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“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, 1990Chairman, Executive Committee

Chairman, Board of DirectorsInstitute 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

Issue #1

School District Consolidation

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Vocabulary Adjustment

Save

“Reduce Costs”6

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Administrative Cost / Pupilby Enrollment Category

Michigan School Districts *

-$400

$100

$600

$1,100

$1,600

$2,100

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.

GroupA 50,000 and overB 20,000 to 49,999 C 10,000 to 19,999 D 5,000 to 9,999 E 4,500 to 4,999 F 4,000 to 4,499 G 3,500 to 3,999 H 3,000 to 3,499 I 2,500 to 2,999 J 2,000 to 2,499 K 1,500 to 1,999 L 1,000 to 1,499 M 500 to 999 N Below 500

Membership

375 School Districts

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

solidation_Repeal,_Question_3_(2009)

• School district consolidation efforts in other states– http://www.nyslocalgov.org/pdf/School_District_Consolidation_in

_Other_States.pdf

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Standardize Job ContentTHEN

Consolidate Administration(If there are REAL savings)

Position Point #1

Issue #2

Statewide / RegionalTeacher

Salary Schedules

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Selected Average Teacher Salaries(2007 - 08)

School Average State / Nat'lDistrict Salary* Rank*

Grosse Pointe 85,985$ 1California 64,424$ 1DeWitt 63,512$ 82Lansing 59,340$ 157Michigan 56,096$ 11Grand Ledge ** 52,370$ 373United States 52,308$ n/aWebberville 47,679$ 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

21 States!

Move to aStatewide / Regional

Teacher Salary Schedule

Position Point #2

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Skyrocketing Cost of Health Careand

Associated Administrative Cost

Issue #3

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14%16% 16% 16% 16% 16% 16% 16% 17%

26%28% 27% 28%

26% 27% 28% 27% 27%

14%14%

26%27%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Single Coverage

Family Coverage

*Tests found no statistical difference from estimate for previous year shown (p<.05).

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2009.

Average Percentage of Premium Paid by Covered Workers for Single and Family Coverage

1999-2009*

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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

AverageAnnual

District PremiumA 9,500.00$

B 11,000.00$

C 11,500.00$

D 10,000.00$

E 8,500.00$

Consortium Premium 10,100.00$

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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Establish a Statewide Pool for

Bidding Health InsuranceWith Premium Co-Pay

Position Point #3

Skyrocketing Pension and Retirement Benefit Cost

Issue #4

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Citizen’s Research Council (Presented: October 28, 2009)

MPSERS Projected Rates

0.05.0

10.015.020.0

25.030.0

2008

*20

1020

1220

1420

1620

1820

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Fiscal year

(% o

f payro

ll)

Pension

Health

Total

* Actual Rates

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• Fix employer contribution?

• Defined benefit vs defined contribution?

• Health care?

Issues to be Examined

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Review and Reformthe Retirement System

Position Point #4

Unequal (“Inadequate”) Resource Allocation of Instructional Staffing

Issue #5

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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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Standardize Instructional Staffing by Implementing a Position Allotment System

Based on Enrollment

Position Point #5

Simple, “One Size Fits All” Funding Formula

Issue #6

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$7,151 $7,261

$8,274 $8,324 $8,984

$12,279

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000S

tate

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Gra

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Sta

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Wa

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Blo

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Per Pupil Funding in Michigan(Why a competitive education system can’t be taken seriously)

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Funding Formula Concept

A + B + C +…. = Total FundingWhere: A = Transportation

B = Textbooks

C = Materials

D = Technology

E = Administration

F = Certified Instructional Salaries

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Use Categorical Funding to Ensure Funding of Key

Instructional Areas

Position Point #6

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Who should pay for government?

Question:

DefenseUniversities

Correctional System

Court System

Fire ProtectionPolice ProtectionSchools

Roads

Oversight of Financial InstitutionsSocial Security

Medicare

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The SYSTEM for funding Michigan’s public schools

is FAILING!

Reality Points #7 & 8

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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)

$8,880,722

$7,825,939

$7,737,233

$7,000,000

$7,200,000

$7,400,000

$7,600,000

$7,800,000

$8,000,000

$8,200,000

$8,400,000

$8,600,000

$8,800,000

$9,000,000

2007-08 2008-09 2009-10

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Impact of “Tax Cuts”Per Pupil Foundation Grant

Grand Ledge Public Schools

$7,426

$7,261

$6,993

$6,700

$6,800

$6,900

$7,000

$7,100

$7,200

$7,300

$7,400

$7,500

2008-09 2009-10 2010-11

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Michigan’s Constitutional Revenue Limit

(Billions)

$-0.6

$0.0 $0.2

$-2.4

$-3.9$-4.2 $-4.4$-4.2

$-4.9$-5.3

$-4.7

$-7.6

$-9.2-10

-9

-8

-7-6

-5

-4

-3

-2

-1

01

1998 2000 2002 2004 2006 2008 2010Source: May 2009 Revenue Consensus Conference

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

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13

15

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19

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72

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74

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76

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78

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80

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82

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84

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86

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88

19

90

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92

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94

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96

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98

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00

20

02

20

04

20

06

Year

Pe

rce

nt

New York

Michigan

United States

Texas

Michigan’s Per Capita Rank…#25

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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%)

Bottom Marginal Tax Rates in State Individual Income Taxes, 2008

1. North Carolina 6.00% 26. Alabama 2.00% Tennessee 6.00** Kentucky 2.00 3. Minnesota 5.35 Louisiana 2.00 4. Massachusetts 5.30* Maine 2.00 5. New Hampshire 5.00** Maryland 2.00 Oregon 5.00 Virginia 2.00 Utah 5.00* 32. New Mexico 1.70 8. Colorado 4.63* 33. Idaho 1.60 9. Wisconsin 4.60 34. Missouri 1.50

10. Michigan 4.35* 35. Hawaii 1.4011. New York 4.00 New Jersey 1.40 Dist. of Columbia 4.00 37. Arkansas 1.0013. 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 3.0021. Arizona 2.5922. Nebraska 2.56 Source: Federation of Tax Administrators23. Rhode Island 2.50***24. Delaware 2.20 * Flat-rate income tax25. 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 10.30% 30. Maryland 5.50% 2. Rhode Island 9.90*** Oklahoma 5.50

3. Vermont 9.50 32. Massachusetts 5.30* 4. Oregon 9.00 New Mexico 5.30 5. Iowa 8.98 34. Alabama 5.00 6. New Jersey 8.97 Connecticut 5.00 7. Dist. Of Columbia 8.50 Mississippi 5.00 Maine 8.50 New Hampshire 5.00** 9. Hawaii 8.25 Utah 5.00*10. Minnesota 7.85 39. Colorado 4.63*11. Idaho 7.80 40. Arizona 4.54

12. North Carolina 7.75 41. Michigan 4.35*13. Arkansas 7.00 42. Indiana 3.40* South Carolina 7.00 43. Pennsylvania 3.07*15. Montana 6.90 44. Illinois 3.00*16. New York 6.85 45. Alaska 0.0017. Nebraska 6.84 Florida 0.0018. Wisconsin 6.75 Nevada 0.0019. West Virginia 6.50 South Dakota 0.0020. Kansas 6.45 Texas 0.0021. Ohio 6.24 Washington 0.0022. Georgia 6.00 Wyoming 0.00 Kentucky 6.00 Louisiana 6.00 Missouri 6.00 Source: Federation of Tax Administrators Tennessee 6.00**27. Delaware 5.95 * Flat-rate income tax28. Virginia 5.75 ** Tax applies only to dividend and interest income29. North Dakota 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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Questions?