Warning: Michigan School Finance Is Complicated

It’s also confusing, and spending interests often don’t tell the whole story

By Tom Gantert | February 8, 2019

Gov. Gretchen Whitmer has said that education will be a focus of her first State of the State address on Feb. 12.

Whitmer spoke often about education during her successful campaign for governor. In some cases, she was repeating inaccurate talking points, arguing that school funding has been reduced in Michigan.

“But over the past eight years, Republicans in Lansing have sided with Betsy DeVos to push an education agenda that included slashing school funding,” Whitmer’s campaign website stated.

Whitmer will probably make a case for more school funding in her upcoming address. This is a complicated area of state government, and members of the public school establishment often paint a picture of a system under fiscal duress. In the coming days, Michigan Capitol Confidential will explain three examples of incomplete or inaccurate information: a focus on just one source of school funding; fact-free claims concerning equitable funding; and the claim that “Michigan is dead last in funding.” Today’s article will address the first example.

Focus exclusively on school “foundation allowance” money

School districts received more from the state every year from 2011-12 through 2018-19.

Yet media reports related to school funding often imply that a stream of money called the foundation allowance is the only source of money that schools receive, and not just one portion of their total revenue. Each district’s per-pupil allowance is different from that of others because the figure is based on a complicated formula of local and state tax revenue. Total foundation allowance amounts received by a school district also rise and fall as enrollment increases or declines, because this money follows the student under Michigan’s system of school finance.

Though the foundation allowance is important, schools receive other, substantial, revenue streams.

In spite of this, many public school administrators, union officials and media outlets cite only foundation allowance figures when discussing school funding.

For example, a Jan. 23 Detroit News article reported: “The state is poised to spend $8,409 per pupil this year under the 2019 budget signed by former Gov. Rick Snyder, which increased that rate and overall K-12 spending.”

The $8,409 per pupil is the projected per-pupil state foundation allowance for the year. Reporting just this figure is misleading, though. That’s because even as the per-student foundation allowance has been stagnant for a number of years, increases in other school revenue streams mean that total state spending on K-12 schools has actually increased by billions of dollars .

For example, in 2010-11 the minimum per-pupil foundation allowance for most school districts was $7,316. In the current school year (2018-19), the amount was $7,871. When stated in 2018 dollars, the 2010-11 school foundation allowance was $8,234 per pupil, meaning schools are getting the equivalent of $363 less in foundation allowance funding for each student, when compared to eight years ago.

Does that mean school districts are getting $363 less per pupil today, after adjusting for inflation?

The answer is no, and Detroit Public Schools Community District is a good example of why.

The Detroit district received foundation allowance payments of $7,660 per pupil in 2010-11, which is the equivalent of $8,621 if stated in current 2018 dollars. In the 2018-19 school year, the district’s foundation allowance is $7,906 per pupil, representing an $852 decline in inflation-adjusted terms.

But looking at the total amount of state dollars the Detroit district received from the state — including not only the foundation allowance but other funding streams as well — changes the picture. In 2010-11, the total amount of Detroit’s state funding was $7,599, or $8,552 if stated in inflation-adjusted 2018 dollars. In the current school year, the state is giving the Detroit district $9,713 per pupil, representing not a decline but an increase of $1,161 in real, inflation-adjusted dollars.

Future editions of this series will examine two other features of Michigan’s school funding system that can also create a misleading portrayal of the financial status of Michigan public schools: claims about equitable funding and that “Michigan is dead last in funding.”

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.

Drivers Will Pay More At Pump If Oil, Gas Pipeline Shut Down

Estimates vary on the effects of closing Mackinac Straits pipeline

By Evan Carter | February 7, 2019

If the two Enbridge-owned oil and gas pipelines running along the bottom of the Straits of Mackinac were to be shut down tomorrow, the effects on Michigan’s economy and its residents would be immediate and widespread.

An immediate shutdown of Line 5 is unlikely, yet that is the preference of Michigan environmental organizations. Closing the pipeline is also the goal of state Attorney General Dana Nessel, who is looking at various legal challenges toward that end.

If the shutdown of Line 5 occurred unexpectedly and the state’s energy industry did not have enough time to prepare, Michigan gasoline supplies could be temporarily restricted, said Mark Griffin, president of the Michigan Petroleum Association. The result, he added, would likely be price increases of up to 30 or 40 cents a per gallon,

“In the short run, it will be very catastrophic, and over the long run, gasoline would be more expensive,” Griffin said. “Environmentalists want to not only shut down a pipeline, they want to shut down the production of fossil fuels in the petroleum industry and drive up gas prices. To them, Line 5 is a choke point.”

On an average day, drivers in Michigan purchase about 12 million gallons of fuel. Light crude shipped across Line 5 to be refined and sold at gas stations in Michigan accounts for about 45 percent, or 5.4 million gallons, of the total average amount sold in the state. That’s according to calculations performed by Michigan Capitol Confidential, with numbers from the Michigan Petroleum Association and Enbridge.

Michigan’s manufacturing and utility industries would also have to scramble if Line 5 were closed.

Much of the light crude oil from Line 5, which comes from Superior, Wisconsin, goes to Sarnia, Ontario, for processing. Some of the refined petroleum is then shipped back to Michigan, where it is used in manufacturing by companies like Dow, Ford and General Motors, as well as by some of the state’s electricity-generating power plants.

If the state’s energy and manufacturing sectors were able to prepare for the shutdown, the results would be more muted, though consumers would still notice. The exact change in Michigan gasoline prices is debated by environmentalists and those in the state’s energy industry.

A 2018 study from London Economics International for the National Wildlife Federation looked at what might happen if refineries in and around Detroit had to replace the light crude they receive from Line 5 with light crude from fuel tanker trucks and freight trains. It estimated that the cost of gas would increase by 0.65 cents per gallon. Alternately, the study estimated a price increase of 0.58 cents per gallon if the shipping capacity of Enbridge’s Line 78, which originates in the Chicago region, is expanded.

A 2017 study conducted by Dynamic Risk for the state of Michigan estimated that closing Line 5 would increase the cost of gas by 2.13 cents per gallon.

In a public comment from For Love of Water, addressed to then-Attorney General Bill Schuette and three Snyder administration department heads, the Traverse City-based group disputed the state-commissioned Dynamic Risk study. It said that the state could afford to shut down Line 5.

“The state and the public have been deprived of a thorough examination of whether the existing pipeline infrastructure in, through and out of the Great Lakes region provides a feasible and prudent alternative to Line 5,” the group said. “The significant water, economic, public health, and ecological interests of the State, local communities, the Tribes, and their citizens are not served by the continued operation of the Straits Pipelines.”

The petroleum association’s Griffin said that money spent on increased gas prices is money not being spent elsewhere in the economy.

“Every penny increase is equal to about $57 million on an annual basis. Two cents would be over $214 million. Somebody has to pay for it; it won’t be free. The last gas tax raised the cost of gasoline over $416 million per year. That’s money not being spent elsewhere in the Michigan economy,” Griffin said.