As highlighted in CRC’s recent report, Distribution of State Aid to Michigan Schools, the school finance reforms of the mid-1990s achieved a number of their intended initial goals.  At the top of this list is progress towards greater per-pupil operating funding equality.  Despite this progress, absolute equity has not been achieved.  Furthermore, the near-singular pursuit of funding equity has meant that financial resources have not been used to address other important educational objectives.

Per-pupil revenue equalization gains were the greatest in the years immediately following Proposal A, when state School Aid Fund revenue growth was the strongest.  Smaller and less frequent gains have been achieved in subsequent years.  Per-pupil revenue equalization has been achieved almost exclusively through policies that provide greater annual increases to the lowest foundation grants than are provided to the highest foundation grants.

In 1995, 307 traditional public school districts received foundation grants less than the basic or target amount.  By 2010, 396 districts (of 551 districts) received the target per-pupil amount.  In terms of the spread between the lowest and highest foundation grants, equalization reduced the gap from approximately $6,300 per pupil in 1995 to about $5,000 per pupil in 2010.

Directing the largest funding increases to low spending districts caused a number of districts (those with relatively high pre-Proposal A spending) to see the value of their foundation grants lose ground compared to what they were in 1995, after adjusting for inflation.  Also, those districts that received the greatest funding increases were not necessarily the poorest districts as measured by average household income and/or per-pupil property wealth.  Thus, the poorest districts did not benefit the most from the policies intended to address equity.

Also of note, annual foundation grant adjustments have ignored other important district characteristics, such as the number of at-risk students.  Therefore, districts with high concentrations of these students, which also struggle academically, did not receive the greatest percentage increases under Proposal A.

In dollar terms, the gap between the lowest and highest spending school districts has been narrowed during the 17 years since Proposal A; a clear sign of progress.  However, other gaps have been allowed to open.  In their review of school finances and the distribution of state aid to districts, policymakers should consider the consequences, both intended and otherwise, associated with the current design and functioning of the foundation grant.  They are likely to find that it fails to address important educational issues and changes may be warranted to meet the needs of Michigan students today and in the future.

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