budget This Week

The Governor released his budget this week and we were fairly pleased with our initial look. But we are always cautious and careful to not put much stock in the initial press releases because we know the devil is often in the details. What the Governor many times gives in one section, he takes away other funding somewhere else. The state is facing many fiscal challenges that could have negatively impacted the School Aid budget. This time, though, there appears to be no huge red flags.

If you recall, the School Aid Fund (SAF) came out of the Consensus Revenue Estimating Conference (CREC) in fair shape. While there was no huge hole to fill, there was no real money for any significant foundation allowance increase. Then there were the potential negatives:

  • Would the Governor propose to fund the Detroit Public Schools (DPS) turnaround plan out of the SAF?
  • Would the needs of water issues in Flint cause the General Fund (GF) to swap community college and higher education funding for school aid funding, causing a huge hole in the SAF?
  • Would the roads cause its own swap of GF dollars and leave the SAF stuck with the bill?

There is good news in this budget. Our fears of DPS, Flint and the roads affecting the SAF significantly, appear to be just fears at this time. In fact, the state increased its GF transfer into the SAF by $184.1 million to bring up the transfer to $230 million, allowing a proposed foundation allowance increase of between $60 and $120 per pupil for 2016-17. There is some caution we should use because it appears that there is some one-time revenue dollars that will not be there in 2017-18.

As we usually say at this point in the year, you need to remember that the Governor’s proposed budget is the first indication of funding and budget priority for the coming school year. Although the intent can be clearly seen, the fact is, this is just the start and the budget will change! The Senate and House will offer their budget proposals in the coming weeks, potentially using many of the Governor’s ideas, or they may be quite different. Time will tell as the process unfolds, but be assured that we will keep our eyes and ears open as we take part in the various meetings that discuss the budget in detail.

For those that would like more information about the Governor’s proposal and the insight of the House Fiscal Agency, the ISD Committee will be held this Thursday, February 18, at 9:30 am at our offices in the MELG Building. Bethany Wicksall from the House Fiscal Agency will lead the discussion on the budget! You don’t have to be from an ISD to attend.

That’s it for now, but please stay tuned, as more information will be coming! Don’t forget to check our link to the 2016-17 budget documents. We have posted many budget related documents already and will update continuously with additional reports as we receive them!

We will be keeping our eyes on the legislature as they move the budgets through both Chambers and finally, the May Consensus Revenue Estimating Conference. There are still lots of hurdles to get over before schools adopt budgets prior to July 1! This is just the beginning of the long process.

We are including some of the detail from the proposed School Aid bill below. There are many other changes and if you know of certain sections of funding that your district receives but is not listed, you should take a look at the full text of the bill to be sure how the language may have changed and might affect your district.

David and Bob

2015-16 Executive Budget

Sec. 6(4)
Blended pupil membership is now 50% current year fall count and 50% prior year spring count. A change from 90% current year fall count and 10% prior year spring count.

Sec. 6(4)
Removes language for Section 25e, which adjusted pupil membership for students enrolling after the count day.

Sec. 11(1)
$72 million appropriated from the Detroit Public Schools Trust Fund (tobacco settlement money)

Increases GF transfer to SAF to $230 million (last year $45.9 million)

Sec. 11S(1)
$10.1 million for services and programs for children who reside in Flint due to declaration of emergency

Sec. 11S(6)
$15 million for state restricted contingency funds for Flint situation that must be released by the state before being spent

Sec. 18(5) &(10)
Annual comprehensive financial data must now be submitted consistent with the district or intermediate district’s audited financial statements in addition to the previously required consistency with accounting manuals and charts of accounts approved and published by the department. If not, the department shall withhold all state aid until the district or intermediate district complies.

Sec. 20(1)
The basic foundation allowance for 2016-17 will be $8,229, an increase of $60.

The minimum foundation allowance for 2016-17 will be $7,511, an increase of $120.

Sec. 20J
The return of supplemental foundation allowance payments for certain districts with foundation allowances greater than $8,169 and because of the CPI cap, cannot levy the necessary millage to garner the full $60 increase in the foundation allowance.

Sec. 21(1)
$5 million - supplemental payments to eligible districts - the lowest 5% achieving districts with certain requirements, including a reform/redesign officer having been appointed for that district.

Sec. 21(f)(10)
If a student is enrolled in more than 2 virtual classes taken in a location outside a school facility, the district is required to provide appropriate hardware, software and internet access without charge to the student in addition to any other costs of the virtual course or courses.

Sec. 22d
This small and isolated section is retained.

Sec. 31a
Funding continues at $390.0 million.

Sec. 54b
Special Education taskforce - $1.37 million – begin implementation of the recommendations published in January 2016

Sec. 61c
$10 million for eligible districts and intermediate districts for the CTE skilled trades equipment initiative.

Sec. 78
$9 million to reimburse eligible districts for costs associated with testing for lead in water.

Sec. 81
Intermediate districts funding increased to $68.2 million, an increase of $1.1 million.

Sec. 102d
Funding for reimbursing districts for the purchase of school data analytical tools as approved by the department, i.e. Munetrix School Edition.

Sec. 147(1)
MPSERS retirement rates have been updated. For example, Basic MIP with premium subsidy dropped to 24.94% for FY2017, a reduction of .84 percentage points. For more rates, see rate sheets.

Sec. 147a
MPSERS offset of $100 million is retained.

Sec. 147c
MPSERS rate cap funding increased to $982.2 million, an increase of 89.3 million. The average MPSERS rate cap will now amount to an estimated $660 per pupil.

Other Notes:

Community College subsidy from the SAF increased to $256.7 million, an increase of $3.7 million.

University subsidy from the SAF increased to $237.1 million, an increase of $31.9 million.

The Detroit Public Schools turnaround plan funding is proposed to come from the tobacco settlement funds of $72 million per year over 10 years to offset the loss of the 18 mills revenue in the School Aid Fund.

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