Budget | Michigan Association of Superintendents & Administrators

2019-20 School Aid Budget

The 2019-20 budget process will begin with Gov. Gretchen Whitmer’s initial budget presentation. Given the recent transition of power, that presentation is not expected until late February or early March.

The House Fiscal Agency, the Senate Fiscal Agency and the State Treasury have met and agreed to the revenue numbers for January.

Check back for more updates as the budget process moves forward.

FY 2020 Budget Process Progress

January CREC

Contents

Summary

The final January 2019 revenue estimate made slight adjustments to the May 2018 Consensus Revenue Estimating Conference (CREC) totals. Estimates were lowered for School Aid Fund (SAF) revenue by $23.9 million for 2018-19, but increased by $25.9 million for 2019-20. The 2020-21 estimate was shown for the first time and grew $337.7 million over the prior year’s revenue estimate! Overall, this is good news for school funding.

MASA would like to caution that these numbers are preliminary and represent the first step in a very long process. Members are encouraged to take these numbers with a grain of salt, and not commit funds that have not been appropriated.

Read the full agreement.

Revenue Projections

In the final CREC agreement for January 2019, the GF/GP estimate from May 2018 was increased $288.6 million for FY 2018-19 and was increased by $199.1 million for FY 2019-20. Revenue for the FY 2020-21 was unveiled showing a 1.3 percent growth or $134.8 million above the estimated FY2019-20 level.

The SAF estimate for FY 2018-19 was decreased by $23.9 million from the May 2018 estimate, totaling a $210.6 million increase over prior year revenues. FY 2019-20 estimate was increased by $25.9 million, totaling $376.2 million over FY 2018-19, and FY 2020-21 is slated to increase $337.7 million above the FY 2019-20 level! This represents overall growth year after year at 1.6 percent, 2.8 percent and 2.4 percent for the three fiscal years, respectively.

The reasons for the growth in both funds relate to elevated income tax revenue, which could be a risk in the future years due to higher than usual 2018 revenue. The refunds for 2018 will be better known in May. As a result, revenues could be adjusted then. On the plus side, the SAF will benefit from online sales tax revenues that are now being collected, as well as sales tax on recreational marijuana. The pressure on the GF/GP expenditure side could be an issue with road expenditures and other tax reductions kicking in over the next few years. Although the SAF seems to have more funding, the pressure to push more expenditures through SAF is always a concern. The interaction between the GF/GP and the SAF is something we watch closely as the transfer of revenue from the GF/GP to the SAF has been a significant source of ongoing support for SAF programming.

Balance Sheet

The HFA estimated balance sheet shows the impact of the revenue agreement on the funds available for school aid. Some key areas to note include:

  • The GF/GP transfer to school aid is reduced for FY 2019-20 by $42.9 million, leaving a transfer in of $45 million. This is an estimate based on the prior Administration, so this is something that could change with the new Governor. The HFA balance sheet includes no revenue from the MPSERS retirement obligation reform reserve fund, which was $31.9 million in the prior year.
  • The ongoing baseline expenditures include all categorical payments and foundation allowances for the budget under which you’re currently operating. The forecast includes moving forward current law with adjustments for student projections, the effect of lowered assumptions in the MPSERS system for both payroll and investment return, and the impact of implementing the dedicated gains policy to lower the unfunded liability. Total expenditures are expected to increase $20.9 million for FY 2019-20.
  • FY 2017-18 final figures leave $362.5 million in the coffers to carryover to FY 2018-19. Although positive, there is still a current year structural deficit of $174.9 million.
  • The estimate for FY 2019-20 shows a structural surplus of $75.6 million, leaving a final ending balance of $263.2 million at the end of FY 2019-20.

The balance sheet represents the best high-level estimate of revenues and ending balances based on the consensus agreement. Depending on policy decisions, it appears that there are funds available to increase foundation allowances or possibly increase other categorical funding in FY 2019-20. Caution is needed because spending more than $75.6 million of the $263.2 million projected ending balance will create a structural problem for FY 2020-21. Long-story-short, we do not recommend spending those dollars yet. We are very early in the budget process.

The figures represented in the estimated SAF balance sheet incorporate all of the changes that occurred in the “lame duck” session. This includes changes in the income tax split, the sales tax revenues for online sales, and revenues from the legalization of recreational marijuana. We also heard that the GF/GP estimates include road funding and the impact of the tax changes, and like the SAF, have an ending surplus. The big unknown is what are the priorities of the new Administration and Legislature and how that will impact the bottom line and final budget.

Pupil Estimates

Overall, the pupil estimates continue to decline annually.

FY 2018-19

  • Local district pupils were adjusted to 1,323,700 which is a 7,800 decrease from May estimates
  • PSA pupils were adjusted to 146,700 which is a 1,800 student decrease from the May estimates
  • Compared to FY2017-18, local districts are down 13,200 students, and Public School Academy (PSA) students are up 100 students
  • Grand total for all pupils is estimated to be 1,470,400 for FY 2018-19

Several factors attributed to forecast a decline in students. There was a reduction in final audited student numbers of 1,500 for 2018, which was not anticipated and therefore will be included in the forecast coming forward. The cohort of students entering kindergarten was down 3,000 from the graduating grade 12 cohort. There is a flat forecast for the number of non-public school students taking classes in public schools (shared time) and enrollment in PSAs is down even with nine new charter schools last year, although eight others closed. The overall trend that declining birth rates are anticipated also accounted for a reduction in the overall student forecast. After a few years of only slight overall declines, this estimate shows a somewhat significant reduction of students in the near future.

FY 2019-20

  • Local district pupils were adjusted to 1,314,200 which is an 11,800 decrease from May estimates
  • PSA pupils were adjusted to 146,600 which is a 4,000 student decrease from the May estimates
  • Compared to FY 2018-19, local districts are down 9,500 students and PSA students are down 700
  • Grand total for all pupils is 1,460,200 for FY 2019-20

FY 2020-21

  • Local district pupils are estimated to total 1,306,000
  • PSA pupils are estimated to total 146,000
  • Compared to FY 2019-20, local districts are down 8,200 students and PSA students are unchanged
  • Grand total for all pupils is 1,452,000 for FY 2020-21

 

**Thanks to MSBO for their assistance in compiling this summary.

Gov. Gretchen Whitmer will release her first budget in late February or early March. Please keep an eye out for updates.

For the most recent budget information from the Whitmer administration, click here.

The House and Senate will not release their respective budgets until after Gov. Whitmer releases her initial proposal in late February or early March.

For the most recent budget information from the House Fiscal Agency, click here.

The House and Senate will not release their respective budgets until after Gov. Whitmer releases her initial proposal in late February or early March.

For the most recent budget information from the Senate Fiscal Agency, click here.

The May Consensus Revenue Estimating Conference (CREC) will take place in May. At this time, the House and Senate Fiscal Agencies will confer with the State Treasurer to determine the final revenue numbers for the FY 2020 Budget.

The final budget is not expected until summer of 2019.

Budget Archives