Michigan budget director questions school funding formula

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“It’s not that I’m saying we need to cut the school aid fund … (but) a lot of this stuff was put in place 15, 20 years ago when Michigan looked totally different,” he said during a recent interview with The Associated Press. “We just need to strip things down and say, `This is the money we’re bringing in, this is where it’s going. Is it lining up appropriately?”‘

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Nearly three-quarters of the sales tax collected annually goes to the $13.3 billion school aid fund, as well as nearly a fourth of the income tax revenue, 42 percent of cigarette tax revenue and a third of the money raised by the use tax and the Michigan Business Tax. The school aid fund also receives all of the money raised through a statewide 6-mill education property tax, the real estate transfer tax, the state casino wagering tax and the net proceeds from lottery sales.

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School districts already are watching nervously as a substantial business tax cut takes effect Jan. 1. As business tax revenue drops over the next two years, school aid revenue will sink by more than $660 million annually, according to the nonpartisan House Fiscal Agency. Coupled with the loss of federal funds, the school aid fund is expected to bring in $1 billion less in the upcoming fiscal year.