A school funding glossary for civilians

Education policy carries its own jargon, with some of the lexicon more accessible than others. Here are some commonly used terms in the school funding debate.

Adequacy: The amount of funding needed to provide all students what they need to meet acceptable educational standards. Adequacy is often used to refer to the process by which additional amounts of funding are distributed to schools based on the needs of their students. Under this approach, some schools would need extra money for special education, bilingual education, or interventions for low-achieving or low-income student populations.

Categoricals: Funds earmarked or targeted to be spent only on specific programs such as special education, transportation or interventions for at-risk students

Charter school: An independent public school with its own board and that, in Michigan, operates under a contract authorized by a school district, intermediate district, community college or university.

Equity: Often used in Michigan funding discussions to refer to a system where all communities – whether rich or poor – have equal access to similar amounts of revenue per student. (In contrast to “adequacy” method of school funding). But “equity” is sometimes used by adequacy proponents as interchangeable with “adequacy;” i.e., providing enough funding to ensure all students have an equal opportunity to succeed, which may mean more money for some student populations than others, given their challenges.

Foundation allowance: Also known as the foundation grant, the per-pupil amount of money that is given to each school district based on number of students enrolled. It became the primary means to distribute state funding to school districts and accounts for about two-thirds of the state school aid fund.

Hold-harmless districts: The 50+ historically higher-spending school districts in the state that are allowed to tax their local property owners additional mills, known as “hold-harmless” mills, for local school district operations. The hold-harmless provision was included so affluent districts would not have to significantly cut back their own school revenues as the state sought more funding parity through Proposal A. The “hold-harmless” provision allowed these districts to maintain their pre-Proposal A funding level through millage votes.

Lottery: Though there’s a widely-held misconception that the state lottery pays for a significant amount of public education in Michigan, it really contributes a relatively small portion to the tab. Lottery revenues have comprised about 6 percent of the total state school aid fund revenues since Proposal A passed. In 2013-14, lottery revenues amounted to 6.4% of the school aid fund, or about $745 million.

Proposal A: A ballot initiative that voters overwhelmingly approved in 1994 that led to the current school aid fund system.

School aid fund: The budget that provides the majority of state revenue for education. It is paid for through a portion of the state sales tax, state education tax, use tax, tobacco tax, real estate transfer tax, industrial facilities tax, income tax, casino tax and lottery profits.

School choice: Programs that provide students with additional enrollment opportunities which range from allowing students to determine which school they will enroll in within their resident district, to allowing non-resident students to enroll in a district other than their own. Participation in choice programs is optional for districts. The degree and extent of participation are determined at the local level, including details such as application and enrollment dates, and which building, grades or programs will be accepting enrollment under a choice program. School choice has spurred competition among schools and school districts for students and the funding each brings.

State education tax: Tax on all property in Michigan that is used to fund public schools - 6 mills assessed on state equalized value (half of market value). This statewide tax was established after Proposal A passed in 1994, changing the education funding system in Michigan from a system that had primarily on local property taxes to fund local schools. Prior to the state education tax, property owners paid an average of 33 mills for their local schools.

Sources: House Fiscal Agency; Senate Fiscal Agency; Citizens Research Council, Michigan Treasury Department