“The Practitioners Summit”

to Reform Public School

Funding in Michigan

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“The longer an organization waits,
the greater the risk that events will
take control, and the organization
will lose the ability to shape and
direct its own future.”
-William S. Woodsice, 1990
Chairman, Executive Committee
Chairman, Board of Directors
Institute for Educational Leadership (IEL)

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 Areas of Emphasis
• Optimizing operating efficiency
• More equitable allocation of resources
• Stable and predictable funding

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What to do instead?

The Expenditure Side

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 Issue #1
School District Consolidation

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Vocabulary Adjustment

Save

“Reduce Costs”
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 Administrative Cost / Pupil
by Enrollment Category
Michigan School Districts *
375 School Districts
$2,100 Group Membership
A 50,000 and over
B 20,000 to 49,999
$1,600 C 10,000 to 19,999
D 5,000 to 9,999
E 4,500 to 4,999
$1,100 F 4,000 to 4,499
G 3,500 to 3,999
H 3,000 to 3,499
$600 I 2,500 to 2,999
J 2,000 to 2,499
K 1,500 to 1,999
$100 L 1,000 to 1,499
M 500 to 999
N Below 500
-$400
A B C D E F G H I J K L M N
* Data from the “1014 Report”, Michigan Department of Education, Administration and Business Expenses, 2007-08.

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 Cost Studies on Consolidation
• Syracuse University study on cost implications of
consolidating school districts.
– http://www-cpr.maxwell.syr.edu/cprwps/wps33abs.htm
• Mackinac Center study on the optimal size for school
districts.
– http://www.mackinac.org/8530
• Maine’s attempt to force consolidation of school districts
is voted down.
– http://ballotpedia.org/wiki/index.php/Maine_School_District_Consolida
• School district consolidation efforts in other states
– http://www.nyslocalgov.org/pdf/School_District_Consolidation_in_Othe

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 Position Point #1

Standardize Job Content

THEN
Consolidate Administration
(If there are REAL savings)
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 Issue #2

Statewide / Regional
Teacher
Salary Schedules

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Selected Average Teacher Salaries
(2007 - 08)

School Average State / Nat'l

District Salary* Rank*
Grosse Pointe $ 85,985 1
California $ 64,424 1
DeWitt $ 63,512 82
Lansing $ 59,340 157
Michigan $ 56,096 11
Grand Ledge ** $ 52,370 373
United States $ 52,308 n/a
Webberville $ 47,679 478
* State data from "Bulletin 1014" (MDE). U.S. data from "Rankings of the States" (NEA).
** Adjusted for health insurance premium co-pay.

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 States with Statewide or Regional
Teacher Salary Schedules
• Alabama • Mississippi
• Arkansas • North Carolina
• Delaware • Ohio
• Georgia • Oklahoma
• Hawaii • Pennsylvania
• Idaho
• South Carolina
• Illinois
• Tennessee
• Indiana
• Kentucky • Texas
• Louisiana • Washington
• Maryland • West Virginia

21 States! 12
 Position Point #2

Move to a
Statewide / Regional
Teacher Salary Schedule

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 Issue #3

Skyrocketing Cost of Health Care

and
Associated Administrative Cost

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 Average Percentage of Premium Paid by
Covered Workers for Single and Family Coverage
1999-2009*

50%
45%
40%
35%
27% 28% 27% 28% 27% 28% 27% 27%
30% 26% 26% 26%
25%
20% 16% 16% 16% 16% 16% 16% 16% 17%
14% 14% 14%
15%
10%
5%
0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

*Tests found no statistical difference from estimate for previous year

shown (p<.05). Single Coverage
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits,
1999-2009.
Family Coverage 15
 Premium Co-Pay Options

• Hard Cap
• Soft Cap Using a Percentage
• Soft Cap with Fixed Employee Co-Pay

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 Typical
local
consortium
based
health
insurance
bids

D
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 Interesting Factoid
• Annual Full-Family Teacher Health
Insurance Premium (Cobra): $16,379.88
• Annual Full Family State Employee Health
Insurance Premium: $19,517.16
• State Legislature refused to disclose but
are self funded and fully vest after 6 years.

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 Position Point #3

Establish a Statewide Pool

for
Bidding Health Insurance
With Premium Co-Pay
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 Issue #4

Skyrocketing Pension and

Retirement Benefit Cost

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 Citizen’s Research Council
(Presented: October 28, 2009)

MPSERS Projected Rates

30.0
(% of payroll)

25.0
20.0 Pension
15.0 Health
10.0 Total
5.0
0.0
14
10

12

16

18

20
*
08

20

20

20

20

20

20
20

* Actual Rates Fiscal year

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 Issues to be Examined

• Fix employer contribution?

• Defined benefit vs defined contribution?
• Health care?

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 Position Point #4

Review and Reform

the Retirement System

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 Issue #5

Unequal (“Inadequate”)
Resource Allocation of
Instructional Staffing

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 What’s the problem?
• Elimination of positions due to budget
pressures vary from district to district
– Increasing class sizes
– Instructional support
– “Specials
• Unfunded mandates
– Special education
– All day kindergarten
– Michigan Merit Curriculum

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 Position Point #5

Standardize Instructional
Staffing by Implementing a
Position Allotment System
Based on Enrollment
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 Issue #6

Simple, “One Size Fits All”

Funding Formula

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Per Pupil Funding in Michigan
(Why a competitive education system can’t be taken seriously)

$13,000 $12,279
$12,000
$11,000
$10,000 $8,984
$9,000 $8,274 $8,324
$8,000
$7,151 $7,261
$7,000
$6,000
$5,000

Bloomfield
Okemos
Ledge

Waverly
Minimum

Maximum
Grand
State

State

Hills
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 Funding Formula
Concept

A + B + C +…. = Total Funding

Where: A = Transportation
B = Textbooks
C = Materials
D = Technology
E = Administration
F = Certified Instructional Salaries

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 Position Point #6

Use Categorical Funding to

Ensure Funding of Key
Instructional Areas
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 Universities
Defense Roads

Question: Medicare
Correctional System

Who should pay

for government?
Court System
Schools
Police Protection Fire Protection

Social Security Oversight of Financial Institutions

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 Reality Points #7 & 8

The SYSTEM for funding

Michigan’s public schools
is FAILING!

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 Revenue (Tax) Issues
• Non Homestead Property Tax
– 6 mill State Education Tax is exempt from
Headlee…..18 mill Non Homestead tax is not
exempt. Why?
– Reduction in the personal property tax for
business
– Taxable value appeals

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 Impact of “Tax Cuts”
Grand Ledge Public Schools
(Local Revenue for Operations)

$9,000,000
$8,880,722
$8,800,000
$8,600,000
$8,400,000
$8,200,000
$7,825,939
$8,000,000
$7,737,233
$7,800,000
$7,600,000
$7,400,000
$7,200,000
$7,000,000
2007-08 2008-09 2009-10
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 Impact of “Tax Cuts”
Per Pupil Foundation Grant
Grand Ledge Public Schools
$7,500
$7,426
$7,400
$7,261
$7,300
$7,200
$6,993
$7,100
$7,000
$6,900
$6,800
$6,700
2008-09 2009-10 2010-11
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 Michigan’s Constitutional
Revenue Limit
(Billions)
1
$0.0 $0.2
0
-1 $-0.6
-2
-3 $-2.4
-4
$-3.9
-5 $-4.2 $-4.4$-4.2 $-4.7
-6 $-4.9
$-5.3
-7
-8 $-7.6
-9
$-9.2
-10
1998 2000 2002 2004 2006 2008 2010

Source: May 2009 Revenue Consensus Conference

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Tax Effort Has Reduced Substantially
State and Local Taxes as Percent of Personal Income, 1972-2007

19

17

15 New York
Michigan
Percent

United States
13 Texas

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7
1972

1976

1978

1986

1992

1994

2000

2006
1974

1980

1982

1984

1988

1990

1996

1998

2002

2004
Year

Michigan’s Per Capita Rank…#25

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 Revenue (Tax) Issues

• Other “Revenue” Options?

– Progressive Income Tax (4.35%)
– Sales Tax (6% excluding food and Rx)
– Sales Tax on Services (26 items)
– Gas Tax ($.19 + sales tax)
– Diesel Tax ($.15 + sales tax)
– Corporate Income (4.95%)

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 Bottom Marginal Tax Rates in State Individual Income Taxes, 2008
1. North Carolina 6.00% 26. Alabama 2.00%
Tennessee 6.00** Kentucky 2.00
3. Minnesota 5.35 Louisiana 2.00
4. Massachusetts 5.30* Maine 2.00
5. New Hampshire 5.00** Maryland 2.00
Oregon 5.00 Virginia 2.00
Utah 5.00* 32. New Mexico 1.70
8. Colorado 4.63* 33. Idaho 1.60
9. Wisconsin 4.60 34. Missouri 1.50
10. Michigan 4.35* 35. Hawaii 1.40
11. New York 4.00 New Jersey 1.40
Dist. of Columbia 4.00 37. Arkansas 1.00
13. Vermont 3.60 California 1.00
14. Kansas 3.50 Georgia 1.00
15. Indiana 3.40* Montana 1.00
16. Pennsylvania 3.07* 41. Ohio 0.618
17. Connecticut 3.00 42. Oklahoma 0.50
Illinois 3.00 43. Iowa 0.36
Mississippi 3.00 44. South Carolina 0.00****
West Virginia 3.00
21. Arizona 2.59
22. Nebraska 2.56 Source: Federation of Tax Administrators
23. Rhode Island 2.50***
24. Delaware 2.20 * Flat-rate income tax
25. North Dakota 2.10 ** Tax applies only to dividend and interest income
*** State tax is 25% of federal tax liability
**** First $2700 of “taxable income” has zero rate; next rate is 3.00%

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 Top Marginal Tax Rates in State Individual Income Taxes, 2008
1. California 10.30% 30. Maryland 5.50%
2. Rhode Island 9.90*** Oklahoma 5.50
3. Vermont 9.50 32. Massachusetts 5.30*
4. Oregon 9.00 New Mexico 5.30
5. Iowa 8.98 34. Alabama 5.00
6. New Jersey 8.97 Connecticut 5.00
7. Dist. Of Columbia 8.50 Mississippi 5.00
Maine 8.50 New Hampshire 5.00**
9. Hawaii 8.25 Utah 5.00*
10. Minnesota 7.85 39. Colorado 4.63*
11. Idaho 7.80 40. Arizona 4.54
12. North Carolina 7.75 41. Michigan 4.35*
13. Arkansas 7.00 42. Indiana 3.40*
South Carolina 7.00 43. Pennsylvania 3.07*
15. Montana 6.90 44. Illinois 3.00*
16. New York 6.85 45. Alaska 0.00
17. Nebraska 6.84 Florida 0.00
18. Wisconsin 6.75 Nevada 0.00
19. West Virginia 6.50 South Dakota 0.00
20. Kansas 6.45 Texas 0.00
21. Ohio 6.24 Washington 0.00
22. Georgia 6.00 Wyoming 0.00
Kentucky 6.00
Louisiana 6.00
Missouri 6.00 Source: Federation of Tax Administrators
Tennessee 6.00**
27. Delaware 5.95 * Flat-rate income tax
28. Virginia 5.75 ** Tax applies only to dividend and interest income
29. North Dakota 5.54 *** State tax is 25% of federal tax liability

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 Local Revenue Options

• Currently 50 Michigan school districts

have the authority to levy a local
millage for school operations.
• This is blantantly unequal!
• Eliminate, expand or restrict?

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Questions?