Chapter Notes
Brian Ericson
Chapter 1: Finance Definitions and Property Tax Information
A mill is one dollar of property tax for every $1,000.00 of taxable value.
Different cities have different numbers of mills calculated into property tax.
A millage is a fixed number of mills levied for a specific purpose, such as
operation, debt, etc.
An appropriation is a term used for setting aside money for a specific purpose
A fund is a self-balancing set of revenues, expenditures, and fund balances for a
specific purpose, such as athletics. No fund may adopt a deficit budget.
A budget may feature expenditures that exceed revenues if there is a sufficient
beginning fund balance and there is a positive ending fund balance. A budge may
not be adopted if there is a ending fund balance deficit.
Prior to 1994 the taxable property value was SEV, which is 50% of the market
value. In 1994, the passage of proposal A resulted in the use of a new value
termed taxable valuation which was set equal to SEV in 1994. The Headlee
Rollback made it so taxable valuation could not increase more than the rate of
inflation and is capped at 5%.
If property is sold, the taxable valuation is again set equal to SEV, which could
result in large increases in property tax.
Due to the Headlee Rollback, if all the property in a governmental unit exceeds
the rate of inflation, millage rates are reduced so that the amount of taxes is the
inflationary increase. The government does not make up the difference between
the number of mills to which it is reduced and the customary 18 mills.
Once the Headlee Rollback reduces the number of mills, it is fixed. The only way
to increase the number of millages back to 18 is by vote.
The student foundation allowance consists of 2 parts: 1) a set amount per pupil
$5,730 in 2009-2010, and 2) the amount a school district generates from levying
18 mills of tax. The later factor results in inequitable funding.
Chapter 2: Budget Process for the State of Michigan
The fiscal year for Michigan is from October 1st to September 30th. The fiscal
year for school districts is from July 1st to June 30th.
There are two mandatory Revenue Estimating Conferences per year in January
and May. The State Budget Director, State Treasurer, Director of House Fiscal
Agency, and the Director of the Senate Fiscal Agency are all present to analyze
economic data and predict revenues and the direction of the economy.
The budget process starts a year prior to the budget year. The first Revenue
Estimating Conference is in the second week of January. The governor uses
information from this conference in developing the proposed state budget. The
subsequent Revenue Estimating Conference(s) provide updates for the budget.
Due to Proposal A, if upcoming year revenues are less than contained in the
original budget and there is a deficit, funding must be rolled back and there will
be a shut down. The Governor and legislature then have 30 days to 1) increase
revenue, 2) reduce expenditures, or 3) channel money from other areas. The
Governor may also issue an executive order with five days notice. The
Appropriations Committee will then have ten days to approve or reject the order.
The Governor presents the proposed budget during a State of State address to
the Senate and House prior to presenting the budget to the Joint Appropriations
Committee, which consists of 27 House members and 16 Senate members. The
Joint Appropriation Committee chops up the budget and sends its parts to
different appropriations subcommittees between the House and Senate for
discussion.
The stating house of each bill is alternated each year. For example, a Senate
subcommittee will first review the education budget one year, while the next year
the education budget will start with a House subcommittee.
Bills passed in the appropriations subcommittees are sent to the full
appropriations committees for discussion and changes. The bill will then move to
the respective House or Senate for discussion, amendment and approval. There is
a five-day waiting period from when the bill is sent from the appropriations
committee to the time the bill is discussed on the floor.
Once the house of origin approves a bill it is then sent over to the other house for
approval. The bill is then sent to the Governor for approval or veto.
The Governor has fourteen days to sign, veto, or line item veto the bill. If no
action is taken in fourteen day the bill is vetoed.
Any veto by the Governor can be overridden by a two-thirds majority vote by the
House and Senate.
Chapter 3: History of State Aid in Michigan
There are three sources of revenue for state aid. The state school aid school fund,
the general fund, and the restricted federal funds combine to provide state aid to
k-12 education.
The state school aid fund derives money from sales tax (35%), income tax (15%)
and state education tax of six mills (14%). The percentages of contributions vary
from year to year.
The State provides a student foundation grant, which is a specified amount per
each student registered. The state also provides categorical or grant funding for
purposes such as at risk student (31a), vocational education, special education,
etc.
Prior to 1994 Michigan schools were funded heavily on property tax through the
Bursley Formula. The formula is as follows: (fixed amount) + (local operating
mills) x (fixed amount) = per student funding.
According to the Bursely Formula, if a district revenue fell short of the guaranteed
per pupil revenue, the State contributed the difference. This led to inequity due to
differences in property values and number of mills. One of the unintended
consequences of the Bursley Formula was a massive disparity in funding due in
large part to out-of-formula districts.
A fundamental misunderstanding of school funding caused constituents in less
affluent areas to believe that there was mismanagement of funds and subsequently
vote down millages. This widened the gap further.
Proposal A attempted to remedy the broken system by eliminating local school
property taxes. All districts below $4200/pupil were brought up to that point and
would be at $5000/pupil with the passage of an 18-mil tax on non-homesteads.
School districts above $5000 began this process with their funding from the
previous year. A cap was also set at $6500/pupil from the 18-mil homestead tax
plus state aide. Proposal A additionally allowed for an enhancement millage of
3 mills, which must be approved by ISDs
According to Proposal A, charter schools may not receive enhancement mils.
Charter schools receive the same per pupil allotment as the school district
boundaries with which they lie, unless they hit the public school academy cap.
To assist schools with previously higher per student funding the hold harmless
millage was adopted. With a student foundation grant over the hold harmless
amount, school districts are able to levy enough mils to reach the student
foundation grant. The first 18 mils must be levied upon homesteads. After 18,
the mils are levied equally on homesteads and non-homesteads.
With Proposal A, school districts became responsible for employer retirement and
social security contributions. Also, there was an increase in sales tax from 4% to
6% and a decrease from 4.6% to 4.4%. A new State Education Tax applied to all
property and was 6 mils.
Chapter 4: Budgeting in Public Schools
There are specific conditions a school must abide by to complete their budget. A
school district must advertise and hold a public hearing on the budget and
property taxes. Also, the Board of Education must approve a property tax millage
and the budget. If these conditions are not met, then funding cannot be expended.
If property tax values increase from one year to the next, there must be a truth in
taxation portion of the budget hearing. Before the board can reaffirm the 18mill for the coming year it must advertise and hold a public hearing. If this
hearing is not held, then the millage rates will be rolled back so that the tax
revenues are equal to the previous year.
There are several different types of budgeting. Traditional/line-item budgeting
relies on historical spending data, rather than justification for costs. This is more
for day-to-day operations. Function budgeting is grouped around basic functions,
such as instruction, transportation, and administration. Functions are broken
down into sub-functions, which are divided into objects. This is a more broad
approach used for central office. Site-based budgeting is a decentralized method
that brings the allocation of funds to individual departments.
The State of Michigan Accounting Manual prescribes a structure for coding,
which includes mandatory categories of funds (general, debt-service), function
(high school, pre-school, summer school), object (salaries, administration,
research), and state code (membership, court placed children, special education)
Other accounting codes include transaction codes (revenue, expenditure, balance),
program (special ed.), facility (name of school), and other (social studies
department).
Audits are historical based, not predictive like budgets. Audits use statistical
analysis and review transactions to determine compliance with federal and state
guidelines.
Budgets are predications and are extremely complex due to being based upon
salary and health changes, retirement rates, student count, property tax, federal
and state grants, FICA rates, and utilities.
A typical school budget has between 60% and 70% of the budget allocated for
instructional costs. Administrative costs are typically less than 5%. Athletic
programs are usually between 0% and 2%. Special education typically receives
between 5% and 10% of funding. A healthy fund balance is 7% to 10%.
Transfer-in revenue is from another local government unit in which the money is
raised by taxes and not earmarked for education. Transfer-out expenditures are
related to specific programs, such as athletics.
John Engler expanded year-end financial reports, termed form b, with the idea of
comparing school spending and test results. This approach was flawed due to
that fact that seniority and union agreements dictate salary, not performance.
Recently, this process has been moved online and renamed Financial Information
Database (FID) and is still very cumbersome.
Chapter 5: Special Education Issues
In 1974 the Education of Handicapped Childrens Act mandated special education
services for all handicapped children. In 1976, as a response, Michigan passed
Public Act 451, which mandated special education services for specific diagnosed
children until the age of 26.
In 1997 the U.S. passed the Individuals with Disabilities Act (IDEA) required
schools to provide a free and specially designed special education to eligible
disabled children.
Schools are also required to provide special education in the least restrictive
environment, which translates into incorporating students into general educations
classrooms as much as possible.
Special education children have the right to due process. They are required to
have an individualized education plan. Parents may contest special education
services with a hearing officer. The cost of the office is placed upon the school
and if the parent is successful, then the cost of their representation in placed upon
the school.
Schools are allowed to discipline disabled students and suspend such students.
However, if the behavior is a manifestation of their disability, then the school
district may not expel the student. The district must reinstate the student
according to the IEP and provide services, weather the student is permitted on the
grounds or not.
In the 1970s Michigan provided 28% of added special education costs and 70%
of special transportation for special education students. The second source for
special education funding came from countywide special education millages
levied by ISDs.
According to the Headlee Amendment of 1978, the State cannot mandate services
without providing funding for them. With funding for special education
increasing and percentages paid for by the State dwindling, school districts sued
the State of Michigan in 1979. They claimed that the State was not meeting
funding requirements in the Headlee Amendment by not providing funding to
schools. The intent of the constitutional amendment was to limit tax increases
levied by Michigan government units to the rate of inflation to prevent unchecked
government taxation. School districts claimed that the government was getting
around the tax increase by requiring more services.
School districts won in 1997, but the reimbursement was only back to 1994, when
Proposal A began. The settlement was $1 billion. Non-plaintiff schools had
specific requirements for the funds, while plaintiff schools did not.
In 1998 another lawsuit was filed for current and future funding by the State. The
State came up with a strategy for dealing with the funding. The Headlee
obligation was either the number of special education students times the
foundation grant or the 28% and 70% of special education costs. Typically the
Headlee obligation is the number of special education students times the current
foundation grant. The government then provides the Proposal A guarantee, which
is the foundation grant in 1994 times the number of total students. A discretionary
payment is added to the two previous amounts.
This new configuration of money ends up yielding the number of students times
the foundation grant. The State argued that the increase in the foundation grant
since 1994 was to address special education funding. The school districts argued
that added cost funding should be on top of the student foundation grant. They
stated that if the increase in the foundation grant was mainly to address special
education funding then there is less than inflation provided for general education
funding. The courts ruled in favor of the State.
Chapter 6: Personnel, Staffing, and Negotiations
Labor typically accounts for 80-90% of expenses for school districts. In recent
years, the increasing cost of healthcare, retirement, and Social Security has led to
larger percentages of revenue going towards staff and less going toward capital
improvements. Many citizens are reluctant to pass long-term bond issues for
capital improvements and assume school districts are irresponsible with funds.
The increase of costs of healthcare, retirement, and Social Security (7%-9%
increases) are outpacing the increases in state aid (2%-4%). Exacerbating the
problem is the fact that there is no other approach for schools to increase funding
under proposal A.
Most teacher agreements feature steps for longevity and salary increases for cost
of living increases. The base step is typically bachelors degree step one.
Health insurance typically increases 10% and 20% annually. Most school districts
use MESSA, which is supported by the MEA, the largest teachers union in the
state of Michigan. MESSA is the cream of the crop for insurance and to address
the monopoly on education healthcare John Engler amended the Public Employee
Relations Act to prohibit specific insurance providers from collective bargaining.
Retirement for most public school employees is through Michigan Public School
Employees Retirement System (MPSERS), which requires contributions from
school districts at a variable rate of around 16% of salary. Employees contribute
4.3% or less.
Both employees and employers must contribute to Social Security through the
Federal Insurance Contribution Act (FICA). The current rate is about 7% of
salary.
The typical rule of thumb is that salary expenses to benefit costs should be 70% to
30%.
Contract negotiation is broken down into six phases:
o 1) Preparation for the negotiation - each side talks to representatives
o 2) Opening proposal phase - initial demands are presented
o 3) Negotiation phase
o 4) Deadline phase each side uses tactics to convince other side
o 5) Reaching the agreement phase a draft is developed, a teacher vote is
taken and a board vote is taken
o 6) Implementation of the agreement phase
The Public Employee Relations Act (PERA) establishes parameters for contract
negotiation. It separates different groups of employees into different agreements.
It also creates a chain of command where the union representative and
administration bargaining representatives must be approached before going to the
board or to teachers. It classifies mandatory bargaining topics (wages, school
calendar), permissive bargaining topics (layoff reduction decisions, drug testing),
and illegal bargaining topics (closed shop, waiver of tenure rights)
PERA defines strikes as work stoppages for protesting or determining unfair labor
practices. This ended the practice of filing for unfair practices before going on a
strike. The fine for a strike is one day of pay. To fine an employee a MERC
hearing must be held at the expense of the district with the fines paid to the state.
Chapter 7: Michigan Public School Employees Retirement System (MPSERS)
All employees of k-12 public school districts including charter schools and
intermediate school districts are enrolled in the Michigan Public School
Employees Retirement System (MPSERS). MPSERS is a separate governing and
financial organization within the States Department of Management and Budget.
The Office of Retirement Services administers the system and is composed of
twelve-member board appointed by the Governor. The system is funded entirely
by tax-deferred employee contributions, employer contributions, and investment
income. The constitutionally guaranteed pension plan is considered separate
from the health benefits. MPSERS has gradually been shifting rising health care
costs for retirees.
With 30 years of service, a public school employee may retire at age 55 under the
Basic or at age 46 under the MIP. With 10 years of service a public school
employee may retire at age 60. A public school employee may retire at age 60
with five full years and five partial years or at age 55 with at least 15 years and
five partial years of service. In this system one year of service is considered
working 170 days for 6 hours per day. Partial credit is given for 17 days.
Employees employed prior to 1990 are Basic Plan participants
who do not contribute and receive a fixed dollar amount that
does not change for inflation. Since 2010, employees must
contribute 3% to healthcare costs. Employees employed after
between 1987 and 1989 could elect Basic or select a fixed
Member Investment Plan. MIPs calculate pension based upon 3
years instead of the five years used by the basic plan, which
results in a higher wage. Currently MIP Fixed employees
contribute 6.9% of their income, but receive cost of living
increases. From 1990 to 2008 all employees were required to
become part of the MIP Graded Plan. Under this plan, as the
wage of an employee increases, so too does the percentage of
contribution up to a cap of 7.3%. The MIP Plus plan has been
required from 2008 to 2010 and requires a 9.4% contribution.
The MIP Hybrid plan requires 11.4%, an additional 2%, which
would be matched by employers. This plan is aimed to
addresses structural deficiencies in the MPSERS.
The contribution rates for public schools vary by year. The
percentage has grown from 11% of gross wages to over 20% of
gross wages. Employers make up what is needed to fund the
system after employee contributions and investment income.
One of the main issues facing the retirement system has to do
with future unfunded health care cost liability as forecasted by
actuaries. Therefore, school districts have to contribute toward
normal cost (pensions), health care costs, and unfunded costs.
In 2008 the pension portion was 83% funded and the health care
portion was 97% underfunded. In 2010 the State mandated an
employee contribution of 3% towards healthcare.
The longer you work, the higher percentage of healthcare is paid
by the retirement system. A 30-year worker receives a 90-10
health benefit plan. If less than thirty years is worked, less than
90% will be covered.
To calculate the pension amount take the average final
compensation (either from 3 or 5 years) x 1.5% x number of
years of credit time
There are also pension options for withdrawal. The straight-life
option nets the highest pension possible for the retiree and the
pension is only paid during the life of the retiree. The 100%
survivor pension pays a reduced amount to the retiree and upon
the death of the retiree, pays the survivor the same pension until
death. The 75% survivor pension pays a reduced amount more
than the 100% survivor pension and pays the survivor 75% of
the retirees pension. There is also a 50% survivor pension.
There is also an Equated Retirement Method where a larger
pension amount is paid in the beginning and less at the end.
This is typically used for individual awaiting social security
benefits. Once options are chose they cannot be changed.
A retired employee may unroll themselves and dependents in
health, vision, and dental plans. This will automatically be
deducted from the monthly pension amount.
In order to collect pension dollars an employee must have fifteen
years of total credit time. This can be obtained through
Universal Buy-In, where employees can buy up to five years of
service and can be paid immediately or over time with monthly
deductions of $50 or more. An employees age and years of
service determine a percentage. This percentage is applied to
the highest year of earning. This is the cost for one year of
service.
If a retiree works for a MPSERS school, he or she may only earn
one third of their final salary average used to calculate the
pension amount per year. This final salary amount is increased
by 5% per year for inflation. Once drawing Social Security, no
individual may earn more than $10,080. If a retiree is not at a
MPSERS school and is not drawing social security, there is no cap
on income.
Chapter 8: Bonds, Sinking Funds, and Other Financing for Capital Expenditures
A shared savings plan is financed through the general fund and pays for capital
improvements over the course of several years. The capital improvements reduce
energy cost and therefore fund themselves. This form of finance works well for
low cost and short-term improvements, but is not applicable to many capital
expenditures and is susceptible to misleading conclusions about savings.
A general fund cash method is also available for up to 20% of a schools budget.
Typically this is used for inexpensive purchases such as furniture, where the
lifespan of the capital is not long enough to justify long-term payments.
Installment purchases are another options, which can spread payments over the
course of up to six years. These require interest payments and are typically for
larger purchases, such as buses and technology hardware.
Sinking funds allow district to levy additional millage, up to 5 mills, for
improvement and development of sites on a pay-as-you-go basis. Property taxes
are placed into a separate fund for capital improvements and therefore are not
subject to interest costs. Sinking funds cannot be used for buses, technology,
furniture, and salaries. The drawback is that the funds only allow for smaller
projects on a pay-as-you-go plan. This is subject to approval from the Michigan
Department of Treasury and the citizens.
A bond is when a district asks taxpayers to approve a debt millage on all property
tax in the district. A bond allows for larger capital improvements, such as
construction, remodeling, bus purchases, technology hardware purchases, and
refinance. This is because all of the funds are available up front. The drawback is
that there is a significant amount of interest paid on the debt.
Obtaining a bond is a lengthy process. A district must 1) review facilities with an
architect 2) establish an advisory committee 3)contract with legal council and a
financial advisor 4)develop a bond proposal 5)obtain authorization from the
Michigan Department of Treasury and from citizens.
Underwriters buy the bonds from school districts and sell them on the open
market. Negotiated sales of bonds can be done for 12 million dollars or more.
These sales allow for more flexibility in entering and exiting the market, and in
varying the bond structure. The drawbacks are that the public does not perceive
this as a process to find the lowest bidding.
Competitive bond sales do not allow for modification of structure and are subject
to market condition of low demand. These bond sales do demonstrate to the
public that open bidding resulted in the lowest interest rate.
Qualifying bonds through the Michigan Department of Treasury helps secure a
lower interest rate by ensuring that the district does not default. In the case that
the district cannot pay the money is burrowed from the Michigan School Bond
Loan Fund. This may be due to underestimating the millage or to a large decrease
in taxable value.
When voters approve a debt millage for a bond, the district is able to levy
whatever debt millage is necessary to pay the debt. This exact millage amount
may vary depending upon taxable values and cost of the project. Typically,
financial advisors overestimate on debt millages.
Chapter 9: Cash Flow and Investments
Since 1983 schools are able to notify local property treasurers in order to levy
property taxes in the summer, and provide a much better cash flow situation for
the upcoming school year with funds received up-front.
In 1994, Proposal A changed the funding of schools from primarily property tax to
primarily monthly state aide payments, which resulted in cash flow difficulties.
Currently, 65%-95% of the student foundation grant is received through monthly
state aide payments. The remainder is received by each school district through
tax collections in summer or winter.
In 1997 the state aide payments were stretched from 9 to 11. Two months of state
aide were shifted to after the school year ended. Unless there was a significant
fund balance, districts were forced to burrow until their funds arrived.
Districts with the same student foundation grant may receive their funds
differently, depending on the taxable value in their district. The larger the taxable
value, the less money received from state aide in monthly payments and the better
the cash flow for the district. This is because more of the funds will come up
front from property tax.
Cash flow is affected by 1) the proportion of state aide payments to total revenue
2) the fund balance and 3) when property tax collections are received
Cash flow is affected by the timing of expenditures. Because salaries are paid biweekly, a district cannot even have weekly cash shortages. Districts must
consider this and burrow accordingly.
Districts can seek out State Aide and Property Tax Anticipatory Notes. These are
for less than 12 months and the collateral is incoming state aide and tax
collections. Districts can receive bids for these notes from financial institutions
offering the lowest interest rates, which typically offer flexibility on the timing.
Also, districts can receive these anticipatory notes from the Michigan Municipal
Bond Authority. The notes are not as flexible, but often come with a lower
interest rate and a streamlined process.
The amount burrowed with anticipatory notes is limited to the largest anticipated
cash flow deficit faced in the first 6 months. An additional amount of 5% of last
years expenditures may be added. In the first 6 months, if the cash flow deficit
does not reach 95% of the amount burrowed, the district will have to pay a rebate
to the IRS. This prevents schools from over-burrowing to invest funds.
A line of credit may also be obtained for districts. Upon board approval a school
district may burrow from a financial institution. The interest rate may be higher,
but schools will have more flexibility in paying off the line of credit in the shortterm.
Districts may invest in state certificates of deposit, and U.S. treasury notes.
Districts are forbidden from investing in more risky forms of investments, such as
the stock market, equity securities, real estate, or foreign investments.
Chapter 10: Activity Funds and Cash Procedures
To safeguard revenue, job functions should be separated with checks and
balances. There should be internal control with difference employees collecting
money and dealing with recordkeeping. The evaluation of internal control is an
integral part of annual audits.
Activity funds, also called trust and agency funds, are not highly monitored in an
audit due to the lack of regulations. The main sources of these funds are not the
government, but are bake sales and fundraisers, are therefore are much smaller.
School principals needs and district administrators need to focus on the collection,
depositing, recording, and spending of activity funds. Impropriety can lead to
mistrust of the district or administration. To deter theft there should be a
separation of duties and a regular deposit of funds to financial institutions.
Principals should review activity accounts on a regular basic, but should also
involve teachers and parents in the activity process. Other stakeholders should
review and determine how their money is spent. The process of raising,
depositing, and collecting funds should be explained to parents or activity leaders.
Also, appropriate parents or teachers should cosign for activity fund expenditures.
Schools should not allow activity funds to be held in bank accounts outside of the
school. Without proper accountability the schools name should not be tied to
those funds. This also violates the Freedom of Information Act, which states that
the public should be able to see how funds are spent.
Separate clubs that legally organize as a separate entity with separate
recordkeeping, sales tax liability, adhere to the IRS regulations, and raise funds
under their own name (not the district) may operate outside of the school.
Unfortunately, these groups do not have governmental immunity protection or the
liability insurance that school district employees possess. If such a club purchases
a playground, they could potentially be sued without having protection.
Trust funds are created for a specific purpose of donating. Normal student
activity funds are agency funds. Activity funds can be spent in ways not
permissible from the general fund, such as political contributions.
Schools cannot require students to raise money for k-12 educational expenditures.
Schools should use general fund money for these expenditures and are exempt
from paying sales tax on such k-12 educational purchases.
School districts must pay sales tax on any products for resale through fundraising,
concessions, etc. Often times, fundraising organization will build in sales tax to
the products used for fundraising. Properly administering sales tax will avoid
large penalty by the Michigan Department of Treasury.
School districts should prohibit use of its unique sales tax number by
organizations or individuals, such as PTO and booster clubs. These organizations
should be encouraged to obtain their own tax ID number. Districts can instruct
vendors that official school purchases will only be made through district checks.
Chapter 11: Miscellaneous School Finance Issues
All schools are required to maintain property and liability insurance. Property
insurance covers school property against weather, fire, vandalism, and employee
errors. Liability insurance protects schools from lawsuits due to building or
property defect and due to Board Errors and Omissions.
Board Errors and Omission coverage protects schools from employment
decisions, board decisions, negligence, and other employment activities. Board
Errors and Omissions protection is invoked if normal employment coverage of
Governmental Immunity does not dismiss a case. Still, Board Errors and
Omission coverage is not provided for gross negligence, where an individual
violated the law, such as in the case of corporal punishment, sexual harassment,
etc.
Due to the high cost of insurance many school districts are a part of insurance
pools. Such pools joins school districts to purchase layers of insurance from
different companies to cover catastrophic claims. With more providers, the risk
and cost are less. Risk Management is also applied in many districts to reduce the
likelihood of claims by the creation of policies to promote safety.
Parents are responsible for student accidents, unless there is proven negligence.
In the case of any accident, students should complete and accident form and
parents should be informed that the accident will be reviewed by the districts
insurance carrier.
School districts may rent the building for non-formal short-term arrangements. In
this situation fees are typically charged for custodians. Districts also lease unused
buildings with lease contracts. When renting facilities it is important to keep in
mind the subtle cost of determination of facilities.
Charter schools were created to spur competition but foster a few problems.
Special education students are steered to public school, which place a larger
financial burden on them. There is also the claim that management companies are
in it for the money. Many students are lured to charter schools and thus causing
financial problems in public school districts.
As part of school of choice, no school can prevent a student from attending
another district. Schools who are part of school of choice are able to accept
students from other schools. Schools that are not part of school of choice are not
able to accept students without the permission on the students district. Districts
may deny incoming students if they are at capacity or if the student has severe
behavior issues.
The argument with school of choice is that students with more opportunity for
transportation can leave a district while others are stuck there, thus creating
segregation. With a special education student, he or she can only change districts
if the two districts agree who will pay for the added special education costs. This
is rare.
Purchases over a certain amount are subject to bids, as stated in the Revised
School Code. The lowest bid does not need to be selected. Quality, availability,
and reliability must be considered. Venders not selected often sue. If a consistent
bidding process was followed the district will not be liable. Districts should
understand the products, avoid gifts, and promote a culture of staff honesty.
The County Clerk gives School Board election options. School Board terms
range from 4 to 6 years. Many districts choose to hold the elections in November
with the other elections, which cut costs. Others choose May, so not to interrupt
the middle of a school year. Often times, the 18-mill non-homestead tax, bonds,
and sinking funds items are on the same ballot.
Chapter 12: An Analysis: The State of School Finance in Michigan
Proposal A has resulted in the shrinking of the gap between
wealthy and less affluent school districts. Less affluent school
districts have seen an increase in the foundation grant.
Homeowners have also seen a drop in property taxes.
Since 1994 there has been an erosion of the tax base due to tax
breaks for businesses. Over 8.3 billion has been excluded by tax
reduction strategies, such as abatements. This causes a larger
burden to be placed on the School Aide Fund.
Another problem with school finances is the structure of state
aide payments, which begin after the school year has begun and
end after the school year. This results in major interest
payments from schools.
Currently, there is a gap between the funding for special
education and the mandates placed upon school districts by the
state.
Headlee rollback millages occur in many districts and lower the
student foundation grants. Restoration of millage reductions is
difficult to get approved. The State doe not make up the
difference of the Headlee losses to State Aide and the voters
have the power to essential decrease the foundation grant for
lower taxes.
School districts may not appeal to the State for delinquent
property taxes, as they could prior to Proposal A.
At-Risk funding comes with restrictions to be applied to new
programs. This often forces school districts to cancel existing
programs in an attempt to meet stipulations.
Consolidation is an option that is rarely used. In the right
situation it could save financial resources for smaller districts.
Consolidating could reduce transportation, maintenance, food
services, business functions, and other costs.
One other approach to reduce cost would be to use technology
for professional developments, as opposed to sending employees
out of state and reimbursing travel etc.
One of the growing problems in Michigan is the increase in
regulation and the cost and time school districts devote to such
regulation.
