Have Schools Faced 'Seemingly Permanent Funding Cuts'?

The August edition of the Ann Arbor Observer periodical weighed in on the contract dispute between the Ann Arbor school district and its teachers. It wrote that the school board was “asserting the union’s contract has to change to reflect new state laws and seemingly permanent funding cuts. ...”

Except, state revenue to the Ann Arbor school district increased a combined $23.5 million over the last four state budgets compared to the 2010-11 school year. Of that amount, $3.7 million would have been for educating a cumulative total of 408 extra students over those four years. The rest was from increases approved by the Legislature, some of it earmarked for things such as special education.

The Ann Arbor Observer is not the first media outlet to inaccurately report that school districts have experienced funding reductions, a myth perpetuated in 2014 by Democratic gubernatorial candidate Mark Schauer and eventually debunked by the mainstream media.

The Ann Arbor school district hasn’t experienced the full benefits of the extra state funding because much of the new money was used to pay for school employee retirement benefits. The district’s contributions to the Michigan Public School Employees' Retirement System rose from $17.6 million in 2012 to $25.7 million in 2014, a 46 percent increase in two years.

School board member Christine Stead said the increasing burden of funding pensions is an important factor in why district officials feel like funding has been cut even though revenues actually rose.

Stead used the state’s foundation allowance grants for her comparisons, which in general account for 85 percent of a school district’s state funding. The payments to MPSERS as well as special education dollars are not included in the foundation allowance.

Stead said, “If the foundation allowance for the AAPS had merely kept pace with inflation since Proposal A was enacted (in 1994), we would have had $58 million more in revenue last year alone.” The Ann Arbor district’s total state revenue last year was $98.6 million.

"The burden of MPSERS and other costs (health care, inflation, etc.) affect all local school districts," Stead continued. "While the state allocation in overall school-related expenses has gone up, what has effectively gone down is what we are able to contribute to our classroom settings. This is where there is an increasing gap in our funding reality."

Stead says that understanding the district’s funding situation requires looking at how the rising pension burden erodes current funding.

Stead has done what many other school leaders have not, which is to support solving the problem of underfunded pensions by shifting new school employees to 401(k)-style retirement accounts, which by their nature, cannot be underfunded year after year.

(Click here to see Stead’s full email response.)