Positive News from Consensus Revenue Estimates

Bob Kefgen's picture

The State Treasurer and directors of the House and Senate Fiscal Agencies met Wednesday to come to consensus on the revenue estimates that will be used to finalize state budgets for next year. The short story: better than expected income tax revenue means more money in both the State's general fund and School Aid Fund for both the current year and next year. Hopefully the increased projections in both funding sources mean the Legislature is less likely to increase their raid on the School Aid Fund to pay for general fund projects…but no guarantees.

Here is a breakdown by the numbers and then some context of how this is likely to play out as the Legislature and Governor's office work to finalize budgets for the 2018-19 school year.

By the Numbers

  • $269.9 million: School Aid Fund revenue is coming in $159.5 million higher than expected for the current fiscal year (FY 2017-18) and is also projected to be $110.4 million higher than anticipated next year (FY 2018-19). The combination means that lawmakers have something like $270 million more than they anticipated to spend in the upcoming 2018-19 budget.
  • $227.9 million: State general fund revenue projections for both the current year and next year are being revised upward ($155.9 million in 17-18 and $72.0 million in 18-19). This should help alleviate the increasing pressures on the state's main source of discretionary revenue, making it less likely that lawmakers will divert additional School Aid revenue to offset general fund costs in the higher education budget.
  • -5,000 pupils: The state is projected to lose roughly 5,000 pupils in 2018-19. This is bad news, but not nearly as bad as the news has been. In the 2012-13 school year, the state lost over 15,000 pupils in a single year. Declining enrollment is still very much a problem, especially in some communities (more money per pupil + fewer pupils ≠ more money in your budget). But globally, Michigan's pupil losses are slowing…and that, at least, IS good news.

So This Means?

We have $270 million more School Aid revenue than anticipated (YAY!), but that doesn't mean schools should expect $270 million more in their budgets. Here are some points to keep in mind…

First, both the House and Senate overspent the Governor's budget by about $100 million in order to restore proposed cuts to shared time and cyber schools without reducing the proposed $120-240 per pupil increase. They got the extra money by allocating additional general fund dollars into the K-12 budget. With revenue up, expect the general fund money to evaporate, so really, we have about $170 million (ish) unaccounted for.

Second, the Legislature can already claim that they are giving schools "the biggest foundation increase" in the past decade or more, so it seems much more likely that those dollars will go into other projects, not foundation. So expect a foundation increase of $120-240 per pupil (still not bad), but not more.

Third, there are several education-related special projects or crises that lawmakers want to respond to, but have been struggling to find dollars to fund. These make likely candidates for places to spend this heretofore unexpected revenue. In no particular order, these buckets include:

  • School Safety: this encompasses both capitol improvements (e.g. installing vestibules, metal detectors, cameras, bulletproof glass, and the like in schools) and personnel costs (e.g. hiring school resource officers, school counselors, school psychologists).
  • Student Mental Health: tied to school safety, there is increasing consensus in Lansing that students need better mental health supports in school. What there is no consensus about is how to address the issue in a sustainable way.
  • Career Readiness: there are at least a dozen bills in the works designed to enhance student's career readiness through the increased use of educational development plan, career cruising, CTE offerings, MMC flexibility, and the like. Much of this work requires resources, like career cruising software and (most importantly) career and college counseling.
  • Expanding CTE: this could include additional funding for students who take CTE courses, money for districts and ISDs to expand offerings, funding for purchasing new equipment, funding for specific programs (e.g. FIRST Robotics), and any number of other permutations that we have seen in the School Aid budget in recent years.
  • Other Things: 3rd grade reading, early childhood education, and At Risk funding have all seen dramatic increases in recent years and there is already money in the budget for each of them, but that may not stop the legislature from adding more funding for these hot button topics.

Next Steps

The Legislature typically finishes up its budget process by the first week of June. Nothing seems to indicate that it will drag on any longer this year. So expect lawmakers to come to some quick decisions about how to spend this windfall and push through legislation that may need to have some clarification and details hammered out later.