The MC: The Mackinac Center Blog

An Opportunity to Improve School Funding Equity?

Pushback against federal regulation should not preclude local reform

A resolution pushing back on proposed new federal guidelines for education funding received broad bipartisan support this week in Lansing. Where a top-down mandate meets resistance, local initiative could pick up slack to address the underlying issue.

MLive reports that State Superintendent Brian Whiston testified Tuesday before the Senate Education Committee against a regulation introduced by the U.S. Department of Education to implement the new Every Student Succeeds Act, or ESSA. The regulation would require local districts to demonstrate that low-income schools are funded at least on par with their wealthier peers before federal Title I dollars are released.

In other words, districts should be using designated federal funds for high-poverty schools to “supplement” state and local dollars, rather than to “supplant” or backfill their budgets.

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Resolution sponsor Sen. Phil Pavlov says schools don’t need another federal mandate, a view that deserves sympathy. Michigan Association of School Administrators executive director Chris Wigent suggested the proposed rule is a solution in search of a problem. But it’s not clear that districts generally direct dollars to their schools in an equitable manner.

School districts with more low-income students already are rewarded with substantial federal dollars, resulting in greater total funding for them compared to schools in nearby wealthier neighborhoods. For example, in 2014-15, Detroit Public Schools and Ann Arbor Schools received about the same amount of combined local and state funding per student. But add in Detroit’s $5,125 versus Ann Arbor’s $300 in federal revenue per student, and the comparison greatly changes.

Under Proposal A, Michigan has established a broadly equitable funding floor at the district level. How dollars filter down from the central office to local schools can be much harder to see, though. Most school-based funding is tied to district programs and staffing formulas, with funding at each school largely determined by employee seniority rather than student need.

Consider the Detroit Community School District, where the Title I federal funding proposal would have direct impact. How much resource equity exists between Fisher Lower Magnet Academy near Gratiot and 8 Mile, where 99 percent of kids are low-income, and the University District’s Bates Academy, with half the student poverty rate?

An increasing number of school districts nationwide have been moving toward systems that distribute significant shares of funding to schools based on student characteristics. Such systems are referred to as “student-based budgeting,” “weighted student funding” or “backpack funding,” because the money (figuratively) goes with the child’s backpack to the place where he or she is served.

The benefits of the practice include more transparent allocation of dollars and more flexibility for principals to prioritize financial decisions that directly impact their student body. And though no decisive impact on learning has been found, the Reason Foundation observes that greater student-based budgeting allocations are highly associated with closing academic achievement gaps between students of different races and socioeconomic groups.

The challenge of pursuing this strategy comes in training principals and other staff, and in upgrading financial systems and tools. But since many larger urban districts have gone down this path, the learning curve for a willing Michigan district would not have to be so great.

The proposed federal mandate has caused many state officials and interest groups to recoil, perhaps for good reason. The strings that come along with D.C. dollars and noble intentions can undercut effective local solutions.

Yet a district like Detroit, in dire straits and looking for a fresh start, ultimately would benefit from empowering local school decisions and from distributing dollars in a fairer, more transparent manner. The question is whether the lift would be too heavy for local leaders to accomplish.


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State Health Policy Toolkit

10 reforms state lawmakers can implement now

Michigan and other states are actively competing to become medical tourism destinations. Whether they succeed depends in large part on opening the state’s medical care delivery systems to competition and innovation and tearing down current protectionist barriers. These same reforms will make health care better and more affordable for our own residents too.

What steps are necessary to make this vision real?

Naomi Lopez-Bauman is director of healthcare policy at the Arizona-based Goldwater Institute and adjunct scholar at the Mackinac Center for Public Policy. She has identified what’s needed to bring it about, which the nationwide State Policy Network assembled int a new “toolkit” called “Ten Reforms State Lawmakers Can Implement Now.

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Here’s a quick summary. The full report offers clear explanations of the specific problems we face and how to address them.

1. Establishing Accountability and Transparency in Government Programs

Problem: Government programs to expand insurance coverage including the Affordable Care Act have added layers upon layers of bureaucracy and are often ineffective, inefficient and duplicative, not to mention unaccountable to both patients and taxpayers.

What Michigan Can Do: Before adding any new programs, start by auditing the ones we already have — state, federal and local — to identify who they are supposed to help and how much of the money actually benefits individuals. Then determine how these resources could be used to better meet the needs of those who need help the most.

2. Regain Control of the Health Insurance Market

Problem: Under the ACA states lost control of seven key insurance regulation factors for the individual market, including obtaining and keeping coverage; its cost; coverage mandates; cost-sharing limits; provider requirements and patient protections. Repealing the ACA will not affect these unless state laws are also changed here.

What Michigan Can Do: Lawmakers should review how the ACA was implemented here by state agency actions or new laws and prepare legislation now to take back control if the ACA is repealed.

3. Verifying Medicaid Eligibility

Problem: The number of Medicaid enrollees is skyrocketing, and many who may not be eligible are getting onto the rolls.

What Michigan Can Do: Implement a “robust and timely” verification system that, among other things, cross-matches Medicaid enrollees against other welfare programs. Adopt the best electronic and other tools to “systematically and routinely” verify eligibility.

4. Unwind the Medicaid Expansion

Problem: This state cannot depend on the federal government to keep funding its medical welfare programs at the same rate. The Medicaid expansion did not increase the amount of health care resources available to patients; it simply added additional patients who are less needy than the pre-expansion population. As a result any federal or state cuts to these programs may fall most heavily on those most in need.

What Michigan Can Do: Seek permission from the federal government to freeze enrollments from the less needy Medicaid expansion population. If the feds refuse, roll back eligibility to pre-ACA levels.

5. Increase the Supply of Health Care Providers

Problem: Long before Obamacare became law Michigan was already rationing health care in many ways, including restrictive scope of practice laws on midlevel providers like nurse practitioners, and using a “Certificate of Need” law that gives industry incumbents a say on whether new entrants will be allowed to compete against them.

What Michigan Can Do: Repeal the obsolete and damaging Certificate of Need law that benefits big industry players at the expense of patients and innovators. Eliminate scope-of-practice laws that benefit current providers but make care less affordable and accessible, and slam the door on innovative new ways of bringing health care services to people where they live, work and shop.

6. Protect Telemedicine and other Innovations

Problem: New services are exploding that give patients access to real doctors by video at a very reasonable cost, from the comfort of their own home. But around the country barriers are going up, including requirements for patients to go to a particular location for a video conference, or have a healthcare professional present during one, or get a physical exam before a prescription can be written. These burdens often have nothing to do with patient safety.

What Michigan Can Do: “Lawmakers should protect and empower healthcare innovators, especially when they offer consumers an affordable option to access timely care,” advises the Toolkit.

7. Safeguard Novel Medical Arrangements like Direct Primary Care

Problem: Direct Primary Care is an attractive alternative that lets families or employers enter flat-fee contracts with a doctor for basic services. By eliminating the insurance company middleman for checkups and a range of routine procedures, costs can be dramatically lower and access to your doctor greatly improved.

What Michigan Can Do: Good news: Our legislature already took a huge step by passing a law that excludes Direct Primary Care from the comprehensive and restrictive regulatory regime that governs health insurance. Not-so-good news: A Senate-passed proposal for a pilot program extending the same benefits to Medicaid recipients was crushed by status-quo interests in the House. We’ll get a do-over when the next Legislature takes up the state budget in the spring.

8. Expand Access to Volunteer Care

Problem: Many barriers stand between needy patients and health professionals willing to voluntarily provide free services.

What Michigan Can Do: Michigan could follow a model adopted in Florida, where doctors contract with the state to get protections from lawsuits in return for giving charity care to patients whose incomes are under 200 percent of the federal poverty level. Letting professionals meet continuing education mandates by providing volunteer care is another approach. Michigan should also facilitate charity groups that “parachute in” for large scale weekend clinics free to all comers, such as the Remote Area Medical organization.

9. Give State and School Employees Access to Free Market Health Options

The Problem: Health Savings Plans are popular in the private sector and are saving both workers and employers billions of dollars.

What Michigan Can Do: Nothing prohibits offering the same option to public employees. Legislation has been introduced to allow this in the past but did not advance. It should.

10. Protect Michigan Taxpayers from the ACA ‘Cadillac Tax’

The Problem: It starts in 2018, and every dollar paid to the “Cadillac Tax” is a dollar that won’t go to provide health care services. For family plans, 40 percent will be taken from of every dollar above an insurance premium price of $27,000. As healthcare costs continue to rise faster than inflation this tax will come down on more Michigan residents.

What Michigan Can Do: Our Legislature already passed a law in 2011 that capped state and school employee insurance benefit costs. But the protection has been watered down once, and is vulnerable to further erosion. One way to defend this law is to require that any Cadillac Tax on government employee insurance benefits be paid by the employees themselves, not taxpayers.


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Defined-Contribution Plans Help State Credit

Michigan's credit rating could increase after pension reform

Lawmakers hear odd arguments when attempting to reform the state’s underfunded pension system. The latest argument is that converting Michigan’s school employee pension program to a defined-contribution system will tarnish the state’s credit rating. For evidence that this is unlikely, Michigan can look to its own history, which shows that offering new workers defined-contribution retirement benefits instead of defined-benefit pensions can improve a state’s credit rating.

Michigan closed its state employee defined-benefit system in 1997, meaning all employees hired after that date would receive 401(k)-style retirement benefits instead of defined-benefit pensions. In 1998 the state’s credit rating was upgraded. Credit ratings consider a lot of factors facing a government’s fiscal health, but improved pension funding was cited as one of the reasons for the upgrade.

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Other examples exist. Oklahoma closed its state pension system recently. (And they did it without triggering the “transition costs” frequently raised in Michigan.) Its credit rating also improved following the change.

The financial risk of underfunded pensions is well-known to credit rating agencies. Earlier this year, the rater Moody’s alerted Michigan that resolving pension funding problems in school districts could be a factor that leads to an upgrade in a rating.

Putting control over retirement back in the hands of school employees would be better than our current system. It would phase out the ability of the state to generate additional debt by promising workers something, but not paying for it until later. And, contrary to what defenders of the system are implying, it would improve the state’s long-term financial prospects.

To learn more about how to fix Michigan’s pension problem, visit:


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RTA Transit Tax Focuses on Old Technology, Ignores Opportunity

Mozena debates merits of plan on Michigan Matters

A ballot measure to increase Wayne County property taxes to fund regional transit is stuck in past, focusing on transportation technology of the 1800s.

During a debate on Sunday’s episode of Michigan Matters hosted by CBS’ Carol Cain, Mackinac Center for Public Policy’s Vice President of Marketing and Communications John Mozena raised questions about the 20-year RTA transit tax plan that would rely on buses and trains.

We need to stop and think about what a 20-year plan means. … At a time of the most amazing change technologically in how people transport themselves around probably since the time Henry Ford was driving around in his quadricycle, we’re locking ourselves into technology from the 1900s in busses and technology from the 1800s in trains rather than allowing the innovation that’s out there in transportation to flourish. Twenty years from now, we’re going to wonder why we ripped up a lane of road to put in a bus lane in rather than self-driving-car guiderails.

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Mozena went on to say that the plan ignores real transportation issues for Detroiters, who face the highest average auto insurance rates in the country, and ignores the opportunity to create jobs near where people live.

This is a terribly pessimistic plan because it assumes that in 20 years, low-income Detroiters are still going to need to get on the bus in the morning, leave Detroit to go to the job, and then come home at night.

Watch the full episode of Michigan Matters here.

Learn more about the proposed tax increase and RTA plan here.


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Ban gas chamber for pets; subsidies for hospitals and Flint businesses; authorize new school taxes; regulate drones; more

The House held a pro-forma session with no votes this week, but the Senate passed a number of bills in its final session before the Nov. 8 election.

Senate Bill 979, Authorize .5 mill Flint property tax for spending and subsidies: Passed 36 to 0 in the Senate

To authorize creation of a new Flint authority with the power to impose a 15 year 0.5 mill local property tax, and use the money for unspecified government spending and subsidies to business owners.

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Who Voted “Yes” and Who Voted “No”

House Bill 4388, Authorize 3-mill "sinking fund" property tax for school security and computers: Passed 36 to 0 in the Senate

To allow school districts to impose a 3 mill property tax for 10 years for a “sinking fund” that can be used to buy computer equipment, software and security equipment. Under current law schools can levy up to 5 mills for 20 years for a much narrower range of uses.

Who Voted “Yes” and Who Voted “No”

Senate Bill 25, Give TEDF subsidies to hospitals: Passed 35 to 2 in the Senate on October 20, 2016

To allow Transportation Economic Development Fund subsidies and spending for hospitals. TEDF money is a type of subsidy in which the state pays for access improvements related to a particular developer’s plant or project.

Who Voted “Yes” and Who Voted “No”

Senate Bill 732, Exempt Masons lodges from property tax: Passed 31 to 6 in the Senate

To exempt property owned by Masons' lodges from property tax, under a presumption that "Masonic activities" are by definition charitable purposes eligible for a tax break.

Who Voted “Yes” and Who Voted “No”

Senate Bill 1073, Authorize electronic hunting and fishing licenses: Passed 37 to 0 in the Senate

To authorize the development and use of an electronic hunting license that individuals could display on a smartphone or other electronic device, to be ready by March 1, 2018. Senate Bill 1075 also passed, to authorize the same for fishing licenses.

Who Voted “Yes” and Who Voted “No”

Senate Bill 97, Require agencies disclose federal aid requests to legislature: Passed 36 to 0 in the Senate

To require state agencies that apply for any form of federal or other financial assistance to notify legislative leaders, relevant committees and the legislature’s fiscal agencies within 10 days, with the notice including any conditions or stipulations associated with receiving the assistance.

Who Voted “Yes” and Who Voted “No”

Senate Bill 1076, Mandate 5 feet of clearance to pass bicycle: Passed 34 to 2 in the Senate

To prohibit passing a bicycle while driving a motor vehicle unless there is at least five feet of clearance between the vehicle and the bike. This would be permitted in no-passing zones too, if there is room to pass with the required clearance.

Who Voted “Yes” and Who Voted “No”

Senate Bill 992, Regulate aerial drones: Passed 37 to 0 in the Senate

To authorize the use of aerial drones for commercial purposes in Michigan, if the operator is authorized or licensed by the Federal Aviation Administration. Recreational use would also be permitted subject to federal rules. The bill would preempt local government restrictions on drone ownership or operation, but allow local regulations on use within their jurisdiction. It would also prohibit improper use of drones, including privacy violations, and authorize misdemeanor penalties. Finally, the bill creates a state commission to develop more detailed rules.

Who Voted “Yes” and Who Voted “No”

Senate Bill 403, Ban gas chamber for dog and cat euthanasia: Passed 37 to 0 in the Senate

To require an animal control or protection shelter to use only injections of a commercially prepared solution for euthanizing a dog or cat. The use of gas chambers would be banned, although reportedly they are already no longer used.

Who Voted “Yes” and Who Voted “No”

SOURCE:, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit


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During Michigan’s economic “Lost Decade” of the 2000s, state government seemed to have just one response for crushing declines in income and employment that cost about 800,000 residents their jobs between 2000 and 2010: more corporate welfare.

If there was any evidence this approach works to turn around an ailing economy — there is not — it still could not have overcome the massive Michigan business and income tax increases imposed in 2007, and smaller exactions, such as a 2004 property tax hike.

Starting in 2011 a new governor steered a different course. Gov. Rick Snyder scaled back the pace of corporate giveaways, eventually ended a disastrous $500 million film subsidy adventure and replaced a destructive gross-receipts-type business tax with a simpler and less onerous corporate income tax.

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It appears to have been an improvement as Michigan incomes and employment levels have grown much faster than the national average since the last recession.

But corporate welfare is always an attraction for politicians. Today, in the absence of any overarching growth or reform agenda, lawmakers on both sides of the aisle are falling back into past bad habits. Indeed, the upcoming lame duck legislative session could see a corporate welfare blowout.

To protect his legacy of growth and reform, Gov. Snyder should be prepared to wield a sharp veto pen. He has raised some concerns about a recent proposal that would help real estate developers finance large projects using taxpayer dollars, but so far has not taken a public position on the proposal.

Fiscal analysts don’t know yet how big a hit state revenues would take from this proposal, but the measure promises a huge wealth transfer from taxpayers to downtown Detroit real estate developers, such as Dan Gilbert. But that’s not the only scheme percolating under the Michigan capitol dome.

Rep. Holly Hughes (R-Muskegon) is the lead sponsor for a cronyist port authority bill being pitched with the usual “economic development” rationalizations. The measure passed the House in a bipartisan vote on September 22. It could deliver port revenue to politically well-connected developers while leaving taxpayers holding the bag if things go badly.

The owners of two privately owned port facilities in Muskegon are not amused at prospect of competition from their own local government. One of them said in press reports that he and the other operator can easily handle any new demand for shipping cargo into Muskegon and adding another player would be counterproductive, and unfair too.

The bill also holds out the promise of benefiting another well-connected special interest, Consumers Energy. The utility owns a closed Muskegon plant with property it would like to sell. Hughes’s bill would potentially raise the price of that property artificially. Consumers had testified in support of it, but then shifted to a “neutral” position on October 17.

Hughes has struggled to justify how this legislation is a net plus for her region or the state. When pressed in a WJR radio interview, she told host Frank Beckman to call someone else for details.

Lansing’s corporate welfare backsliding may be gaining momentum. The recent push began with a 2012 vote to deliver taxpayer dollars to Detroit Red Wings owner Mike Ilitch for a new stadium project. Last year lawmakers wrote a special law giving tax breaks to a Nevada company that wanted to use the moribund Steelcase “Pyramid” building near Grand Rapids for a data center.

Today, in addition to Hughes legislation and the Gilbert proposal, there’s also a “public-private partnership” bill introduced by Sen. Mike Kowall. Like the port proposal this also could become a vehicle for delivering profits for well-connected developers with potentially big losses for taxpayers.

In another disturbing echo of Michigan’s last “lost decade,” the renewed corporate welfare push comes after a series of tax hikes imposed on regular citizens, including vehicle registration and gas tax increases.

If the current year in politics has demonstrated anything, it’s that the public is sick to death of political elites putting their own careers and special interest politics above the interests of the state and nation. If Michigan lawmakers want to bring that revolt to galloping boil in this state, they are on course to do so. Let’s hope they instead step back from this ledge.


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Michigan Considers Freeing Up Uber and Taxis

Ridesharing companies, taxis and limos would compete on level playing field under bills

A package of bills that would establish statewide, uniform regulations and an open market for transportation companies has been introduced in the Michigan Legislature. Importantly, it would also restrict local governments’ ability to manipulate this market.

More than a year ago, the Michigan House passed a bill package related to ridesharing companies like Uber and Lyft. These companies are operating in some areas in Michigan, but they have been restricted by municipal regulators. The bills would explicitly make it legal for them to operate anywhere in the state, meaning that no matter where you live, you could start earning extra income by driving for Uber or Lyft.

The Michigan Senate is now considering similar bills, but these would also eliminate the government’s current restrictive rules on limousine and taxi companies and regulate all car-for-hire companies on a level playing field. In other words, taxicab and limousine companies would operate under the same regulations as these new ridesharing companies.

The bill package would do the following:

  • Require transportation companies to pay an annual fee and register with the state;
  • Prohibit local governments from tacking on extra taxes and fees or requiring additional licenses;
  • Mandate that companies only hire drivers with a clean driving record and no history of criminal behavior;
  • Require companies to insure the vehicles and drivers to a specified level;
  • Require all vehicles used by these companies to be inspected annually by a certified mechanic and display a company emblem at all times; and
  • Allow airports to create additional “reasonable” regulations, but only if they apply equally to taxis, limousines and ridesharing companies.

Cities like Ann Arbor have cracked down on Uber and Lyft, and local regulations on taxis are often unbearable. The city of Kalamazoo, for example, has 75,000 people, but only a single cab company is registered with the city, despite a much larger demand for service.

The bills have only just been introduced, but they stand a good chance of getting attention, since the state House has already signaled its desire to address this issue — and did so with wide bipartisan support. These are strong bills that establish fair and safe regulations for everyone to compete on a level playing field and prevent local governments from banning popular services. You can read more about the issue and hear the stories of drivers and riders at


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Young Entrepreneurs Set Up Shop In Detroit

Local media covers Detroit Children's Business Fair

Young entrepreneurs tried their hands at business this weekend at the inaugural Detroit Children’s Business Fair.

The event, co-hosted by the Mackinac Center for Public Policy and Junior Achievement of Southeastern Michigan, challenged children ages 6 through 14 to create a business and set up shop at the marketplace that took place Saturday in downtown Detroit. Approximately 30 children from 11 businesses sold products and services ranging from marshmallow guns, to coffee, to stress balls.

“We make the coffee and we sell it to people because we want people to stay awake and have energy in the morning,” said Juan Basurto told Rod Meloni, of Local 4 WDIV Detroit. His company, J.E.M. Coffee, sold Peruvian coffee and chocolate. “We want to raise money for our school so we can fix stuff that’s broken, like our playground. … I’m pretty excited for the new customers that are coming in.”

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Mackinac Center Media Relations Manager Chantal Lovell told WDET in Detroit that the Center chose to co-host Detroit's first Acton Children’s Business Fair because it believes that more and better businesses mean more and better jobs, which leads to a better life for American families.

“We’re hoping this shows kids the opportunity there is in business and the rewards that and sense of satisfaction that can be had from a day of hard work and creativity.”

Watch Local 4’s coverage of the Children’s Business Fair here.

Learn more about Acton Children’s Business Fair here.


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Skorup pens op-ed in The Detroit News

Detroit’s comeback has been promised for decades, but recovery has yet to fully materialize.

Mackinac Center Policy Analyst Jarrett Skorup tackled the topic in an op-ed for The Detroit News, in which he highlighted some of the development projects that were each billed as the thing that would bring Detroit back. Be it the 1977 opening of the Renaissance Center, the 1985 People Mover, or the 2013 arena deal for the Detroit Red Wings, none of the developments have fully delivered on the promised hype.

Skorup explains that Detroit’s heavy regulatory climate and high taxes are getting in the way of its own recovery.

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Most notably, the government charges too much to live there. Detroit has the highest income tax in Michigan and one of the highest property taxes for homes and businesses in the nation. Wayne County is by far the highest-taxed, tacking on extras to fund the zoo, the Detroit Institute of Arts, the community college, the jail, an intermediate school district, and other local public authorities.

This is combined with a business and regulatory environment that is the worst in Michigan (and perhaps the nation).

Bankruptcy restructured the city’s finances, now it’s time to reform the rest of Detroit’s government to allow its businesses to flourish.

Read the full op-ed in The Detroit News.


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Superintendent Compensation Available Online

State media covers update of Mackinac Center database

Parents, lawmakers, media and education officials may now easily find the latest compensation information for the leader of Michigan school districts, thanks to an updated database maintained by the Mackinac Center for Public Policy.

In September, the Center announced it had updated its superintendent compensation database, which also includes the contracts under which superintendents work. Ben DeGrow, director of education policy for the Center, said information empowers parents and decision makers to make the best choices possible.

The database includes information provided by districts that responded to the Center’s Freedom of Information Act requests. Approximately 90 percent of districts responded to the requests and the database includes over 500 contracts. Of the information available, 32 superintendents have total estimated compensation packages worth $250,000 or more; 109 receive $200,000 or more each year.

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WOOD TV 8 covered the increase in compensation in recent years, particularly among superintendents in West Michigan. One of those is Grand Rapids Public Schools Superintendent Teresa Weatherall Neall, who is the second-highest compensated superintendent in Michigan. She receives an estimated total compensation of $319,707 a year.

Mlive also wrote about the release and found the average compensation package for Michigan superintendents to be $171,311.

The database was originally launched in 2012.

Access the database here.

Watch Wood TV 8’s coverage here.

Read Mlive’s report here.

Read The Exponent’s coverage here.


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