School Aid, Part 2: Less per student, and fewer students
Last week (Part 1) we showed that the foundation allowance portion of the School Aid Fund has dropped from about 85% to 56%. The result? Local districts have fewer budget choices as more of their revenue is earmarked by state law. Technically this does not mean less money to local districts. It does mean fewer choices are left to local districts about how to spend their money.
Meanwhile inflation marches on. Let's examine its impact on the foundation allowance.
The simple headline: In real (inflation adjusted) dollars, the foundation allowance was lower in 2025 than in 1995, the first year of the Proposal A era. This matters because local districts rely on foundation allowance dollars to buy everything they need to operate the district.
In 1995, the basic foundation allowance was $5,000 per pupil. In 2025 dollars, that is about $10,600. Fast forward to 2025 and the basic allowance yielded $9,608––a $1,000 per pupil decrease in real dollars since the dawn of Proposal A.
This was not always been the case. The foundation allowance grew in real dollars from 1995 to 2002. Enter the Great Recession and by 2012 the foundation allowance lost about $2,000 per pupil of that value. It's been level ever since.
Now let's recall that Michigan’s public school enrollment is down 13% since 1995. Charter schools grew from zero to about 154,000 students over that time. Charters gained market share (student enrollment). Traditional Michigan public school enrollment has fallen 23%. The compounding effect is substantial.
The two declines multiply
A district’s foundation allowance revenue is the foundation allowance times its student count. For traditional districts at the basic allowance, every $100 of foundation revenue in 1995 is about $70 today, in real dollars.
Both dollars and spending power have declined. Public school costs do not fall at the same pace. In fact, many of the largest expense areas grow faster than inflation, such as transportation (e.g. bus) and health insurance costs.
We will come back to those. Next in this series: where the rest of the School Aid budget goes other than the foundation allowance.
How we measured this: The allowance figures are the basic per-pupil foundation allowance enacted for each fiscal year, including enacted per-pupil reductions (FY2003–04, FY2010–11, FY2020). Real dollars are FY2025 dollars, adjusted with the U.S. CPI-U averaged over Michigan’s October–September fiscal year; FY2026 uses 11 months of price data. Enrollment is state pupil membership (blended FTE) for FY1995 and FY2025, and the traditional district count excludes public school academies (aka charter schools). The $70 figure multiplies the real change in the basic allowance (0.91) by the change in traditional district membership (0.77). It is an illustration, not measured district revenue.
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