Education funding formula a challenge to comprehend

MARQUETTE – Ask people involved with public schools and they’ll likely say public school funding in the state of Michigan is a complicated road to travel.

With strict rules on where money can be spent and a blended revenue stream combining local and state taxes, it’s easy to get confused, especially about where local school districts get most of their revenue.

“As I was selling the operational millage this summer, that was probably one of the big sticking points,” said Marquette Area Public Schools Interim Superintendent Bill Saunders.

Saunders said “one or two people” at each presentation he made about the millage would invariably ask him, now that Marquette General Hospital was a for-profit, tax-paying entity, “‘Why are you asking us for money? They’re giving you … millions of dollars. You shouldn’t need any more money from us.'”

“That is a pretty common misconception,” Saunders said.

The state revamped its funding formula for schools in 1994, when voters passed Proposal A, shifting a larger percentage of the financial burden of K-12 public education onto the state’s shoulders in lieu of local property tax.

However, a portion of local tax revenue remained in the form of a 20-year operational millage. Districts could levy up to 18 mills on all non-homestead properties, such as businesses or second homes, for their operating budgets.

The state also set an annual foundation allowance of so many dollars per pupil.

MAPS Assistant Superintendent for Finance Deb Barry said the idea was to create equality in public schools across the state by shifting funding to the state level. However, the state didn’t want to create an atmosphere in which local organizations felt they had no stake in their local schools.

“By basically setting that threshold with the foundation allowance (the state) is leaning on local tax effort to come in so that your local property owners, non-homestead, are still invested in your school,” Barry said.

Area voters recently approved an operational millage renewal request from MAPS, keeping a local revenue stream of more than $8 million coming through its doors. The district’s operational millage accounts for roughly one third of its overall budget.

The 18-mill levy is important because the state assumes local districts are collecting that millage in full – whether they actually are or are not – when it’s calculating its portion of a district’s per-pupil foundation allowance.

The state’s portion is always the difference between local tax revenues and the state-set founation allowance.

This way, if a district’s local tax revenue ever shifts – up or down – the state can make the district whole.

Currently, MAPS receives roughly $2,800 per pupil in local revenues, according to state calculations. The 2013 foundation allowance is $6,966, so the state pays about $4,200 per pupil to MAPS to reach that amount.

Though most people understand that local tax revenue does play a part in public school funding, MAPS officials said they find that some don’t know about the blending of funding that occurs between the state and local revenue streams.

“When they do, for instance, like an MGH or Duke LifePoint, right now the state does see some added revenue from their tax dollars which goes to benefit, obviously, all schools,” Saunders said. “It goes into the pot, so as places in the state maybe go out of business that helps compensate for what the state awards to all the districts, but we don’t locally see any gain.”

Marquette General Hospital CEO Gary Muller said the addition of the hospital to the tax rolls in Marquette County as a result of its sale to Duke LifePoint Healthcare will indeed be a boon to local schools.

“Marquette General is proud to be among the top taxpayers in the region, with additional municipal, county and state taxes helping to increase our overall tax base. There are now several million dollars of new tax funds in our community from Duke LifePoint that have come in as revenue to Upper Peninsula communities,” Muller said in a written sttement. “Our state taxes will, of course, help strengthen our schools and our overall operations have helped maintain property values in Marquette through the nationwide economic recession. By solidifying and growing property values, local schools will have a more solid local tax base to depend on. They also receive state funds for educating students. Marquette General’s continued progress and taxes it pays will help strengthen every aspect of the community, from road repair, to fire and police protection, to maintaining a solid tax base for our schools.”

Jackie Stark can be reached at 906-228-2500, ext. 242.