Lansing — Michigan school administrators say some K-12 districts are exploring the possibility of taking out short-term loans or tapping into limited savings to tide them over in the event of a state government shutdown on Oct. 1.
Those who are not making contingency plans for a shutdown could be forced to close their doors temporarily until the Legislature and governor reach an agreement, superintendents said Wednesday at a press conference in Lansing.
“Every day that passes without a budget, districts are forced into further contingency planning,” said Tina Kerr, executive director of the Michigan Association of Superintendents & Administrators. “Instead of focusing on what we should be right now, which is student success, these superintendents and their entire teams are spending time and resources trying to guess what the funding will look like.”
For one Michigan district with fewer than 1,000 students, officials would pay more than $70,000 in service fees and interest for loans to ensure enough cash flow to continue operations, Kerr said.
“How is it that we’re expected to meet student needs but, at the same time, we don’t know what funds we’re going to have to do this?” Kerr said.
Senate Appropriations Chairwoman Sarah Anthony, D-Lansing, described herself as “frustrated” with the pace of negotiations on Wednesday, 20 days before the Oct. 1 budget deadline. And Senate Majority Leader Winnie Brinks, D-Grand Rapids, said it is “unacceptable” that schools find themselves in this position.
“Passing a budget on time is a top priority for Democrats, but I want to be very clear that we will not get backed into a corner and settle for a bad deal for our kids,” Brinks said in a statement Wednesday.
House Speaker Matt Hall, R-Richland Township, did not immediately respond to a request seeking comment.
But Hall noted last month that each of the budgets proposed so far — the governor’s, the Senate’s and the House’s — is increasing education funding overall, so it’s likely a final budget won’t drop below the floor set in those proposed spending plans. Any schools laying off individuals in light of those proposed increases are “probably doing it for performance reasons,” Hall said.
The Republican-led House and the Democratic-led Senate have been unable to reach a budget deal, with roughly three weeks remaining in the fiscal year. If the chambers fail to reach a deal by Oct. 1, most state operations will shut down, including payments to K-12 schools. Schools are expecting a state aid payment on Oct. 20, a payment that may be in jeopardy in the event of a shutdown.
The state budget year begins Oct. 1, but the fiscal year for K-12 public schools began July 1, making the lack of a state funding plan for schools over the past two months a challenge for administrators. In 2019, the Republican-led Legislature passed a law requiring budget passage by July 1, in part to accommodate the school calendar. But the law contained no penalties for lawmakers who failed to meet that deadline.
The Legislature blew through the July 1 deadline and have yet to pass a spending plan, causing some school districts lay off staff, wait to fill positions or plan for larger class sizes.
More: The backstory: Delays, disagreements put Michigan on a path to government shutdown
In addition to Wednesday’s press conference with superintendents, a group of 13 Lansing-area school superintendents sent a letter to parents in their districts this week, urging them to contact lawmakers to reach a “quick agreement” on the budget.
“At the heart of the deadlock is a proposal to redirect dollars from the School Aid Fund – the fund voters were promised would be dedicated to K-12 education – to other priorities, including road repairs,” the superintendents wrote. “Many believe this violates the original intent of the system voters approved in 1994 to provide fair, statewide funding for public schools.”
The House budget passed by the lower chamber this summer moved School Aid Fund dollars to other areas of the budget, including higher education, prompting concerns about further “raids” on a fund that’s supposed to be dedicated to K-12 schools.
Asked if she would commit to not re-directing more School Aid Fund dollars away from K-12 schools, Anthony said she wants to see “adequate backfills” in the form of some new revenue source for the School Aid Fund.
“That’s the goal,” Anthony said.
On what sources of new revenue she would support, Anthony cited a $3 billion road funding plan Gov. Gretchen Whitmer rolled out in February that included increasing taxes on marijuana and businesses, including big tech companies.
“Many of the concepts that the governor put out early this year we are in agreement with,” Anthony said.
Education leaders on Wednesday expressed some concerns about any attempt to “backfill” the School Aid Fund, arguing similar promises to do so in the past have not been kept.
“The School Aid Fund has served as the state’s piggy bank when lawmakers want to spend more money but don’t want to raise the revenue,” said Peter Spadafore, executive director for the Michigan Alliance for Student Opportunity. “We’re in that situation right now. There is not enough money, particularly with the changes from the federal government, to fund a roads plan and keep all of the government open the way that it was this year.”
While the fight over the School Aid Fund and other elements of the budget continues, the delay in passing a budget has already taken a toll on operations at districts across the state, Spadafore said.
Spadafore noted that it takes time for the state to program the line items contained in the budget into the state aid payment program, meaning even if a budget were passed tomorrow, it could take days or weeks to get the payments to schools.
“Wealthier districts can sometimes patch the holes, but for low-income and rural schools, there’s no safety net,” Spadafore said.
Scott Koenigsknecht, superintendent for Clinton County RESA, the countywide intermediate school district, noted that the budget often includes grants, which take time to process and award to schools, creating further delays in funding for the districts.
“We will see a delay in funds even if the budget passes soon,” Koenigsknecht said.
Lori Haven, a superintendent at Perry Public Schools, said the district already has reduced two staff positions, increased class sizes and delayed purchases in light of Lansing’s budget uncertainty. The situation could become “critical” if lawmakers don’t act soon, Haven said.
“If we don’t receive our state aid payment on Oct. 20, Perry Public Schools could soon face a cash flow crisis,” Haven said. “In the coming months, this would force us to take out high-interest loans in order to make our payroll to keep our schools open.”
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