The Michigan Constitution (Section 29 of Article IX) prohibits the state from mandating new programs or activities of local governments (including school districts) without providing state funding. Despite this voter-approved provision in the constitution, Michigan’s current method of funding public schools and previous Michigan Supreme Court decisions convey to local school districts that it is unlikely that they will receive any sort of financial reprieve in efforts to implement new state-mandated programs or activities.
The Michigan Supreme Court recently heard oral arguments in the next installment in the long-running school finance Adair case. While a plaintiff win would indicate that the state legislature did indeed underfund a set of state-mandated activities, specifically the maintenance and transmission of data to the Center for Educational Performance and Information (CEPI), previous state government responses to Section 29 violations dealing with school funding indicate that, even with a favorable ruling, school districts may not be in for a financial windfall.
How, exactly, has this political process previously played out and what can we learn from this?
Michigan’s School Funding System and Guarantee
Prior to 1994, public education in Michigan was largely funded at the local level through property taxes with state aid playing a minor role in the overall finances of schools. With the adoption of Proposal A, school funding was centralized: state taxes are now responsible for the majority of school funding and state lawmakers annually set the per-pupil foundation allowance that each district receives.
In addition to a largely state-controlled school finance system, Proposal A also established a constitutional funding guarantee via a per-pupil funding floor for every school district. Section 11 of Article IX of the Michigan Constitution specifically states that each district will receive at least the same amount of combined state and local per-pupil revenue for school operating purposes that it did in 1994-95, the year when the constitutional amendment was enacted.
According to the Michigan Senate Fiscal Agency, the legislature appropriated $3.5 billion more than the Proposal A funding guarantee in Fiscal Year 2014. To whom and for what these additional funds can be used is at the discretion of state lawmakers, which means that it is up to them to determine the portion that will go to fund state-mandated services.
Responding by Reallocating, Rather Than Increasing Funding
The initial chapter in the Adair saga alleged that the State of Michigan violated Section 29 by mandating new data collection, maintenance, and reporting activities of school districts. In the summer of 2010, the Supreme Court ruled in favor of the plaintiff districts that the requirements constituted an unfunded mandate for which the state did not provide funding to cover the necessary costs.
State policymakers responded to the Michigan Supreme Court’s Adair I ruling by appropriating $25.6 million in the FY2011 state budget specifically for the data maintenance and transmission requirements that were at issue in Adair I. While these appropriations were a new line item in the School Aid budget, they were not new dollars to schools. Instead, the Michigan Legislature enacted a supplemental appropriations bill that required $25.6 million of the appropriated state school aid fund money – money that originally would have gone toward per-pupil funding – be used solely for the purpose of paying districts for the cost of the state-mandated collection, maintenance, and reporting of data. The state effectively honored its constitutional requirement to fund its mandate by redirecting existing school funding and earmarking the funds for a specific purpose.
In the FY2012 budget, an additional $8.4 million was added to pay for Adair compliance, bringing the total to $34.0 million. As was the case with the initial amount, the additional funding was not new; lawmakers moved funding from the CEPI line item into the Adair compliance line item. In effect, the state’s response to Adair has been to create a new categorical funding stream for schools while, at the same time, reducing the amount of resources districts receive for other purposes.
Different Case, Same State Response Likely
While the specific legal issues arising from the current iteration of Adair may vary, it is unlikely that a legislative response would vary from past precedent even if the Supreme Court rules in the plaintiffs’ favor. A win for the school districts in this Section 29 challenge, or any other future challenge for that matter, is not likely to result in the state providing schools with additional overall funding.
In its oral arguments presented to the Court, the State of Michigan signaled that it allocates in excess of $3 billion annually above what is constitutionally required under the Proposal A funding guarantee. Thus, even if the state were found to be deficient in its funding responsibility, as is alleged in Adair II, it would be well within its authority to tap into this pot of money and redirect funds to meet a constitutional requirement. Doing so would not result in additional new money for schools, but another reallocation of existing funds schools already receive.
Future Headlee Challenges
Given the state legislature’s response to the Adair I ruling, it would appear that funding future Headlee requirements will result in a financial zero-sum game for school districts. Because the state is funding schools well above the Proposal A funding floor, it can tap into these resources as a fiscal response to court decisions related to both un- and underfunded mandates. The bottom line is that Michigan’s highly centralized school finance system allows the state to require schools to implement new programs or activities and subsequently shift resources within the bigger school funding pot without increasing the overall state funding provided to schools to finance programs or activities. In effect, rendering moot the Headlee Amendment’s prohibition against unfunded state mandates.
A version of this post also appears on the Green & Write Education Policy Insights Blog.