School Aid Budget: Will FY2014 Increases Be Sustainable in FY2015?
State Budget Note 2013-02, July 2013

Just nine days following the announcement of an agreement on state budget targets, the Legislature wrapped up the first large piece of the Fiscal Year (FY) 2014 state budget when it sent the omnibus budget bill containing FY2014 appropriations for K-12 schools, universities, and community colleges to the Governor. Funding for K-12 school districts included an additional $126.6 million above the level initially recommended by the Governor – the result of May revenue estimates that included a cumulative $123.3 million in additional School Aid Fund revenue across both FY2013 and FY2014.

The additional revenue allows for enhancements to the budget that result in small per-pupil funding increases for all school districts, but the magnitude of the increases varies significantly across districts. The inclusion of an equity payment means that districts currently receiving the minimum foundation allowance will see larger increases than districts receiving more than the minimum allowance. Further, changes to funding earmarked to assist districts with retirement obligations will be more advantageous to the 84 percent of all charter schools that do not rely on that funding to finance Michigan Public School Employee Retirement System (MPSERS) contributions.

Unfortunately for school districts, projected School Aid Fund revenues for FY2015 may not be adequate to maintain these budgeted increases. Since much of the new revenue identified at the May consensus conference was tied to circumstances unique to FY2013, the short-term bump in available revenues is significantly larger than the long-term projected increase for FY2015 and beyond. Without either an increase in the GF/GP contribution for the School Aid budget or some further improvement in projected School Aid revenues, a significant portion of the FY2014 budgeted increases will need to be eliminated in FY2015. State policymakers will be faced with another round of difficult decisions next year in finding a balance between maintaining these increases for school districts, meeting other state GF/GP funding needs, and making decisions on funding for early childhood education, with the Governor having requested an additional $65.0 million of School Aid Fund revenue in FY2015 for the Great Start Readiness Program in his February proposal.


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