Lansing: Local School Districts’ Largest Funding Source

School funding flows downhill – and slowly – from Lansing.  To understand local district budget issues, we must first understand their largest source of revenue – the state budget.

LansingAmong the greatest misconceptions about public school budgets is that local property taxes provide for the majority of funding.  This is understandable because that was indeed the case – before 1994’s  Proposal A.   Before Proposal A, a typical district might count on the state for 20% of its revenue.  Today, for the majority of districts in Michigan, the state provides about 80% of the operating revenues. Proposal A was a radical change that brought property tax relief, but created great dependency for the local school district on Lansing’s financial health.   Given its current condition, this is obviously unwelcome news.

We’ll be exploring Proposal A in greater detail in ensuing posts.  To gain an understanding of local district operations and budget decisions we need a fundamental understanding of Proposal A and its implications.  But before heading into those discussions, it’s equally helpful to know where K-12 funding sits in the larger picture of the state’s budget. 

It would take far too many words and place too great a demand on your patience to explain the intricacies of the state budget.  Luckily Birmingham, Michigan’s Rob Lawrence has boiled the ocean and created an outstanding, information filled 6 minute video on the topic – all based on a one page diagram.  Rob serves on the Board of Education for Birmingham Schools.  It was his blog site that encouraged me to start this one.  Please take the time to watch this video and we’ll take it from there.


I’m sure at many points in those 6 minutes you were recalling the budget stories covered by the media in relation to the state budget dillonchallenges.  The most recent one is the proposal by Democrat Speaker of the House Andy Dillon to overhaul the health care expenditure for all state employees, including school employees and retirees.  We’ll leave the discussion of the pros and cons of that proposal to another time, but at a very high level (and as covered by Rob’s video) the budget exposure the state has in this area is one of its greatest problems. This gets into the Michigan Public School Employee Retirement System (MPSERS) –  a classic example of a state level problem impacting the local district budget.  It, too, is a great topic for another day.  Are you beginning to see how this all weaves together?

But before diving into those spider holes, let’s absorb the 30,000 foot view, wonderfully summarized by Rob’s video.  We have a state in undeniable financial peril.  We have K-12 education costs as the state’s largest budget item.  This is not an ideal combination for those of us adversely impacted by K-12 funding constraints.    This pressure is likely to persist for some time.  It would be irrational to think radical change to Proposal A is just around the corner.  Unfortunately it would be just as irrational to think the state economy will recover quickly enough to allow us to avoid some tough decisions locally.  So here we sit between Scylla and Charybdis.

This is the context of the challenges facing local school districts in Michigan today.  The challenges are real and in our back yard.  My attitude has been that we need to confront the challenges logically.  Understanding the state’s budget and Proposal A are the first steps.  We need to understand Lansing’s budget challenges to better understand our own.  This is where we are headed in this blog.  We’ll dig into Proposal A and taxes next and subsequently get much deeper into the local budget issues.  But for starters, consider yourself more knowledgeable that the proverbial “average bear” in matters of the state of Michigan’s budget.  Thanks for investing the time.


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