Michigan school districts facing $1B shortfall hold $2.8B in savings

To make up for revenue shortfalls due to COVID-19, districts should avoid hitting up local taxpayers.

Michigan’s public schools are facing a $1 billion shortfall in their K-12 budget.

But local, county and regional intermediate school districts have a combined $2.3 billion surplus in general funds and another $528 million surplus dedicated to special education programs. With $2.8 billion in reserves, some lawmakers are considering telling districts to tap into those savings, rather than hike taxes on residents or cut services.

The shortfall comes from reduced tax revenue, with COVID-19 and Gov. Gretchen Whitmer’s lockdown measures triggering high unemployment and decreased consumer spending.

Rather than cutting per-pupil funding, raising taxes or relying on other cash-strapped governments, districts can rely on their savings. “I think all districts should consider using some of their fund balance to get through this year,” state Sen. Wayne Schmidt, R-Traverse City, told Crain’s Detroit Business. Schmidt chairs the Michigan Senate’s K-12 appropriations subcommittee.

State lawmakers must approve a school aid budget by Sept. 30, and Schmidt argues this is an appropriate time to dip into savings. “That’s kind of what it’s there for,” he said.

Public schooling is already Michigan’s top expense, with more than 40% of the $42 billion in state and local taxes collected going to K-12 education.