I can add some context to a bit of this, I think. The hold harmless rate is a historical add-on (of sorts). In 1992, the state overhauled school funding, moving from all locally funded to state-funded through a capped statewide property tax amount and 2% of the state's 6% sales tax. The idea was to bring everyone to about the same funding, and for most, it was pretty easy as a majority of districts were around an average amount. That said, there were a couple dozen districts where the communities had agreed to higher taxes, resulting in higher per-pupil funding. In a compromise, these districts were classified as "hold harmless" and would be allowed to continue asking their communities for a bit of funding over and above the state average funding, but they can only ask for the same mills and never an increase. (Also, if the community ever votes it down, it's gone forever, and they begin receiving the state minimum per pupil funding.) If the hold harmless is decreasing, I would guess that it's due to the Headlee amendment, which holds property tax increases to either the rate of inflation or 5%, whichever is less, and something that occurs when the rate would be higher, and then the mills get lowered (I don't fully understand it, but know that it's a thing that happens).
Finally, in theory, the bond shouldn't have anything to do with the para pay. I'm not sure how it works in other places, but in Michigan, bond funds cannot be used to pay salaries. They can only be used for renovations, new construction, or a defined set of capital outlay expenses (generally, technology, musical instruments, busses, furniture, and a few other categories of items).
Replying to myself because I found the answer to the question re: the mills. The district cannot increase it. They are lowered automatically when property values start to increase too fast, as a way to prevent the few districts who are able to levy hold harmless millages from outpacing the rest of the state's per pupil funding (any more than they already do).
This is really really helpful. I got the sense that this was what Headlee was all about, but the detail is amazing. In the end, this is trying to equalize things, but it's also preventing districts from raising more revenue in a time of crisis/uncertainty.
Exactly. (I was commenting on the TikTok, but this is easier.) The restructuring of school funding in 1992 had good aims and did some good in terms of bringing everyone onto more equal footing in terms of funding. It also tied everyone's hands and put the amount of funding completely into the hands of the state, where it has not come close to keeping pace with inflation. (Some anecdata: I live in one of the hold harmless districts. We get just a little more than $10k/student. If our 1992 funding had kept pace with inflation, we'd be closer to $15k/student.)
It's part of the reason why you see everyone taking on bond debt - it's the only real way that schools have to raise funds. So, they use the vast majority of the per-pupil funding they get from the state for teaching/learning and then go out for a bond to handle big purchases and infrastructure. All of the bond debt that you're seeing should be covered by a separate millage that can only be used for bond projects and should have no impact on the general operating of the district.
Yes! The connection to the bond market seems clear. I wanted to tell you about this even happening at the end of the month. Would you be interested in talking about this quickly on the call?? I think it'd be helpful/interesting for people. If not, would love to have you attend generally. https://debtcollective.org/event/cliffandcrises/
Seems right up my alley - just registered! I run an ed foundation in my state, and am the VP of the association of ed foundations for our state level org. I’d be happy to talk about MI school funding!
Great. Can you email me at David.backer@gmail.com? Let’s figure it out and see what’s possible with the team, I’m not sure how much time we have now that I’ve asked the group.
I can add some context to a bit of this, I think. The hold harmless rate is a historical add-on (of sorts). In 1992, the state overhauled school funding, moving from all locally funded to state-funded through a capped statewide property tax amount and 2% of the state's 6% sales tax. The idea was to bring everyone to about the same funding, and for most, it was pretty easy as a majority of districts were around an average amount. That said, there were a couple dozen districts where the communities had agreed to higher taxes, resulting in higher per-pupil funding. In a compromise, these districts were classified as "hold harmless" and would be allowed to continue asking their communities for a bit of funding over and above the state average funding, but they can only ask for the same mills and never an increase. (Also, if the community ever votes it down, it's gone forever, and they begin receiving the state minimum per pupil funding.) If the hold harmless is decreasing, I would guess that it's due to the Headlee amendment, which holds property tax increases to either the rate of inflation or 5%, whichever is less, and something that occurs when the rate would be higher, and then the mills get lowered (I don't fully understand it, but know that it's a thing that happens).
Finally, in theory, the bond shouldn't have anything to do with the para pay. I'm not sure how it works in other places, but in Michigan, bond funds cannot be used to pay salaries. They can only be used for renovations, new construction, or a defined set of capital outlay expenses (generally, technology, musical instruments, busses, furniture, and a few other categories of items).
Replying to myself because I found the answer to the question re: the mills. The district cannot increase it. They are lowered automatically when property values start to increase too fast, as a way to prevent the few districts who are able to levy hold harmless millages from outpacing the rest of the state's per pupil funding (any more than they already do).
This is really really helpful. I got the sense that this was what Headlee was all about, but the detail is amazing. In the end, this is trying to equalize things, but it's also preventing districts from raising more revenue in a time of crisis/uncertainty.
Exactly. (I was commenting on the TikTok, but this is easier.) The restructuring of school funding in 1992 had good aims and did some good in terms of bringing everyone onto more equal footing in terms of funding. It also tied everyone's hands and put the amount of funding completely into the hands of the state, where it has not come close to keeping pace with inflation. (Some anecdata: I live in one of the hold harmless districts. We get just a little more than $10k/student. If our 1992 funding had kept pace with inflation, we'd be closer to $15k/student.)
It's part of the reason why you see everyone taking on bond debt - it's the only real way that schools have to raise funds. So, they use the vast majority of the per-pupil funding they get from the state for teaching/learning and then go out for a bond to handle big purchases and infrastructure. All of the bond debt that you're seeing should be covered by a separate millage that can only be used for bond projects and should have no impact on the general operating of the district.
Yes! The connection to the bond market seems clear. I wanted to tell you about this even happening at the end of the month. Would you be interested in talking about this quickly on the call?? I think it'd be helpful/interesting for people. If not, would love to have you attend generally. https://debtcollective.org/event/cliffandcrises/
Seems right up my alley - just registered! I run an ed foundation in my state, and am the VP of the association of ed foundations for our state level org. I’d be happy to talk about MI school funding!
Great. Can you email me at David.backer@gmail.com? Let’s figure it out and see what’s possible with the team, I’m not sure how much time we have now that I’ve asked the group.