Michigan

Funding priorities for p-12and/or higher education

Michigan Public School Educator Retirement System (MPSERS) Cost Offset

The legislature appropriated $100 million to local school districts participating in MPSERS, based on each participating district’s percentage of the total statewide payroll for participating districts across the state. These payments are for the purpose of offsetting a portion of the retirement contributions owed by the district for FY 2015.¹

MPSERS Retirement Rate Cap Costs

To allocate funds to districts and Intermediate School Districts to remit to MPSERS. This funding is used to pay the difference between the uncapped MPSERS contribution rate (33.41% of payroll for MIP/Basic), and the capped rate that school employers will pay in FY 2015 (25.78% of payroll for MIP/Basic). The legislature increased this allocation by almost $270 million to $674.7 million.²

Additional Payment Toward MPSERS Pension Liabilities

To pay $108 million to local school districts and intermediate school districts to remit to MPSERS to pay down a piece of the unfunded accrued liability associated with the early out provision in 2010.³

School Readiness Grants

Increased by $65 million to nearly $240 million revenue allocated to at-risk four-year-old children. $40 million of the $65 million will be available immediately with the remaining $25 million at the legislatures discretion should the need arise.⁴

Best Practices

The state appropriated $75 million to provide a $50 per pupil payment to districts that satisfy at least seven of nine best business practices.

Changes to funding formula for p-12 and/or higher education

The state legislature provided all school districts with a $50 increase for FY 2015. In addition, seeking to provide a minimum foundation grant of $7,251, the state allocated $103 million for an equity payment to raise schools to that amount.

Pressing state issues affecting p-12and/or higher education funding

Retirement System

The most recent actuarial valuation of MPSERS shows the total accrued liability at $63.8 billion with current assets of slightly over $38 billion. This provides a funding ratio of 59.6%. In addition, for the current year, employers are required to pay between 25.78% and 33.41% of employee’s salary for retirement benefits.⁵

Student Enrollment

Student enrollment continues to decline, which directly affects the amount of revenue public schools are appropriated. In FY 2013, there were 1,535,989 students, FY 2014 1,522,600 and it is expected to decline below 1,504,000 by FY 2016.⁶

Exclusive to p-12 forces diverting funds from traditional public school districts and/or exclusive to higher education: trends in state funding for public institutions

School Aid Fund Allocation

A major diversion occurred in FY 2013–14 and FY 2014–15. The state increased the allocation from the School Aid Fund for P-12 to community colleges and higher education institutions. Permissible by the Michigan Constitution,⁷ community colleges received $197.6 million for the two fiscal years and higher education received $200.5 million in FY 2013-14 and $204.5 million in FY 2014–15 for a two-year combined total of $800.2 million.⁸

Elimination of Michigan Business Tax

The revenue raised in the School Aid Fund was reduced due to legislation passed eliminating the Michigan Business Tax (MBT). The MBT was replaced by the Corporate Tax causing a decrease of $687.8 million in revenue for P-12 schools.⁹

P-12 per-pupil expenditur e

Per-Pupil Allocation

$7,076 per pupil (2014–15) + $50 per pupil (All Districts) = $7,126*

*For those districts less than $7,251, a one-time payment was made to ensure minimum funding of $7,251. Language was not included specifying that this funding would be built into the base for FY 2015-16.¹⁰

Allocation of state dollars and percent of the state budget for p-12

(Figures in Millions)
Gross Appropriation for P – 12 Schools: $13,870.3 (26.5% of Total Budget)
Appropriation from School Aid Fund: $12,062.2