These are (or were) the good old days.
At least that is the case for scores of Michigan school districts who still enjoy the cool shade of the Federal funding blooms that grew out of national pandemic and its Elementary and Secondary School Emergency Relief Fund.
The ESSER train was a game changer for Michigan public schools. To help put the amounts into perspective, today Michigan Benchmark added to its growing library of Michigan public school funding data, accessible on our Research Central portal. Navigate to the "Federal Revenue by District" tab and users can see the history of their school district's Federal revenue history from 2012 through 2023.
Federal Funding Measurables
For convenience and for best interpretation the Federal funding history is displayed in three dimensions per district: (a) Total Federal Revenue; (b) Federal Revenue per Pupil, and (c) Federal Revenue as a proportion of each district's total General Fund revenue.
The numbers are staggering. As you assess the rise in funding, both on an overall basis and on the district level, one can only be reminded of the impact of the drop in revenue that your district is either currently experiencing or will do so next year.
Consider that in 2013, the total statewide General Fund Federal revenue of all of Michigan's non-charter schools was $720 million. It remained in a relatively tight band through 2020 when it reached $860 million at the dawn of the pandemic era.
But it was off like a rocket after that, climbing to $1.7 billion in 2021 and rising to $2.5 billion in each of 2022 and 2023. In other terms, this is a 3.5x increase in just three years and yielded an average increase in funding per pupil to exceed $2,000 per year. If we consider that the standard per pupil Foundation Allowance is roughly $9,500, this has delivered a boon to local district finances.
ESSER Funds Coincide With Historic Fund Balance Gains
The gains to Michigan public school balance sheets have been enormous. The graphic below tells the tale of the aggregate Michigan public schools General Fund Equity (defined here) climbing from $1.7 billion in 2020 to $3.1 billion at the end of 2023.
Sure, some districts have been scrupulous and fund equity levels demonstrate that. But incremental investment has taken place. Consider that in 2012 the average ratio of students to teachers was about 23. In 2023, that ratio had fallen (most would say "improved") to 21. Two may not seem like much, but in every other measurable manner, it's a big deal. In broad strokes, when normalized for comparison sake, it means Michigan public schools have hired the equivalent of 6,000 more teachers, an increase of the equivalent of 10%.
Rising Federal aid is not exclusively responsible for that. Indeed Michigan has taken other measures to increase aid to public schools. But by any measure, a nearly $2 billion increase in Federal aid is enormous.
Meet the Cliff: Federal Aid to your Michigan School District Has or Will Fall
And what goes up, will come down - at least when it comes to funding public schools. The veterans of Michigan's Great Recession can attest to that.
How big will the drop be in your local Michigan district? You can see for yourself in our Research Central library under the "Federal Revenue by District" tab.
Some of you districts are in the deepest throes of pain of this weening process. And if you're not, you soon will be. To demonstrate, review the graphic below. It compares two types of districts.
District A took the brunt of its Federal funding decline from 2022 to 2023. The drop was enormous. This district saw its Federal funds climb from $7.1 million in 2020 to $32 million in 2022. In per pupil terms over just two years this delivered an astonishing $2,300 per pupil in funding in just two years. Further analysis (available via our Michigan Benchmark Report service) shows that this district delivered dramatic reductions in its pupil to teacher ratio.
All great stuff and great for staff, students, and parents... but... how do you unwind that?
Because, sadly, they will need to. This District A ran a large deficit last year and will do so again this year. The ESSER party helped, but it was not so great to save them from peril.
District B has yet to feel the flame. Unlike District A that took a huge drop from 2022 to 2023, District B saw their Federal aid continue to climb into 2023. Based on our analysis, your district is either in one camp or the other. If you are more like District A, you already know this and are likely deep into the process.
But if you are more like District B, hang onto your hat for what will likely be a tougher budget development process as you approach the June 20, 2024 deadline for budget adoption.
Cliff Navigation Strategies
If you serve on a local Michigan public school Board of Education, here are some suggestions for actively participating in your budget development process and for being informed about the decisions you will be asked to make, such as approval of the 2024-25 budget:
If your Board has not already done so, when navigating a required reduction in General Fund spending, the longer the runway the better. Michigan Benchmark can assist with our Budget Modeling Service, but whatever path your Board takes, ensure you receive the information you need in a timely manner before being asked to vote.
Ask for a report on what the change in Federal funding is expected to be in 2024-25 versus what it has been this year (2023-24) and last year. This will give you a sense of the level of increase ESSER has yielded your district. (Or message us and we can walk you through the data we have.)
Ask the administration to deliver a summary of how many district staff or other non-Human Resources investments were made primarily because of the availability of ESSER funds.
Make sure all parties understand any bargaining unit agreement requirements for notifying staff in the event that layoffs are needed.
Ask the administration what its plans are to reduce district costs if there is an anticipation of reductions in Federal revenue.
When cutting budgets, ask to "see the math" of how the district, specifically, will deliver cost reductions. The administration should be able to walk the Board of Education through the process it follows to deliver the cost reduction. This plan should be specific and laden with numbers and equations. If you do not see this, it is a red flag.
Ask if the administration can share a summary of how the increased Federal revenue delivered specific benefits for students and staff and which of those investments the administration would like to find alternate funding sources so that the investments could be protected, either in total or partially.
If you'd like to talk one on one about these or any of your school finance issues, book some time via the link below.
Happy budget season! Stay tuned and be sure to subscribe to stay abreast.