State May Pilfer K-12 Funds (MI)

June 11, 2010

Diverting funds from Michigan’s school aid fund to ultimately benefit the state’s general fund is "basically money laundering," said state Sen. Valde Garcia, R-Marion T ownship.

The plan is legal, however, and one of few options the Legislature will have to fill gaps in general fund coffers projected at state’s revenue-estimating conference last month in Lansing, Garcia said.

The proposal would divert an expected $292 million surplus in K-12 funding above January estimates into higher-education coffers, which is allowed by law. Doing so would retain dollars in the general fund that otherwise would be paid to community colleges and universities.

Most state operations are paid for out of the general fund.

Garcia said the idea goes against Michigan’s emphasis on K-12 education, but that he can’t outright oppose it because the extra dollars could help shore up the general fund.

He said across-the-board budgets cuts will result in a loss of funding for state troopers and veteran’s affairs services, among other areas he said are crucial to the state.

"My concern with that is, in essence, we would be hypocritical in doing that," Garcia said, but "we’re not going to raise taxes. And, second, we’re going to have cut some things.

"The question becomes, if we don’t do this, how are we going to fix the other shortfall?" he asked.

In May, the estimate for school aid revenue was $292 million above January estimates. General fund revenue, meanwhile, was estimated nearly $244 million below prior estimates.

Per-pupil funding slashes over the past three years are a clear indicators that the school aid fund shouldn’t be tampered with, said Scott Menzel, superintendent of the Livingston Educational Service Agency.

"They would actually be robbing the school aid fund," Menzel said.&l t;/p>

"It seems inconceivable to me that they would play this shell game to fill this hole in the general fund budget," he added.

Menzel said community colleges and universities have other mechanisms at their disposal, such as raising tuition and seeking operational millages, that wouldn’t involve school aid dollars. He said the reported improvement in school aid revenues is positive, but could that projections are just that, and could be proven false.

The Legislature needs to take extreme caution in planning expected surplus dollars until they’re in the bank, Menzel added.

"Where are they going to get that from in the next fiscal year? They won’t have it," he said.

State Rep. Bill Rogers, R-Genoa Township, agreed.

Rogers suggested the extra revenue, if and when it comes to fruition, be socked away for future use for K-12 funding. He said budgeting the extra dollars upfront could prolong the state’s school funding crisis several years out.

"I just say hold on. We’re not out of the woods," Rogers said.

State Rep. Cindy Denby, R-Handy Township, said legislators have a sworn duty to protect funding for K-12 education, and shouldn’t deviate from that path.

Denby, like Menzel and Rogers, said K-12 funding has become too vulnerable in recent years to tamper with.

"That’s a mandated responsibility we have as a state to fund K-12, and we’ve struggled the last several years with trying to shore up the fund to cover the needed funding for our schools," Denby said.

"I don’t think it’s the time to start chipping away at it for other purposes that would be eligible. I don’t think that’s the right thing to do," she added.

Garcia said schools will save considerably as a result of an early retirement incentive that banks on 28,000 of 56,000 eligible public school employees retiring this year.

Today is the deadline to accept that incentive, which offers a modest increase to retirees’ pensions.

The reforms also require all public school employees in the retireme nt system to contribute 3 percent of their salaries into a health-care trust, and enact a lower-cost, mixed defined-benefit and defined-contribution plan.

"Those three things are the significant reforms that will save the schools a lot of money," Garcia said.

Michigan school districts are safe from further cuts this school year and likely will escape budget cuts next year as well, state economists said following last month’s state revenue conference.

Some public school officials said they were expecting to receive about $265 less per pupil for the 2010-2011 budget year than they did this year, in addition to increasing retirement and health insurance costs.

Schools already absorbed a $165 per-pupil cut for the 2009-2010 budget year.

The state’s public schools would get $65 more per student through a version of a budget bill approved in late May by the Democrat-run state House. The bill would give schools the money this fiscal year and maintain it in the fiscal year that starts Oct. 1.

The move would restore part of a $165 per-student cut now in effect this year for schools across the state.