Monthly Archives: December 2009

Fund Equity Is Not a Long-Term Solution to School Funding Challenge

As everyone acknowledges the reality of the financial distress facing public schools, the focus must shift from assigning blame toward crafting solutions.  Understanding fund equity is essential to a meaningful dialog on this topic.  An objective view of data shows that fund equity will help districts cope, but is clearly not a long-term solution to the root cause problems.

Remember the first time you saw the picture below?  Look at it one way and you see an old woman, but with a subtle shift in focus it looks like a young one.

old woman optical_illusion

A view of the state’s K-12 budget and those of the local school district’s can have  a similar effect – most notably in relation to a school district’s fund equity.  You can learn much more about fund equity in this installment of the GPPSS Financial Transparency Series, but in short fund equity can be defined as the aggregate of a district’s revenue less its expenses over the history of its operations.

Sometimes called a  “rainy day fund”, fund equity draws attention in times of budget contraction because it is viewed, rightfully, as an alternative to other imminent and unattractive cuts.  The key question, however, hinges on the nature of the budget shortfall.  Is it temporary or an annually recurring one? A recurring shortfall is referred to as a structural deficit.  The distinction is significant.  I view the budget contractions that Michigan K-12 schools are now experiencing as permanent, what I previously wrote about as the New Normal. Continue reading


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Filed under GPPS Finances, State of Michigan Finances

Contemplating the “New Normal” on Michigan’s Darkest Day

Michigan’s communities are engaged in a high stakes game, wrestling with the lethal combination of rising costs and falling revenues.  Despite the urgency of the situation, a long-term view is critical for long-term health.

New reports surface daily chronicling how communities are responding to the financial trauma plaguing Michigan public schools.  Here is a sampling of articles from Dearborn, Saugatuck/Portage, WyomingWayne-Westland/LivoniaBloomfield HillsAllendale, Coopersville, Grand Haven, Hudsonville, West Ottawa, Spring Lake, Charlevoix, Grand Ledge, Hemlock/Saginaw/Chesaning, Escanaba, Fenton/Holly/Linden, Lansing, Utica, Northville, Three Rivers, East Jackson, Adrian, Muskegon, Detroit, Walled Lake, and Birmingham

welcome to MI What’s the point?  The list runs the gamut of the wealthiest districts to those that receive the lowest per pupil revenue.  Some are very large and some are very small.  Some are urban, some suburban, and some rural.  Some were previously receiving section 20J funds and some never received them in the first place. 

The point is that if you’re a school district in the state of Michigan you are certain to be experiencing financial distress.  There are no exceptions.

Welcome to Michigan –  a great state, but great times?  Not so much.

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Filed under GPPS Budget Decisions, State of Michigan Finances

The Economics of Class Size

“Doing more with less” was the recurring concern the Board of Education heard from teachers at our last meeting.  Who is getting more and who is getting less?  What are we measuring?  What matters most and to whom?  Let’s take a closer look at the dynamics and economics of class size as we wade into murky budget waters.

class size In my most recent blog I reported on my trip to the State of Michigan Board of Education meeting where economists delivered testimony on the state budget.  Tax policy, specifically the decision to raise taxes, is at the heart of the K-12 funding debate.  Let’s call it the tax question.

Governor Granholm and many Democrats argue that taxes should be raised to avoid painful cuts to local school district budgets.  They cite statistics that show Michigan’s tax burden is middle of the road in comparison to other states.  Senate Majority Leader Mike Bishop and many Republicans argue that whatever the rationale, increased tax burden will worsen Michigan’s already ravaged economy.

The state board put the tax question to  economist Patrick Anderson who advised, “Everyone who hires workers and pays taxes thinks [higher taxes] do matter…and they are the ones that really matter.”  This  position cannot be substantiated irrefutably, but is certainly logical.  Indeed, no one argues that increasing taxes is better in and of itself.

The same can be said of class sizes.  No one argues that higher class sizes are better.  Except in narrow examples (e.g. K-3 class sizes of less than 15 students) research is inconclusive as to whether smaller class sizes improve achievement.  To paraphrase Anderson, to the people who matter, higher class sizes DO matter.  Students, parents, and teachers prefer smaller class sizes.  Supported by research or not, who would not prefer smaller class sizes?

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Filed under GPPS Budget Decisions, GPPS Finances