u.p. education legislative summit marquette, mi september 8, 2005 u.p. education legislative summit...
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U.P. Education Legislative SummitMarquette, MI
September 8, 2005
Michigan’s Financial Crisis and the Outlook for School Funding
Michigan’s Financial Crisis and the Outlook for School Funding
Tom Clay, Director of State Affairs
Citizens Research Council of Michigan
www.crcmich.org
Tom Clay, Director of State Affairs
Citizens Research Council of Michigan
www.crcmich.org
Citizens Research Council of Michigan 2
Citizens Research Council of MichiganCitizens Research Council of Michigan
• Founded in 1916• Statewide• Non-partisan• Private Not-for-profit• Promotes sound policy for state and local
governments through factual research• Relies on charitable contributions of
Michigan businesses, foundations, and individuals
• Founded in 1916• Statewide• Non-partisan• Private Not-for-profit• Promotes sound policy for state and local
governments through factual research• Relies on charitable contributions of
Michigan businesses, foundations, and individuals
Citizens Research Council of Michigan 3
• Total State Budget - $41.2B• State’s Two Major Funds:
General Fund - $8.9BSchool Aid Fund - $12.8B
• Other State Funds Restricted for Other Purposes, e.g. Transportation, Federal Revenues
• Over 80% of All Revenues Spent Outside State Government
• Total State Budget - $41.2B• State’s Two Major Funds:
General Fund - $8.9BSchool Aid Fund - $12.8B
• Other State Funds Restricted for Other Purposes, e.g. Transportation, Federal Revenues
• Over 80% of All Revenues Spent Outside State Government
The Michigan BudgetFY2006 Proposal
The Michigan BudgetFY2006 Proposal
Citizens Research Council of Michigan 4
Five Years of Budget Problems
Five Years of Budget Problems
• Worst Since World War II• Declining General Fund Revenues• Slow Growth in School Aid Fund
Revenues• Structural and Cyclical Deficits at Play• General & School Aid Funds Affected
• Worst Since World War II• Declining General Fund Revenues• Slow Growth in School Aid Fund
Revenues• Structural and Cyclical Deficits at Play• General & School Aid Funds Affected
Citizens Research Council of Michigan 5
Deficits DefinedDeficits Defined
Cyclical — Caused by Economic Downturn - Revenues Worsen - Some Spending Pressures Increase - Deficit Erased When Economy Recovers
Structural — Caused by Cost Increases to Maintain Current Policies Outpacing Revenue Growth, Even in Good Economic Times
Cyclical — Caused by Economic Downturn - Revenues Worsen - Some Spending Pressures Increase - Deficit Erased When Economy Recovers
Structural — Caused by Cost Increases to Maintain Current Policies Outpacing Revenue Growth, Even in Good Economic Times
Citizens Research Council of Michigan 6
Budget Deficit PressuresBudget Deficit Pressures
• Both Funds Outspending “Regular Revenues”
• Causes– Economy– Tax Cuts– Structural Imbalances In Spending and
Revenues
• Both Funds Outspending “Regular Revenues”
• Causes– Economy– Tax Cuts– Structural Imbalances In Spending and
Revenues
Citizens Research Council of Michigan 7
General Fund & School Aid Operating Deficits
General Fund & School Aid Operating Deficits
($1,200)
($1,000)
($800)
($600)
($400)
($200)
$0
$200
$400
$600
($ i
n M
illi
on
s)
FY00 FY01 FY02 FY03 FY04 FY05
School Aid Fund
General Fund
($1,200)
($1,000)
($800)
($600)
($400)
($200)
$0
$200
$400
$600
($ i
n M
illi
on
s)
FY00 FY01 FY02 FY03 FY04 FY05
School Aid Fund
General Fund
Citizens Research Council of Michigan 8
Summary of One-Time Resources (in Millions)
Summary of One-Time Resources (in Millions)
Rainy Day Fund $1,363 FY2000 School Aid Fund Surplus 984
FY2000 General Fund Surplus 212
Medicaid Benefits Trust Fund 561
Advance State Education Tax Collection Date 455
Tobacco Settlement/Merit Award Revenues 317
Temporary Federal Fiscal Assistance 655
Bond for Pay-as-you-go Capital Projects 211
Revenue Sharing Accounting Change 181
Refinance Bonds 209
Employee Wage Concessions 186
Other 1,200
$6,534
Citizens Research Council of Michigan 9
Causes of Michigan’s Budget Problems
Causes of Michigan’s Budget Problems
• Structural Imbalances
• Weak Economy
• Tax Cuts
• Stock Market Decline
• Michigan’s Deteriorating Share of Auto and Light Truck Market
• Structural Imbalances
• Weak Economy
• Tax Cuts
• Stock Market Decline
• Michigan’s Deteriorating Share of Auto and Light Truck Market
Citizens Research Council of Michigan 10
How Weak is the Economy?How Weak is the Economy?
Michigan’s Recent Statistics:• 50th in Personal Income Growth• 50th in Unemployment Rate• 50th in Employment Growth (Decline for
Michigan-Only State in the U.S.)
• 50th in Index of Economic Momentum (Population, Personal Income, Employment)
Michigan’s Recent Statistics:• 50th in Personal Income Growth• 50th in Unemployment Rate• 50th in Employment Growth (Decline for
Michigan-Only State in the U.S.)
• 50th in Index of Economic Momentum (Population, Personal Income, Employment)
Citizens Research Council of Michigan 11
Total U.S. Vehicle Sales & Big 3 Share 1992-2004
0
5,000,000
10,000,000
15,000,000
20,000,000
Sale
s Le
vel
52%54%56%58%60%62%64%66%68%70%72%
Total U.S. Sales Light Vehicles Big 3 Share of Total Sales
Citizens Research Council of Michigan 12
Michigan Manufacturing Employment
Michigan Manufacturing Employment
500
600
700
800
900
1,000
1990 1992 1994 1996 1998 2000 2002 2004
Mon
thly
Em
ploy
men
t (1
000s
)
500
600
700
800
900
1,000
1990 1992 1994 1996 1998 2000 2002 2004
Mon
thly
Em
ploy
men
t (1
000s
)
Source: U.S. Department of Labor, Bureau of Labor Statistics.
June 2005671,400
Lost 1 in 4 Manufacturing Jobs
Jan 1992
775,900
Jul 1999908,200
Citizens Research Council of Michigan 13
The General FundThe General Fund
• Revenues May Be Spent for Any State Program
• Income Tax and Single Business Tax Comprise Nearly 3/4 of Revenues
• Both Taxes Have Been Cut Significantly in Recent Years
• Annual Cuts Now Total $1.3 Billion
• Revenues May Be Spent for Any State Program
• Income Tax and Single Business Tax Comprise Nearly 3/4 of Revenues
• Both Taxes Have Been Cut Significantly in Recent Years
• Annual Cuts Now Total $1.3 Billion
Citizens Research Council of Michigan 14
Perspective On RevenuesPerspective On Revenues
• General Fund Revenues in FY03, FY04, & FY05 Below FY1995
• Inflation-Adjusted General Fund Revenues Below 1972 Level
• General Fund Revenues in FY03, FY04, & FY05 Below FY1995
• Inflation-Adjusted General Fund Revenues Below 1972 Level
Citizens Research Council of Michigan 15
General Fund RevenuesGeneral Fund Revenues
$7,000
$7,500
$8,000
$8,500
$9,000
$9,500
$10,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Fiscal Year
Mil
lio
ns
Citizens Research Council of Michigan 16
General Fund BudgetGeneral Fund Budget
83% of General Fund Spending in 4 Areas:1. Higher Education ($1.8B)2. Community Health—Mental Health,
Public Health, Medicaid ($2.5B)3. Corrections ($1.7B)4. Human Services—Family Services,
Juvenile Justice, Public Assistance ($1.1B)
All Other General Fund Programs—$1.5B
83% of General Fund Spending in 4 Areas:1. Higher Education ($1.8B)2. Community Health—Mental Health,
Public Health, Medicaid ($2.5B)3. Corrections ($1.7B)4. Human Services—Family Services,
Juvenile Justice, Public Assistance ($1.1B)
All Other General Fund Programs—$1.5B
Citizens Research Council of Michigan 17
Significant CutsSignificant Cuts
• Higher Education Cut 14% in 2 Yrs - $297M
• Revenue Sharing Cut 26% in 4 Yrs - $399M
• General Fund Support for School Aid Cut 75% in 3 Yrs - $284M
• State Workforce Down 8,500 in 3 Yrs (14%) - Smallest Workforce Since 1974
• Higher Education Cut 14% in 2 Yrs - $297M
• Revenue Sharing Cut 26% in 4 Yrs - $399M
• General Fund Support for School Aid Cut 75% in 3 Yrs - $284M
• State Workforce Down 8,500 in 3 Yrs (14%) - Smallest Workforce Since 1974
Citizens Research Council of Michigan 18
MedicaidMedicaid
• Spending Up 40% in 4 Yrs—Nearly Double Digit Increases
• Caseload Up 27%• Covers 1.4 Million Michigan Citizens• Pressures on Rates Paid Providers—
Could Add Significantly to Growth in Future
• Spending Up 40% in 4 Yrs—Nearly Double Digit Increases
• Caseload Up 27%• Covers 1.4 Million Michigan Citizens• Pressures on Rates Paid Providers—
Could Add Significantly to Growth in Future
Citizens Research Council of Michigan 19
CorrectionsCorrections
• Spending Up 14% in 3 Years• Largest State-Operated Program• 50,000 Prisoners• Over 30% of State Workers• Over Half of Workers Paid From
General Fund Revenues• Higher Incarceration Rate Than
Neighbors
• Spending Up 14% in 3 Years• Largest State-Operated Program• 50,000 Prisoners• Over 30% of State Workers• Over Half of Workers Paid From
General Fund Revenues• Higher Incarceration Rate Than
Neighbors
Citizens Research Council of Michigan 20
States With More Than 500 Prisoners Per 100,000 Residents
States With More Than 500 Prisoners Per 100,000 Residents
Citizens Research Council of Michigan 21
Beyond FY2006: The General Fund Structural
Problem Continues
Beyond FY2006: The General Fund Structural
Problem Continues
• Expenditure Causes– Medicaid– Corrections
• Revenue Causes– Antiquated Revenue Structure– Revenue Sources Unresponsive to Economic Growth
• Expenditure Causes– Medicaid– Corrections
• Revenue Causes– Antiquated Revenue Structure– Revenue Sources Unresponsive to Economic Growth
Citizens Research Council of Michigan 22
MedicaidMedicaid
• Projected Spending Pressures Exceed General Fund Revenue Growth
• Significant State Revenue Sources Will Not Grow—e.g. Tobacco Revenues
• General Fund Requirements Grow at 150% of Total Spending Growth
• Near Term General Fund Increases at 12% - 3 to 4 Times as Fast as Revenues
• Projected Spending Pressures Exceed General Fund Revenue Growth
• Significant State Revenue Sources Will Not Grow—e.g. Tobacco Revenues
• General Fund Requirements Grow at 150% of Total Spending Growth
• Near Term General Fund Increases at 12% - 3 to 4 Times as Fast as Revenues
Citizens Research Council of Michigan 23
CorrectionsCorrections
• Crime Rates Falling but Prison Populations Continue to Increase
• Populations Projected to Increase 1,800/ Year until 2010 (if Current Policies Continue)
• Annual Cost Increases About $100M• Annual Increases About 7%—Twice as
Fast as Revenues Will Grow
• Crime Rates Falling but Prison Populations Continue to Increase
• Populations Projected to Increase 1,800/ Year until 2010 (if Current Policies Continue)
• Annual Cost Increases About $100M• Annual Increases About 7%—Twice as
Fast as Revenues Will Grow
Citizens Research Council of Michigan 24
Structural Revenue IssuesStructural Revenue Issues
• Revenue System Reflects Economy of the 50s, 60s, and 70s
• Revenues Grow More Slowly than Economy
• Consumption Taxes Goods-Oriented• Relatively Few Services are Taxed• Services are Over Half of Private
Sector Economic Activity
• Revenue System Reflects Economy of the 50s, 60s, and 70s
• Revenues Grow More Slowly than Economy
• Consumption Taxes Goods-Oriented• Relatively Few Services are Taxed• Services are Over Half of Private
Sector Economic Activity
Citizens Research Council of Michigan 25
State Taxes as a Percent of Michigan Personal Income
6.0
6.5
7.0
7.5
8.0
8.5
1995 1997 1999 2001 2003 2005
Year
Per
cen
t
Citizens Research Council of Michigan 26
A Medium-Range General Fund Budget Scenario
A Medium-Range General Fund Budget Scenario
• Medicaid & Corrections Projections Incorporated
• Other Areas of General Fund Spending Assumed to Increase at 3%/Yr
• Revenues Grow about 3%/Yr• Major Revenue Sources w/No Growth —Retard Overall Growth
• Medicaid & Corrections Projections Incorporated
• Other Areas of General Fund Spending Assumed to Increase at 3%/Yr
• Revenues Grow about 3%/Yr• Major Revenue Sources w/No Growth —Retard Overall Growth
Citizens Research Council of Michigan 27
Combining Revenues and Spending Pressures
Combining Revenues and Spending Pressures
• State Will Have Balanced Budgets— Constitutionally Required
• Incremental Problem Each Year Will Exceed $300M (Over 3% of Spending Base) After FY2006
• State Will Have Balanced Budgets— Constitutionally Required
• Incremental Problem Each Year Will Exceed $300M (Over 3% of Spending Base) After FY2006
Citizens Research Council of Michigan 28
General Fund Structural Deficit
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
FY05 FY06 FY07 FY08 FY09 FY10 FY11
Fiscal Year
In M
illio
ns
General Fund Spending Pressures
General Fund Revenues
Citizens Research Council of Michigan 29
ImplicationsImplications
• Balancing Budget W/Spending Cuts Will Require Structural Changes Likely Affecting Medicaid & Corrections
• Significant Changes in State Financial Support for Local Government & Higher Education Would Likely Continue
• Balancing Budget W/Spending Cuts Will Require Structural Changes Likely Affecting Medicaid & Corrections
• Significant Changes in State Financial Support for Local Government & Higher Education Would Likely Continue
Citizens Research Council of Michigan 30
School Aid:Growing Spending Pressures
and Weak Revenue Performance
School Aid:Growing Spending Pressures
and Weak Revenue Performance
• Retirement Contributions
• Employee Health Insurance
• General Pay Raises
• Revenues Growing Slowly
• Retirement Contributions
• Employee Health Insurance
• General Pay Raises
• Revenues Growing Slowly
Citizens Research Council of Michigan 31
School Aid RevenuesSchool Aid Revenues
$8,000
$9,000
$10,000
$11,000
$12,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Fiscal Year
Mil
lio
ns
Citizens Research Council of Michigan 32
The School Aid FundThe School Aid Fund
• Revenues Earmarked Exclusively for Public Schools
• FY2006 Forecast $12.6 Billion• Slow Growth in Revenues Since FY2003• Main Sources of Revenue:
– Sale and Use Taxes- $5.5 Billion (40%)– Income Tax- $2.1 Billion (16%)– State Education Property Tax- $2.0 Billion (15%)– Other Revenues Include Lottery, Cigarette, Federal
• Revenues Earmarked Exclusively for Public Schools
• FY2006 Forecast $12.6 Billion• Slow Growth in Revenues Since FY2003• Main Sources of Revenue:
– Sale and Use Taxes- $5.5 Billion (40%)– Income Tax- $2.1 Billion (16%)– State Education Property Tax- $2.0 Billion (15%)– Other Revenues Include Lottery, Cigarette, Federal
Citizens Research Council of Michigan 33
State-Local School Finance Relationship
State-Local School Finance Relationship
• Amounts of Total Revenue for Each District Determined By The State Pursuant to State Law and Appropriations
• School Aid Revenues and Total Local Operating Property Taxes Determine The Amount the State Can “Afford”
• Local School Operating Property Taxes Subtracted From The Total to Determine State Payments to District
• School Districts Cannot Levy Operating Taxes
• Districts Pay Retirement Contributions As A Flat Percentage of Payrolls
• Amounts of Total Revenue for Each District Determined By The State Pursuant to State Law and Appropriations
• School Aid Revenues and Total Local Operating Property Taxes Determine The Amount the State Can “Afford”
• Local School Operating Property Taxes Subtracted From The Total to Determine State Payments to District
• School Districts Cannot Levy Operating Taxes
• Districts Pay Retirement Contributions As A Flat Percentage of Payrolls
Citizens Research Council of Michigan 34
The Economic and Revenue Outlook for FY2006
The Economic and Revenue Outlook for FY2006
• Moderate Economic Recovery
• Small Employment Gains
• Improved Income Growth• General & School Aid Fund
Revenue Growth — 3.5 to 4%
• Moderate Economic Recovery
• Small Employment Gains
• Improved Income Growth• General & School Aid Fund
Revenue Growth — 3.5 to 4%
Citizens Research Council of Michigan 35
FY2006 School Aid ProposalFY2006 School Aid Proposal
• $175 Per Pupil Increase
• $50 Increase for High School Students
• Increases for At-Risk Students, Intermediate School Districts, and Special Education
• Funding Increases Will Be Absorbed by Higher Retirement and Health Insurance Costs
• $175 Per Pupil Increase
• $50 Increase for High School Students
• Increases for At-Risk Students, Intermediate School Districts, and Special Education
• Funding Increases Will Be Absorbed by Higher Retirement and Health Insurance Costs
Citizens Research Council of Michigan 36
School Aid Outlook Beyond FY2006School Aid Outlook Beyond FY2006
• Moderate Revenue Growth ($250 Per Pupil)• Revenue Growth Rate Below General Economy• Annual Revenue Increases in 3 to 3.5 Percent
Range• Not Enough Growth to Match Spending
Pressures
• Moderate Revenue Growth ($250 Per Pupil)• Revenue Growth Rate Below General Economy• Annual Revenue Increases in 3 to 3.5 Percent
Range• Not Enough Growth to Match Spending
Pressures
Citizens Research Council of Michigan 37
Significant Continuing Demands On Revenues
Significant Continuing Demands On Revenues
• Retirement Contributions
• Employee Health Insurance
• General Pay Raises
• Fuel and Utilities
• Retirement Contributions
• Employee Health Insurance
• General Pay Raises
• Fuel and Utilities
Citizens Research Council of Michigan 38
Public School Employees Retirement System
Public School Employees Retirement System
• CRC Report Issued in September, 2004
• Covers Pension and Health Benefit Contributions
• Projections Still on Target
• CRC Report Issued in September, 2004
• Covers Pension and Health Benefit Contributions
• Projections Still on Target
Citizens Research Council of Michigan 39
School Retirement FundingSchool Retirement Funding
• School Districts Pay Contributions for Employees
• Rate for FY2006 16.34% of Payrolls
• Contribution Rate Composed of Two Parts– Regular Pension Benefit– Health Care Benefits
• Both Parts Will Continue to Increase Dramatically in the Future
• School Districts Pay Contributions for Employees
• Rate for FY2006 16.34% of Payrolls
• Contribution Rate Composed of Two Parts– Regular Pension Benefit– Health Care Benefits
• Both Parts Will Continue to Increase Dramatically in the Future
Citizens Research Council of Michigan 40
Pension Funding ComponentPension Funding Component
• Stock Market Crash in 2001 and 2002
• Lost 22% of Market Value In 2 Years
• Gap Between Assumptions and Actual Returns Was Nearly 40%
• Contribution Rate Subsidized By Reserves in FY04, FY05 and FY06
• Rate Jumps From 7% in FY04 to 12% in FY08
• Stock Market Crash in 2001 and 2002
• Lost 22% of Market Value In 2 Years
• Gap Between Assumptions and Actual Returns Was Nearly 40%
• Contribution Rate Subsidized By Reserves in FY04, FY05 and FY06
• Rate Jumps From 7% in FY04 to 12% in FY08
Citizens Research Council of Michigan 41
Retiree Health Benefits ComponentRetiree Health Benefits Component
• Funded on a Pay-As-You-Go Basis• Now Costs 6.55% of Payroll• Unfunded Liability Has Increased Tenfold
Since 1985• Pre-funding and Amortizing Liability Would
Jump the Rate to 15% of Payroll• Under Current Funding Practice
Contribution Rate Will Climb to Over 20% by End of Next Decade
• Funded on a Pay-As-You-Go Basis• Now Costs 6.55% of Payroll• Unfunded Liability Has Increased Tenfold
Since 1985• Pre-funding and Amortizing Liability Would
Jump the Rate to 15% of Payroll• Under Current Funding Practice
Contribution Rate Will Climb to Over 20% by End of Next Decade
Citizens Research Council of Michigan 42
Combining Health and Pension Contribution Rates
Combining Health and Pension Contribution Rates
• Rate Jumps From 12.99% in FY04 to 16.34% in FY06 to 20% in FY08
• Incremental Requirement For FY06 Through FY08 Averages More Than $200 Million Per Year ($125 Per Student)
• FY2006 Rate Subsidized With $50 Million of Reserves
• Per Pupil Increase In FY2006---$80 • Total Three-year Increase About $600 Million• Three Years of 3.5% School Aid Revenue
Growth Produces About $450 Million Per Year
• Rate Jumps From 12.99% in FY04 to 16.34% in FY06 to 20% in FY08
• Incremental Requirement For FY06 Through FY08 Averages More Than $200 Million Per Year ($125 Per Student)
• FY2006 Rate Subsidized With $50 Million of Reserves
• Per Pupil Increase In FY2006---$80 • Total Three-year Increase About $600 Million• Three Years of 3.5% School Aid Revenue
Growth Produces About $450 Million Per Year
Citizens Research Council of Michigan 43
MPSERS Contribution RatesFiscal Years Ending 1991 Through 2020
0
5
10
15
20
25
30
35
1991 1994 1997 2000 2003 2006 2009 2012 2015 2018
Fiscal Year Ending
Pe
rce
nta
ge
of
Pa
yro
ll
Pension
Health Benefit
Total Contribution
Citizens Research Council of Michigan 44
Employee Health InsuranceEmployee Health Insurance
• Double-digit Premium Increases Recently
• Schools Spend About $1000 Per Pupil on Health Insurance Premiums
• Annual Increases Around $100 Per Pupil Likely For Next Several Years
• Double-digit Premium Increases Recently
• Schools Spend About $1000 Per Pupil on Health Insurance Premiums
• Annual Increases Around $100 Per Pupil Likely For Next Several Years
Citizens Research Council of Michigan 45
Employee Salaries and WagesEmployee Salaries and Wages
• Largest Component of School Budgets
• General Raises and Step Increases Add to Payroll Costs
• Each Percentage Point of Increase in Payrolls Costs About $50 Per Pupil
• Total Payroll Increase of 3% Would Cost About $150 Per Pupil
• Largest Component of School Budgets
• General Raises and Step Increases Add to Payroll Costs
• Each Percentage Point of Increase in Payrolls Costs About $50 Per Pupil
• Total Payroll Increase of 3% Would Cost About $150 Per Pupil
Citizens Research Council of Michigan 46
The Numbers—School AidThe Numbers—School Aid
• Revenues Grow About $250 Per Pupil Per Year
• Spending Pressures and “Requirements”
-Retirement and Health Insurance--$225+
-Salaries and Wages (3%)--$150+
• Structural Deficit Exceeds $125 Per Pupil Each Year (Nearly 2%)
• Revenues Grow About $250 Per Pupil Per Year
• Spending Pressures and “Requirements”
-Retirement and Health Insurance--$225+
-Salaries and Wages (3%)--$150+
• Structural Deficit Exceeds $125 Per Pupil Each Year (Nearly 2%)
Citizens Research Council of Michigan 47
Structural Deficits Require Structural Changes
Structural Deficits Require Structural Changes
• Expenditures– Retirement Costs—Retiree Health Care– Health Insurance– Change Programs
• Revenues– Broaden Base of Sales and Use Taxes– Eliminate Some Tax Expenditures
• Expenditures– Retirement Costs—Retiree Health Care– Health Insurance– Change Programs
• Revenues– Broaden Base of Sales and Use Taxes– Eliminate Some Tax Expenditures
Citizens Research Council of Michigan 48
Who Can Change the Structure?Who Can Change the Structure?
• Influence of School Boards or Local Voters Very Limited
• State Controls Most Financial Policies– Retirement Contributions and Benefits– Tax Rates and Taxable Items– Total Revenue Received By Districts
• Areas of Local Control or Influence– Employee Compensation– Instructional and Other Programs
• Influence of School Boards or Local Voters Very Limited
• State Controls Most Financial Policies– Retirement Contributions and Benefits– Tax Rates and Taxable Items– Total Revenue Received By Districts
• Areas of Local Control or Influence– Employee Compensation– Instructional and Other Programs
Citizens Research Council of Michigan 49
Some Policy OptionsThe State
Some Policy OptionsThe State
• State Could Allow Some Local District Taxing Authority
• State Financial Incentives for Inter-district Cooperation and Consolidation
• State “Take-over” of Employee Health Insurance• Modify Retiree Health Benefits and Vesting
Provisions• Change Basic Pension Benefit (Prospectively) to
Defined Contribution Plan
• State Could Allow Some Local District Taxing Authority
• State Financial Incentives for Inter-district Cooperation and Consolidation
• State “Take-over” of Employee Health Insurance• Modify Retiree Health Benefits and Vesting
Provisions• Change Basic Pension Benefit (Prospectively) to
Defined Contribution Plan
Citizens Research Council of Michigan 50
Some Policy OptionsLocal Districts
Some Policy OptionsLocal Districts
• Make Greater Use of ISD Services
• Contract (“privatize”) Some Non-instructional Services (e.g. Food Service, Transportation, Custodial)
• Reduce Number of Days in Attendance and Increase Length of Days to Offset Reduction
• Make Greater Use of ISD Services
• Contract (“privatize”) Some Non-instructional Services (e.g. Food Service, Transportation, Custodial)
• Reduce Number of Days in Attendance and Increase Length of Days to Offset Reduction
Citizens Research Council of Michigan 51
Responsibility and AuthorityResponsibility and Authority
• Public Education a State Constitutional Responsibility
• Providing Tax Revenues to Pay the Expenses of State Government is a State Constitutional Responsibility
• Legislature and Governor Have Both the Responsibility and Authority to Deal With the Problem
• The Solutions Reside Primarily in Lansing
• Public Education a State Constitutional Responsibility
• Providing Tax Revenues to Pay the Expenses of State Government is a State Constitutional Responsibility
• Legislature and Governor Have Both the Responsibility and Authority to Deal With the Problem
• The Solutions Reside Primarily in Lansing
Citizens Research Council of Michigan 52
Citizens Research Council of Michigan
Citizens Research Council of Michigan
CRC Publications Available at
www.crcmich.org
Providing Independent, Nonpartisan Public Policy Research Since 1916
CRC Publications Available at
www.crcmich.org
Providing Independent, Nonpartisan Public Policy Research Since 1916