FY2011 School Aid Fund Budget

The FY2011 School Aid Fund Budget: A Day Late and A Few Hundred Million Dollars Short
July 2010
State Budget Note 2010-02

In Brief

Before embarking on its traditional 4th of July two-week recess, the Michigan Legislature passed the Fiscal Year 2011 (FY2011) budget for the School Aid Fund (SAF), which provides operating funding for Michigan’s local and intermediate school districts. July action on the SAF budget this year breaks with recent history, during which the state budget (SAF and General Fund) has not been enacted until late September or even after October 1, the start of the new state fiscal year. The legislature’s “early” adoption of the budget provides schools with a greater degree of certainty as they begin their fiscal years on July 1. Observers should be cautious about placing too much importance on the recent legislative action, however, as a number of major budgetary issues, both for this year and next, remain to be resolved.
Given the fiscal struggles of FY2009 and FY2010, coupled with the loss of $1.3 billion in temporary federal stimulus funding from the budget, crafting a balanced budget that did not further reduce per-pupil spending is a significant accomplishment. However, the adoption of this “early” budget was aided greatly by the significant positive change in the official SAF revenue estimates and the fact that major General Fund budget shortfalls were not addressed at the same time.

Introduction

The Michigan Legislature should be lauded for its work to complete next year’s School Aid Fund (SAF) budget more than three months earlier than it did last year. In 2009, the FY2010 SAF budget was passed by the Legislature on October 13 and signed by the Governor, with vetoes, on October 20, 2009 — the day that the first state aid payment of the new fiscal year was scheduled to be released to K-12 and intermediate school districts and well after the beginning of the state’s fiscal year on October 1. Late SAF budget passage over the last few fiscal years has posed significant problems to public schools because their fiscal years begin on July 1 and state dollars provide over two-thirds of their school operating budgets.1
While final passage of the FY2011 SAF budget on July 1 provides some direction to local school administrators and elected officials at the start of their fiscal year, it was, literally, a day late and, figuratively, a few hundred million dollars short. Local school budgets were enacted before July 1st and took effect on this date. Although the FY2011 budget restores some funding, it is “short” in that it retains a sizeable per-pupil reduction, originally enacted as part of the FY2010 budget. Furthermore, the budget deal is “short” in that the legislature left unresolved major decisions concerning projected General Fund budget shortfalls for the current and next years, which may or may not affect the School Aid Fund. While the Michigan Legislature completed its work on July 1st, the budget does not become law until signed by the governor, which did not occur on that date.
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