Adequacy studies determine the true cost of providing a quality education to ALL students, regardless of their income, location or other circumstances. These studies often include geographic cost differences, labor cost differences, and analysis of geographic isolation, among other factors.

Learn more about adequacy studies here: http://schoolfunding.info/wp-content/uploads/2017/03/CostingOut-Overview.pdf

States frequently use multiple methodologies to improve validity and reliability of adequacy study results. There are four commonly accepted methodologies:

The Successful School Districts (SSD) approach, which calculates a base funding amount by assuming the spending of districts meeting state standards is identical to the spending of districts not meeting state standards.

The Professional Judgment (PJ) approach, which gathers leading educators who are most knowledgeable about the delivery of quality education to identify the human resources and operating expenses needed to meet standards in specific circumstances.

The Evidence-Based (EB) approach, which uses peer-reviewed academic research on student performance to identify the resources needed.

The Statistical (SA) approach, sometimes called the Cost Function approach, which uses regression analysis and statistical modeling to examine the relationship between district spending and district performance.

Policymakers should have the best, most complete and accurate information on what it truly costs to educate all of our students. The information must be comprehensive, valid and reliable.

The cost of the taxpayer-funded study, released in June of 2016, was $399,000. This study was the result of legislation which became law in 2015 as Public Act 555.

The goal was to conduct a comprehensive statewide cost study to determine sufficient resources per-pupil to provide a public education that enables a student to demonstrate successful completion, in terms of proficiency, of all credit requirements of the Michigan Merit standard.

The purpose of the state-funded study was to determine whether public resources are being distributed to Michigan’s K-12 schools to provide all children with an equal opportunity to achieve and succeed.

The state-funded study was required to include:

A determination of the educational resources and related expenditures needed to provide a quality elementary and secondary education for all public school students.

An examination of exemplary school districts that are high-performing and low-spending.

A review of district-level support of public schools, including an examination of the potential utility of geographic cost-of-education indexing.

An investigation of additional funding categories that may be necessary to meet unique needs, including but not limited to:

  • Socioeconomic status
  • Limited English proficiency
  • Special education needs
  • Scarcity and density of population
  • Issues related to the rural, urban, or suburban nature of the school district

The study was also required to report the impact of food service and transportation costs, as well as costs associated with community services, adult education, school building construction and maintenance and other capital costs, and debt service.

It was also required to determine the cost impact of student population growth and decline.

Overall, Michigan should create a more equitable school funding system that serves all students, regardless of their circumstances. The state’s school finance system is getting less equitable over time.

The base cost for educating Michigan’s public school students should be $8,667 per pupil.

There should be substantially greater funding for low-income students and English Language Learners. These additional resources would allow districts to more fully implement, and perhaps even expand, research-based best practices for such students.

Michigan should increase revenues for the lowest-spending districts and narrow the gap between high-spending and low-spending districts over time.

Michigan should have a single formula allowance amount for all districts, with an option to seek local operating revenues.

A system should be created to track special education expenditures for districts at the local level.

Michigan should collect targeted data to set regional cost differences, and explore alternatives for narrowing the wide range of per-pupil revenues and expenditures.

The state-funded report of 2016 was a very good start, but a new study using multiple methodologies is needed to drive comprehensive school finance policy reform. The state-funded study is not a full adequacy study because the standard used for identifying a successful school district was not a full representation of Michigan’s standards. Too much of the definition of success used in the state’s study was “proficiency” with too little emphasis on student growth.

The state’s study in many ways resembled the successful school district methodology. However, the state RFP required the study team to use  “exemplary districts.” This analysis assumes an even playing field on which all school districts can succeed based on the average base spending of “exemplary districts.”  As noted in the state’s report, there are a wide variety of differences district-by-district, which does not allow for this assumption to hold.

The exemplary districts have a demographic homogeneity that many studies have shown to result in lower funding needs. Other deficiencies in the state funded study are found in the report prepared by JL Myers Consulting on this website and titled: “A Review of the Michigan Education Finance Study.”

Types of adequacy studies conducted in 25 states from 2003 to 2014:

 

Type of Adequacy study # of studies
Successful School Districts (SSD) 17
Professional Judgment (PJ) 29
Evidence-Based (EB) 19
Statistical (SA)
Multiple approaches 23

 

The amount of funding needed to serve at-risk and low-income students, special education students, English Language Learners and other vulnerable groups needs more research and data. The weighting or funding level in the state-funded study report for these students was more an average and does not reflect the funding levels found in other states.

Data on special education and capital costs available in Michigan is not comparable, so use of the Successful School District method was significantly impacted by lack of data on significant portions of school district spending.

The state’s study also did not fully examine cost of living differences, labor cost differences  or cost per pupil differences caused by the presence or lack of economies of scale due to enrollment size.

The different needs of Michigan’s charter schools (about 10% of total enrollment statewide) and traditional public schools require more research and analysis. The use of multiple methodologies will provide the needed additional analysis of this type of public education.

Michigan’s traditional and charter schools spend their money in very different ways:

Charter schools spent an average of $9,251 per student, compared to $10,351 for traditional public schools.

Among the reasons: Traditional districts are getting extra money from the state to offset retirement costs, yet these pension contribution costs represent 12.2% of total expenditures. At charter schools, pension costs represent only 0.7% of expenditures.

Traditional districts tend to get more special education funding because they usually have a much higher percentage of disabled students, as well as those with more severe disabilities. These students are more costly to serve.

Traditional and charter public schools also spend their money differently. Charter schools, which generally spend less on teacher salary and benefits, spend less on instruction and transportation. However, charter schools spend more on business and administration, including fees to charter authorizers and charter management companies. They spend much more on facility operations because they don’t have access to public bonding or sinking funds for building construction or upgrades. These differences need much more examination.

The Commission identified quickly becoming a top student performance state as essential to Michigan’s future. Michigan is currently near the bottom in education performance nationwide.

To quote the Commission’s report:

“Dramatic gains will not happen without significant new investment. Policymakers should view education as an investment, and increasing investment now will lead to increased prosperity in the future.”

The Commission recognized that the work of many government commissions, blue-ribbon committees, and similar efforts are often put on the shelf and not revisited. There is little appetite for generating revenues needed to implement report recommendations, the Commission found.

Michigan taxpayers have a right to be skeptical of requests for additional resources, the Commission concluded. K–12 performance in Michigan has not been historically commensurate with spending. However, the Commission was clear: Without significant new investment, Michigan cannot become a top-performing education state.

We must determine additional resources needed for disadvantaged students. Michigan’s funding formulas should be equitable. Similar districts and similar students should be provided with similar resources. When necessary, students with greater educational needs should be provided with additional resources  to have an equal chance of meeting performance standards.

Michigan should develop funding formulas to support the system. Once the amount of funding needed to meet performance standards is determined, Michigan should develop  funding formulas that efficiently and effectively distribute these resources.

The School Finance Research Collaborative, a diverse group of business leaders and education experts from Metro Detroit to the U.P., who agree it’s time to change the way Michigan schools are funded. This is a broad based, statewide, and bipartisan Collaborative committed to completing the research necessary to support school finance reform.

A generous grant provided by the W.K. Kellogg Foundation supported the establishment of the School Finance Research Collaborative.

The remaining funding needed to complete the additional research and associated communications is being sought from the foundation community.

We plan to have a research contractor identified by mid-April of 2017, and we expect the study and research to take about nine months to complete the study.

Once accurate and comprehensive data is available, the Collaborative will work to communicate this critical information to Michigan policymakers, stakeholders and the public at large.

The adequacy study will address all pre-K-12 students (in traditional and charter public schools), but will exclude homeschool/shared-time, cyberschools and adult education.

This effort will identify the base cost of providing education (on a per-pupil basis) and weightings for significant subgroups, including special education students, English Language Learners, and at risk/poverty students.

The weightings for poverty must factor into the impact of high concentrations of poverty. The successful vendor may also identify the impact of high concentrations of ELL and special education students. The objective is to provide all of the information needed to develop a school funding formula which is both adequate and equitable.

The adequacy study will exclude costs associated with capital renovations, as well as the construction, acquisition or lease of facilities or technology, including expenditures funded by a bond issue or sinking fund.

However, funding is being sought for a separate project to address pre-K-12 capital needs, and it is hoped that this separate effort can be undertaken simultaneously. This separate and critically important project is expected to include information about the variation of property tax base in school districts (ability to pay), how other states address capital funding for Pre-K-12 education programs, and an in-depth study of critical capital needs of public schools.

Development of a school funding formula will also be a separate project once the adequacy study is completed. The formula-development project often includes such factors as:

  • Funding levels for special education students, and differing needs depending on disability type
  • English Language Learners
  • Low-income students
  • Development of a geographic cost index
  • Address unequal funding support for special education students from ISDs (intermediate school districts)
  • Address declining enrollment and the establishment of thresholds for additional funding for declining-enrollment districts
  • Identify a method to adjust the base cost annually until the next study is undertaken.

Our research will help answer this question by exploring best practices and lessons learned in other states. Michigan lawmakers need better, more complete information so they can address adequate funding and student achievement.

Key points:

Michigan public schools spent $13.9 billion on operating expenditures in 2015-16, which is 6% less than the cost in 2007-08, without factoring inflation.

According to the 21st Century Education Commission Report, Michigan currently ranks 24th in per-pupil K–12 spending. This represents a sharp drop in the state’s standing.

Michigan ranked 8th highest in per-pupil spending as recently as 2000. Since that time, the state has seen inflation-adjusted per-pupil spending fall by $663 per student, while the U.S. average for per-pupil spending increased by over $1,400. Michigan schools have also seen increasing fiscal pressure from retirement costs. Declining resources relative to other states is a likely cause of Michigan’s recent poor performance.

Michigan ranks in the middle of the 50 states (23rd) on per-pupil spending, according to Governing.com, based on 2014 U.S. Census data from fiscal 2014, the most recent available. The national average was $11,009. The figure for Michigan was $11,110.

Based on schools’ general-fund expenditures, Michigan’s per-pupil spending increased 11% between 2007-08 and 2015-16, a period when the cost of living increased 14%.

A significant portion of the increase in Michigan K-12 funding was provided to help districts offset increases in their mandatory payments to the state retirement system. That money is essentially handed out by one branch of state government and given right back to another. That amount was roughly $440 per student in 2015-16.

Over the past 15 years, more than 30 states have conducted school finance adequacy studies. Of  those states, 90% have used multiple methodologies in their studies. Many states conducted studies multiple times in that period.