School Funding Looks Unequal If Major Revenue Sources Not Counted

With the Michigan Legislature passing a $17.13 billion K-12 school budget this week, many news stories in the state focused on the theme that it closes a funding gap across school districts.

The term “funding gap” is based on the fact that different school districts have received different amounts of money from the state through something called the foundation allowance. What most news stories neglect to report, however, is that the foundation allowance is only one of several ways public schools get revenue.

This omission is the source of numerous claims that school districts in poor Michigan communities get less than those in more affluent ones. But the argument collapses when all sources of school funding are considered.

The Detroit Public Schools Community District is a leading example.

In 2019-20, the Detroit district’s foundation allowance was $8,142 per pupil. But if all its revenue sources (local, state and federal) are included, the financial support it receives comes to $17,379 per pupil. In other words, the foundation allowance accounted for less than half of the district’s total funding.

Detroit’s $17,379 per-pupil funding is also higher than the statewide school district average of $16,322 per pupil in the 2019-20 school year.

The big funding advantage for districts that serve poor communities comes from federal funding, which is largely means-tested. Detroit’s district received $5,036 per pupil in federal support in 2019-20. That’s far more than the $171 per pupil received by the school district in the affluent Grosse Pointe communities.

When all sources of funding are reviewed, the core argument about a funding gap evaporates. But why has there been any gap in the state foundation allowance before this year?

It goes back to a complicated school funding overhaul approved by voters in 1994, called Proposal A. The measure successfully solved many of the challenges created by some communities being more financially capable of funding their local schools than others.

One goal of Proposal A was to not penalize communities that already collected more in local school property taxes. The other goal was to gradually reduce the funding difference between districts, which finally happened in the school budget that was in the news this week. The foundation allowance is going up to $8,700 per pupil for all districts in the next school year.