Policy Documents

Research & Commentary: Michigan School Finance Overhaul

December 12, 2012

Draft legislation in Michigan would restructure the school finance system so state funds predominantly follow children, allowing them to attend any public school in the state that will have them. Gov. Rick Snyder commissioned the 302-page proposal from the Oxford Foundation, a Michigan nonprofit. Districts would be free to choose whether to accept non-district students. The legislation also would give early high school graduates up to $10,000 for college, expand online learning possibilities, and cut funding of schools that do not improve student test scores.

Michigan has the nation’s most restrictive constitutional amendment on tax dollars going to private schools, so the proposal is likely the most choice-oriented funding system the state could adopt.

More than 30 school districts and states have implemented “student-based budgeting” or “backpack funding,” where tax dollars attach to individual students (rather than programs or districts) within a system of public school choice. Opponents argue systems that allow funds to exit poorly functioning schools will exacerbate those schools’ financial and academic struggles. They also claim such arrangements “privatize” education and undermine local control.

Proponents note individual control is the most local arrangement possible, since it gives families the right and responsibility to wield the money states spend on their behalf. The longevity of specific schools matters far less, they say, than ensuring students are not trapped in schools they don’t want to attend, especially because such schools chronically fail to impart basic academics. In addition, they note, the proposal does not allow tax dollars to go to private schools, so it in no way privatizes education or conflicts with Michigan’s constitution.

Expanding Michigan students’ education options will encourage schools to improve, because schools will earn money by attracting students and ensuring they learn, instead of automatically receiving funds regardless of quality or student satisfaction. This means schools win when their students do, centering education on what directly and efficiently improves learning. This reclaims education from a bureaucratic jobs program back to its main public purpose: educating young citizens.

The following documents offer more information about the proposed changes to Michigan’s school finance system.


Michigan Would Fund Children Directly Under New Proposal
Michigan K-12 students would become free agents, able to attend any in-state public school that will enroll them and even take different classes at different schools, under a proposal Gov. Rick Snyder released in November, reports School Reform News. The “open enrollment” plan would link the approximately $6,900 Michigan spends per child directly to individual children. The state, like most, currently allots money to districts and programs, not students.

Michigan Public Education Finance Project Draft Legislation
This draft legislation outlines a Michigan school finance system in which most state per-pupil funding would follow individual students to any public school the student chooses to attend. Districts would be free to choose whether they want to accept non-district students. The 302-page proposal also would give early high school graduates up to $10,000 for college, expand online learning options, and cut funding of schools that do not improve student test scores.

Frequently Asked Questions About Weighted Student Formula
Reason Foundation Education Director Lisa Snell answers basic questions about how a weighted student formula could fundamentally reshape school finance and performance. She has met with state legislators and others to discuss weighted student formula reforms, and she has studied their rise and effects across the country. She explains how weighted student funding, or “backpack funding,” works, outlines how it treats poor and disabled children, and discusses the effects on jurisdictions that have tried it.

The V-Word: Public School Establishment Making False Voucher Claims in School Funding Debate
The public school establishment is resorting to scare tactics and falsehoods to avoid discussing the merits of a proposal that would reform Michigan’s public school funding system for the first time since 1979, writes Michael Van Beek for the Mackinac Center for Public Policy. A primary goal of the proposal is to make it easier for students and parents to choose from a wide selection of public school learning opportunities. Establishment forces call the proposal a “voucher” system, which is false because it never allows tax funds to enter private schools, he writes.

Michigan’s Rick Snyder Takes a Stand for Overhauling School Finance
Restructuring school funding along the lines of a new Michigan proposal would eliminate excuses school districts use to oppose all forms of school choice, keep poor and minority kids out of better schools, and refuse to take on other systemic reforms, writes RiShawn Biddle for Dropout Nation. With the traditional district model having proven it cannot provide all kids a high-quality education, and since the Michigan constitution charges state government with providing education, the governor and legislature can do whatever they deem necessary in structuring public education, Biddle notes. The plan would push districts to please the families they serve and spur increased school options and specialization. In short, it would lead to greater opportunities for more children to gain a high-quality education.

A Sea Change for School Funding in America
The United States is in a great transition from funding institutions to funding students, Lisa Snell writes for Learning Matters, a PBS affiliate. K-12 funding is moving closer to how the country funds higher education: away from a system funded by local resources and driven by residential assignment to a system where choice drives funding and the money accompanies a child’s “backpack.” More than 30 such “school funding portability” systems function in cities such as New York, Baltimore, Denver, Hartford, and Cincinnati. In 2011, Rochester, Newark, and Boston moved to full weighted student funding formulas where the money follows the child.

Editorial: Let Dollars Follow Students
Thanks to new technology, learning is no longer confined to physical classrooms, students can better learn at their own pace, and schools can better track students’ growth over the school year. The proposed overhaul of Michigan’s school finance system addresses these realities, which constitute significant changes since the last such overhaul more than 30 years ago, states the Detroit News editorial board. The reform would improve the schools, encourage students to gain college credit more quickly, and reward them with a scholarship for finishing high school early.

School Finance in the Digital-Learning Era
Funding is the policy area most in need of reform if digital learning is to succeed, writes Paul Hill for the Fordham Institute. “Our system doesn’t fund schools, and certainly doesn’t fund students,” he notes. By consolidating education funding into a “backpack” model and creating education debit cards for parents, the system Hill outlines would ensure families can choose from a diverse range of robust schooling options.

School Choice, Charter Schools, and Trends in Educational Privatization
This section of Reason Foundation’s Annual Privatization Report 2011 provides a comprehensive overview of the latest on school choice, charter schools, voucher and tax credit programs, and other news from the education sector. New Jersey, Rhode Island, Indiana, and more than 30 school districts recently changed their school funding systems to a weighted student formula where the money follows the child. Meanwhile, California, Utah, and Connecticut have ongoing legislative debates about similar weighted student formula school finance reforms.

Weighted Student Funding in the Netherlands: A Model for the U.S.?
The Netherlands have a long history of employing weighted student funding, a model that could be customized for the United States, write Helen Ladd and Edward Fiske in a Duke University working paper. The lessons the Dutch have learned from this decades-long practice could guide U.S. policymakers in designing such policies, particularly in increasing parental choice and helping disadvantaged students.

The Student-Centered Funding Act
The Student-Centered Funding Act, model legislation from the American Legislative Exchange Council, would create a student-centered finance model based on a weighted formula in which money “follows” a child to the chosen school. “Integral to meaningful accountability,” it says, “is: (1) empowering principals to act as leaders of their schools over these matters; and (2) empowering parents to pick the public schools they believe best meet their children’s unique, individual needs.”


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the School Reform News Web site at http://news.heartland.org/education, The Heartland Institute’s Web site at http://www.heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org.

If you have any questions about this issue or The Heartland Institute, contact Heartland education policy research fellow Joy Pullmann, at 312/377-4000 or jpullmann@heartland.org.