A consensus for tempered optimism

tGov. Snyder already inheriting a healthier School Aid Fund than his predecessor

New Michigan Governor Rick Snyder already has a huge advantage over his predecessor – a healthy forecast for the School Aid Fund that could yield a $1.8 million boost to our local budget.

Last week the Senate and House fiscal agencies reached concurrence with the state treasury on revised revenue forecasts for the 2010-11 and 2011-12 fiscal years (summarized here) that, if they hold true, would obligate the state to increase per pupil revenue by $219.

How does this reconcile with state’s dire 2011-12 budget forecast of a $1.8 billion (with a B) projected shortfall?  This pertains to the state’s General Fund (GF) budget.  K-12 school districts are funded by the separate School Aid Fund (SAF) and its discrete tax structure.

The SAF has proven to index more closely with the state’s economy (clearly now improving) whereas the GF is not only slower to respond, but in some ways is constitutionally restrained from doing so (see Amendment, Headlee and other statutory limitations).

We should temper our optimism as we acknowledge some pitfalls.  Snyder has been rumored to be considering shifting some SAF revenue to the GF to fund projected shortfalls in the community college budget.  In fact this very thing took place last September.

Potentially more damaging is a massive increase in the state mandated retirement rate (MPSERS).  Since the state controls both the per pupil aid and the retirement rate, it is not uncommon to see both simultaneously increase – a politically deft move that gives the appearance of a more money for schools (bread and circuses for the plebes), when the net effect is a reduction.  I have written before about this as a back door cut.

Given our recent past, healthier SAF revenues is a good thing no matter what.  A depressed General Fund is bad for K-12 schools in an indirect way.  Snyder’s State of the State address on Wednesday should be informative as we watch for his proposed reforms to the state tax code, a large plank in his campaign platform.

A long and winding road lies ahead.  Meanwhile at our January 24th meeting, the Board of Education will formally launch the 2011-12 budget development process, an endeavor significantly dependent on the state’s decisions and financial condition.  More soon on that front.

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