School Aid Revenue Projections Down Slightly

In a sentence, the January Consensus Revenue Estimating Conference (CREC) numbers show that Michigan schools are looking at a slight downturn in the FY 2013-14 budget but, because of reforms passed last term, districts will not see an increase in their MPSERS rate for the first time in many years.

Although total revenue to the School Aid Fund is projected to continue to grow next year, the growth is now projected to be less than originally expected according to CREC. While not insignificant, the adjustment is not necessarily large enough to translate into a cut for schools. Put another way, if the current year budget was continued into FY 2013-14, the drop in expected revenue would mean the School Aid budget would be facing a $54 million shortfall unless additional money was allocated from the general fund or other sources.

Total statewide pupil enrollment in Michigan's local school districts is continuing to decline steeply. Local district enrollment is projected to decline by 25,060 pupils this year (FY 2012-13), a bigger drop than initially projected. That trend is expected to continue for the next two years with an expected drop of approximately 23,000 students per year in FY 2013-14 and FY 2014-15. However, charter school enrollment is expected to spike by 10,430 this year and then approximately 17,000 students per year for each of the next two fiscal years.

In planning their budgets for next year, districts should note that the Research Seminar on Quantitative Economics (RSQE) at the University of Michigan, which has historically been more accurate in its revenue projections than the CREC, projects School Aid revenue to come in $75.74 million below the CREC estimate for the current fiscal year and $93.5 million below the CREC estimate for FY 2013-14. This should sound a note of caution for educators since this points to the possibility for future reductions in school spending.

The roughly $400 million per year that has been transferred out of the School Aid Fund to the community college and higher education budgets for the last two budget cycles is more than enough to cover the amount of any shortcomings both this year and next.