Brendan P. Walsh

Things are starting to look eerily and sadly familiar in Lansing.  In the spirit of March Madness, Governor Granholm is attempting a back door cut that would make legendary North Carolina coach Dean Smith smile, but local school districts frown.  Let the political games began.  It’s Budget Madness.

A few weeks ago Governor Granholm unveiled her rough budget proposal.  As it related to the School Aid Fund, the source of 65% of GPPSS’ revenues, Granholm eagerly proclaimed that she would veto any budget recommendation that reduced per pupil funding.  Some estimates have the required per pupil reduction nearly at $268.  It doesn’t sound like much, but to our district that would reduce our revenue by $2.7 million.

So yeah for Granholm?  Hardly.  The beleaguered lame duck gov was less bold in her proposed increase to the school employee retirement system (MPSERS, discussed in detail here).  In her proposal, the MPSERS rate would increase from 16.9% to 19.4%.  For reference, this is the percentage of salaries paid to employees that the district must contribute on their behalf to their retirement pension and benefit fund.

Since there is NO discussion of an increase in the Foundation Allowance next year, translated into next year’s budget, that increase from 16.9% to 19.4% represents a loss of almost $1.4 million.  So net/net, this is the equivalent of a cut of about $175 per pupil.  Governor Granholm, spare the spin job. A cut’s a cut.

Meanwhile, those dastardly fiends in the Michigan Senate revealed their plan the other day.  They are holding fast to their “cuts only” approach to the budget and call for a per pupil reduction of $118, or about a $1 million loss for GPPSS.  However, in the proposal they call for a retirement rate increase far below that of Gov. Granholm – moving from 16.9% to 17.08% – an increase of a more meager $80,000 to district expenses.

It will be curious how the various stakeholders react to these proposals.  I have a pretty good sense.  Granholm’s plan puts lipstick on the pig because she knows most people don’t know the nuances of the economic implications of her proposal.  But in the background, it aims to preserve a rapidly deteriorating, and perhaps terminally ill, defined benefit program at the continued expense of local school budgets – the mother-lode of unfunded mandates.  This is precisely how individual employee costs increase and why we can afford fewer and fewer every year.

The Senate can claim they are staying true to their word with more cuts, and perhaps further their plan of forcing reform on the retirement system.  But oddly, in a role reversal, the Senate’s plan is actually better economically for local school budgets – not by a huge margin, but certainly better.

To paraphrase Gertrude Stein, “A raise is a raise is a raise.”

These are the subtleties of Michigan K-12 finances.  How many school employees recognize increases in district contributions to their retirement plans for what they are?  All too often, only salary increases are recognized as raises.  Make no mistake about it.  It is a raise, plain and simple.  When an employer spends more money for an employee’s personal benefit, regardless of whether the money goes to salary, health care, or retirement, that constitutes a raise.

Despite their different means, the proposals are fairly similar.  Neither are good news for local school budgets, but neither are as bad as what others are calling for.  As was the case last year, the worst choice Lansing could make would be to sandbag the local districts again by bringing forth these options only to drop the hammer well after budget decisions are made (ala the October 2009 cuts).

This is why prudent school districts budget conservatively.  The district carries all the risk in these scenarios.  Salaries are locked in.  So are health care costs and retirement rates, but our funding remains in doubt.  Not a good combination.  Yet when we spend within or below our budgets, certain parties claim we are “hoarding” funds.  But if the cuts of October 2009 taught us one thing it is this:  The Lansing politicians have no regard for the local school district budget.  It is solely up to us to mitigate that risk.