“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 $1,600 $1,100 $600 $100 -$400
Group A B C D E F G H I J K L M N Membership 50,000 and over 20,000 to 49,999 10,000 to 19,999 5,000 to 9,999 4,500 to 4,999 4,000 to 4,499 3,500 to 3,999 3,000 to 3,499 2,500 to 2,999 2,000 to 2,499 1,500 to 1,999 1,000 to 1,499 500 to 999 Below 500

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. • School district consolidation efforts in other states

– http://ballotpedia.org/wiki/index.php/Maine_School_District_Consolida

– 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 District Grosse Pointe California DeWitt Lansing Michigan Grand Ledge ** United States Webberville Average Salary* 85,985 64,424 63,512 59,340 56,096 52,370 52,308 47,679 State / Nat'l Rank* 1 1 82 157 11 373 n/a 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 Arkansas Delaware Georgia Hawaii Idaho Illinois Indiana Kentucky Louisiana Maryland

• • • • • • • • • •

Mississippi North Carolina Ohio Oklahoma Pennsylvania South Carolina Tennessee Texas Washington West Virginia
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21 States!

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

*Tests found no statistical difference from estimate for previous year shown (p<.05). Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2009.

Single Coverage 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 25.0 20.0 15.0 10.0 5.0 0.0
20 14 20 10 20 12 20 16 20 18 20 08 * 20 20

(% of payroll)

Pension Health Total

* 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 $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 $6,000
Bloomfield Hills Okemos Grand Ledge State Minimum State Maximum Waverly

$12,279

$8,274 $8,324 $7,151 $7,261

$8,984

$5,000

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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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Defense

Universities

Roads Medicare

Question:
Correctional System

Who should pay for government?
Schools Police Protection Social Security Court System Fire Protection 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 $8,800,000 $8,600,000 $8,400,000 $8,200,000 $8,000,000 $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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$8,880,722

$7,825,939 $7,737,233

Impact of “Tax Cuts”
Per Pupil Foundation Grant Grand Ledge Public Schools
$7,500 $7,400 $7,300 $7,200 $7,100 $7,000 $6,900 $6,800 $6,700 2008-09 2009-10 2010-11
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$7,426 $7,261

$6,993

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 $-4.9 -6 $-5.3 -7 -8 $-7.6 -9 $-9.2 -10 1998 2000 2002 2004 2006 2008 2010

Source: May 2009 Revenue Consensus Conference 36

Tax Effort Has Reduced Substantially
State and Local Taxes as Percent of Personal Income, 1972-2007
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17

15 Percent

New York Michigan United States

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Texas

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9

1972

1976

1978

1986

1992

1994

2000

Year

Michigan’s Per Capita Rank…#25

2006

1974

1980

1982

1984

1988

1990

1996

1998

2002

2004

7

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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 Tennessee 3. Minnesota 4. Massachusetts 5. New Hampshire Oregon Utah 8. Colorado 9. Wisconsin 6.00% 6.00** 5.35 5.30* 5.00** 5.00 5.00* 4.63* 4.60 26. Alabama Kentucky Louisiana Maine 2.00 Maryland Virginia 32. New Mexico 33. Idaho 1.60 34. Missouri 2.00% 2.00 2.00 2.00 2.00 1.70 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 2. Rhode Island 3. Vermont 9.50 4. Oregon 9.00 5. Iowa 8.98 6. New Jersey 7. Dist. Of Columbia Maine 8.50 9. Hawaii 8.25 10. Minnesota 11. Idaho 7.80 12. North Carolina 13. Arkansas South Carolina 15. Montana 6.90 16. New York 17. Nebraska 18. Wisconsin 19. West Virginia 20. Kansas 6.45 21. Ohio 6.24 22. Georgia 6.00 Kentucky Louisiana Missouri 6.00 Tennessee 27. Delaware 28. Virginia 5.75 29. North Dakota 10.30% 30. Maryland 9.90*** Oklahoma 32. Massachusetts 5.30* New Mexico 5.30 34. Alabama 5.00 8.97 Connecticut 8.50 Mississippi New Hampshire 5.00** Utah 5.00* 7.85 39. Colorado 40. Arizona 4.54 7.75 5.50% 5.50

5.00 5.00

4.63*

41. Michigan

4.35*

7.00 42. Indiana 3.40* 7.00 43. Pennsylvania 3.07* 44. Illinois 3.00* 6.85 45. Alaska 0.00 6.84 Florida 0.00 6.75 Nevada 0.00 6.50 South Dakota 0.00 Texas 0.00 Washington 0.00 Wyoming 0.00 6.00 6.00 Source: Federation of Tax Administrators 6.00** 5.95 * Flat-rate income tax ** Tax applies only to dividend and interest income 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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twitter.com/SchlFndngSummit

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