I have one word for those seeking insight from the new “early warning” system legislation signed into law by Gov. Snyder shortly after the July 4 holiday weekend.
Enrollment.
Student enrollment is the single most important element in the fiscal health of public schools under the Michigan school funding formula. If you look behind the dollar figures in every financially faltering district, you’ll find they’re hemorrhaging students. Detroit was losing students by the tens of thousands and Saginaw Buona Vista by hundreds.
Big or small, double digits or thousands, it doesn’t make a difference. If you’re losing students, you’re in danger of falling into a fiscal emergency. No early warning system will change that.
This per-pupil funding system, adopted in 1994, was soon followed by schools of choice and public school academies. These free-market education reforms were trumpeted by then Gov. Engler and others to inspire competition and, ultimately, improvement. Instead, it was a death knell for Michigan’s urban schools, as decades of middle class flight beginning in the ‘60s had already taken its toll. These new free-market reforms provided a way out for those who couldn’t afford the suburbs. Enrollment plummeted.
It’s little surprise districts are falling into irreparable financial distress as a result of this system. It’s grow or die. Why, you may ask? If a district doesn’t have to educate a student, why should they receive the money for an empty seat?
It’s simple math. When a district loses 30 students, it’s a loss of about $220,000. If the 30 students were all third-graders scheduled to attend Mr. Miller’s class in Elmwood Elementary, the decision would be easy. Mr. Miller would be reassigned or he’d be looking for workand everything else would go on as scheduled.
Unfortunately, students don’t leave in single classroom groups. They leave at all grade levels and from all of the buildings within a district, so there may be one or two fewer students in a class or maybe 10 fewer in a building. That doesn’t change the operating costs for the next year, because the 29 remaining students still need Mr. Miller to teach third grade, and so on in every other class that lost a student. So, for the district, next year’s operating costs are pretty much the same as the year before except it has $220,000 fewer dollars than in the previous year to provide the same level of service.
The fortunate districts are in the far suburbs, where people continue to migrate for more property and larger homes at smaller prices. There, new housing starts and young families provide the stability that insufficient funding does not. Others draw students from already suffering districts through schools of choice. You can’t listen to the radio, drive the highways or read online news sources in the Detroit Metro area from April through August without advertising from school districts desperate to buoy their bottom line with transfer students.
There is a somewhat simple solution to this problem, one that is not totally unique to the system. Just provide schools as much or more funding for the students they had last year as they will receive for the students they have this year.
Today, the formula is 90-10. Ninety percent of a district’s funding is calculated on the current year student count and 10 percent is allocated on the previous year count. That means districts must be Nostradamus-like in their ability to predict how many students will enroll in the coming year. If they’re suffering declining enrollment, like two-thirds of the districts in the state, their efforts will be focused on how much the district will have to cut to prudently manage its budget.
If, however, the formula was 50-50, districts would have relatively firm financial footing upon which to start a new year. It wouldn’t require them to be so precise in their estimates of the number of students who may move in, who may move out and who may be enticed to another district, a charter or an online academy.
If you think these types of predictions are easy, Google “startup business failure rate,” and you’ll find reliable data indicating 50 percent of all businesses — that’s ALL businesses, construction, finance, retail, health, manufacturing, services, etc. — fail within the first four years of operation, according to the Entrepreneur Weekly, the Small Business Development Center and research from the University of Tennessee and Bradley University.
While there are many reasons for business failure, overestimating the number of customers or clients a new business will serve is chief among them. Given the research that goes into business placement, and the failure rate that comes with inaccurate customer estimates, it’s a fair question to ask why policy makers would even want to put school districts in the position of being so reliant upon the inaccurate science of estimating future enrollment.
Fifty-fifty funding, or 60-40, would stabilize schools, stabilize student programming, and afford districts the opportunity to do more long-range planning. There’s an obvious cost to the School Aid Fund, but it’s marginal compared to the stability it would bring and the ability of districts to focus more on education than on financial security.
Obviously, there are many more issues to address if we are to adequately and equitably fund our schools. In one of its final acts last year, the Legislature approvedan independent study of school finances — an adequacy study — to determine how much funding is necessary to adequately educate our children. All of us in education hope this study provides a clear road map for legislators to change the system.
In the meantime, equalizing funding for previous and current year student counts would be a good interim solution.
