Running head: SCHOOL FUNDING STUDY 1

School Funding Study

Anchor Bay School District
Brooke E. Hurley
Oakland University



















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The State of Michigan has significantly changed the way schools are funded since the
implementation of Proposal A. In the year of 1994, Michigan experienced a dramatic change in
the way the state funds its schools. Proposal A was implemented and the funding was changed
from local property tax to state sales tax. This proposal shifted the power from local voters and
officials making decisions, to decisions now being made by the Legislature of Michigan. Since
the implementation of Proposal A, its impacts have had both positive and negative effects on
Michigans school districts.
Public schools in Michigan continue to rely on the local tax base for components of
school funding. At this time school funding in Michigan remains unpredictable and per pupil
funding is constantly fluctuating. Districts around the state of Michigan do not receive the same
amount of support from the School State Aid Fund, therefore districts are not equitable.
Unfortunately, a gap in equity will remain between hold harmless districts and foundation
allowance schools because the method for equalization in not equalizing. Base foundation grant
schools like the Anchor Bay School District will never receive the same amount of funding as
surrounding districts such as Grosse Pointe, who receive approximately $9000 per pupil. This
just reinforces the fact that schools in the state of Michigan are not equitable, but are held
accountable to provide the same degree of education with significantly less funding.
At the current time, school funding is based on the School Aid Fund. The School Aid
Fund is compromised of the state sales tax, state education tax, and income tax. This fund is
dependent on a successful economy within Michigan. Over the last five years in Michigan,
economic adversities have been present, therefore lessening the revenue to the School Aid Fund.
The Anchor Bay School District as well as the state of Michigan continues to face financial
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struggles due to the decrease in the State Aid Fund. Due to these decreases, the school district
has to carefully plan and prepare budget related issues. All programs should be evaluated for
effectiveness and efficiency.
Anchor Bay does not levy hold harmless millage, nor does it levy any sort of local
enrichment millage. A total of 82.1% of Anchor Bays operating revenue comes from state
sources. Local funds constitute 11.5% of district operating revenue, while 5.9% comes from
federal sources, and less than 1%, 0.03% comes from other sources. The district has several
bonds for building improvements. Anchor Bay most recently passed a 7 year recreation millage
to help offset the cost of operations on the Anchor Bay Aquatic Center; a stand-alone swimming
pool facility. There was an upgrade to the facility and outside groups now rent space and provide
services to the community within the building.
As the graph below indicates, Anchor Bays foundation allowance and per pupil
operating revenue decreased dramatically during the 2012 fiscal year, losing $470 per pupil.
Using conservative estimated enrollment numbers, Anchor Bay, with 6000 students lost, $2.82
million dollars in per-pupil revenue with this reduction in the foundation allowance in 2012.
Since the initial cut, the foundation allowance amount Anchor Bay receives has increased
slightly, but is still well below 2011 funding amounts. Even with the increases in the foundation
allowance over the past three years, the 2015 projected foundation allowance amount is still
$129 below what the district was receiving in 2011.

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Enrollment in Anchor Bay peaked with 6,530 students in 2008-2009. In the following
years since then, enrollment numbers have been on a slight decline, about 500 students over the
last 8 years, or about 7%. However, the state enrollment has declined about 9% over the same 8
years; an effect of the economic downfall the state has been experiencing. Currently, Anchor Bay
has 6,232 full time students enrolled K-12. This is down about 45 students from 2012-2013
enrollment numbers, which had a total of 6,275 FTE students. The district participates in school
of choice within the ISD and has benefited by this practice. A total of 176 students are enrolled
in Anchor Bay schools via school of choice. Anchor Bay also loses a large number of students
to LAnse Creuse. A total of 90 students left Anchor Bay for bordering district LAnse Creuse,
taking their foundation allowance along as well. When added up, the number of students enrolled
in the district through school of choice, and the number of students leaving the district for other
schools participating in school of choice is almost a push. The New Haven school district houses
Merritt Academy, a charter school. Many students leave Anchor Bay to attend the charter school,
but many end up returning to Anchor Bay during the school year. This does have a negative
impact on Anchor Bays revenue due to the blended count calculation. Students are not enrolled
for the October count day, where 90% of the per-pupil funding is determined, but they are
enrolled for the second count in February where 10% of funding is determined.
Due to declining enrollment and other cost cutting reasons, Anchor Bay reconfigured one
of its elementary schools into an early childhood center, and the home to Central Offices. The
students who normally attended this school were sent to another elementary school where
numbers were low. This saved the district administrative costs, as an elementary administrator
was no longer needed for the building. It also allowed them to reduce support-staffing expenses
in closing the cafeteria and needed less custodial staff. The district was able to save a significant
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amount of money, without actually closing a building. Additionally, by moving the district
Central Offices from Macomb County into St. Clair County, insurance premiums were reduced
significantly.
Over the past years, Anchor Bay has been very proactive in other cost saving and cost
cutting measures across the district, to avoid cuts that impact students and instruction. During the
2006-7 school year, Anchor Bay started an Energy Conservation Savings Plan. Since its
inception, the district has saved $1,309,100 in energy costs. Concessions have been taken by all
district bargaining units to avoid a deficit budget. Anchor Bay evaluated outsourcing options,
and took the position of not privatizing the custodial and transportation services. The custodial
staff in the Anchor Bay schools clean about 10,000 square feet more than the state average,
cleaning about 43,196 square feet per person. Transportation cost cutting reductions has allowed
Anchor Bay to provide transportation to all students at a cost of only $5.22 per mile. This is one
of the lowest transportation operating costs in Macomb County. A total of 65.8% of Anchor
Bays operating budget is spent on instruction. Only $826 per pupil is spent on administrative
and principal support services. This is a tremendous cost saving area when compared to the state
and Macomb County averages. The state average cost of these services is $1,143 per pupil, and
Macomb County averages $1,476 per pupil, putting Anchor Bay among the lowest in the state in
administrative costs. This is a direct result of collective bargaining concessions and cost saving
measures. Class sizes have remained a primary focus in the district. Caps on class size remain
consistent and have been protected by all parties when bargaining contracts. Both parties know
the importance of keeping class sizes as low as possible, but still operating in a fiscally
responsible manner. Most classes are at the maximum number of students allowed by contract,
thus keeping the required staff at the absolute minimum. Another collective bargaining
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agreement aimed to cut costs was the requiring of secondary teachers to be used as a sub at least
once per week. This eliminated the need for as many outside subs, as teachers are used during
their prep period. At the elementary level, a reduction in elective teachers was made to keep the
district out of deficit spending. These concessions were necessary to avoid a deficit during the
2012-2013 school year. All bargaining units also took health care concessions, switching to a
plan with a higher deductible and a HSA account. This saved the district in benefit costs. All of
these budget decisions and cuts have kept Anchor Bay out of deficit spending.
Anchor Bay has suffered tremendous financial stresses. Currently, the district has a fund
balance of about $1,101,788. This is approximately 2% of the total operating budget of the
district. The fund balance of the district in 2008 was about $8,708,722. Three years later, in
2011-12, the fund balance had dropped to a mere $634,888. This was a result of cuts to the
foundation allowance, and caused the previously mentioned collective bargaining agreements to
be negotiated with the cost saving measures in place. Had these contracts and cost saving
measures not been implemented, Anchor Bay would have been operating in deficit and would
have been forced to lay off employees. The district also would have forced an 18% pay cut to all
employees. Since the 2011-12 budget, Anchor Bays fund balance has been slightly increasing,
but is still not adequate enough for a district of its size. However, the positive balance does keep
Anchor Bay from deficit spending and the takeover by an Emergency Financial Manager from
the state. The Anchor Bay School Board does not have a policy for a target level of fund balance,
but a safe amount recommended by district auditors is approximately 15% of the general fund.
The collective bargaining contract for teachers now has a pay incentive dependent upon the
districts fund balance, as negotiated in 2012. When the fund balance rises to a certain
percentage, teachers receive a bonus incentive. If the percentage is not reached, the teachers
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receive no bonus. This formula was meant to offset the loss of step increases incurred by the pay
freeze negotiated into the contracts to eliminate the deficit spending.
The Anchor Bay School District has benefited to budget related issues by taking a
proactive approach to cost savings and cost cutting measures across the district to avoid cuts that
impact students and instruction. This approach is of utter most importance when planning
budgets for school districts. The Anchor Bay School District will continue to carefully plan, and
prepare budget related issues to maximize efficiency and effectiveness for all within the district.
In the future, as Michigans economy hopefully increases, school funding will become more
predictable, equitable, and sufficient for all.