Plans to improve Michigan’s K-12 schools depend on how the state funds public education

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Michigan voters will head to the polls in November to elect a new governor and vote for all 148 seats in the state Legislature.

Education is expected to be a central issue in those races, with candidates offering competing visions for improving student outcomes and strengthening public schools.

Whether the goal is improving literacy, attracting and retaining teachers or expanding student supports related to health and safety, the success of any vision for Michigan’s schools will ultimately depend on how schools are funded.

We conduct research on K-12 education policy and finance at the Education Policy Innovation Collaborative at Michigan State University. Our work examines how school funding shapes educational opportunities for students in Michigan.

As the state’s school finance system has changed over the past few decades, school funding has become increasingly complex. We explain how those changes affect students, taxpayers and policymakers.

Money shapes academic achievement

For the 2025 fiscal year, Michigan’s education budget was more than US$21 billion, and education accounted for more than 25% of state spending.

What Michigan spends on students matters. A recent review of studies conducted over decades shows that achievement improves when K-12 students receive a better-funded education. Other studies show that academic outcomes fall when funding declines.

Research also shows that greater funding can not only lead to increased attendance and higher educational attainment, but also meaningful life outcomes beyond high school graduation. These include being more likely to enroll in and complete college, higher earnings and lower likelihoods of being arrested as an adult.

One of those studies concluded that increased funding has a positive return on investment for taxpayers based on reduced crime alone.

While increasing education spending generally can improve student outcomes, evidence suggests that making direct investments in classrooms through higher pay for educators has the biggest impact on student achievement.

How Michigan’s school finance system works

Before voters approved Proposal A in 1994, local school districts and communities in Michigan largely controlled education funding decisions. Proposal A shifted control over day-to-day expenses like salaries, textbooks and materials, utilities and building maintenance to the state. Funding for capital expenses, like purchasing land or building schools, is still set locally.

Most of the funding provided by the state comes from what is called the foundation allowance. This is a set amount that districts receive for each student they enroll. For the 2026-27 school year, the foundation allowance will be $10,300.

The state also provides categorical funding, which supports specific student groups like English learners and economically disadvantaged students, and services like transportation and enhanced security.

The cost to educate students is rising

In Michigan, the cost to educate students has increased over the past three decades because of demographic changes in the state’s student body.

Michigan’s fertility rate has declined significantly, and younger adults have been more likely to move out of the state and less likely to move into it. As a result, over the past 25 years, the K-12 population in Michigan fell by 360,000 students – more than any other state.

Over this same period, hundreds of charter schools have opened, which in Michigan operate as independent public school districts and receive state funding similarly to traditional public school districts. Michigan’s students are now spread across 822 districts – up from 524 in 1994.

The result: The typical Michigan district enrolls fewer than half as many students as it did three decades ago.

For example, since 2002, Grand Rapids Public Schools has lost more than one-third of its students, and Detroit’s traditional public school district has seen its student population decline by more than two-thirds.

As districts lose students, their costs often don’t decrease in line with their revenues. For instance, if a K–12 district loses two students in each grade, it would lose 26 students overall. That decline would reduce state funding, but it would likely not reduce the number of classrooms, teachers, bus routes or school buildings needed to serve the students who remain.

Needs are growing

Since 1995, the share of economically disadvantaged students in Michigan public schools has gone from just under one-third to over 50%, and the share of students with disabilities has increased by over 25%. Since 2007, the share of English learners has nearly doubled. Each of these groups requires more resources to educate.

A recent study from the Michigan School Finance Collaborative concluded that economically disadvantaged students would need 35% more funding than noneconomically disadvantaged students to reach the same outcomes, and English learners would need 35% to 70% more funding depending on their level of English proficiency.

Students with disabilities also require considerably more support. Adjusted for inflation to 2024 dollars, the average cost of providing services for students with disabilities is $15,000 more than what districts spend on general education students.

In other words, Michigan would need to spend more per pupil now to reach the same level of student achievement based on the kinds of students it serves.

Districts grapple with funding instability

Despite many reports of record funding, our research shows that revenues for Michigan’s districts have not adapted to increased student needs or kept pace with inflation.

It’s true that after the state assumed control over most education funding in 1994, revenues continued to increase for much of the next decade.

Total per-pupil funding peaked in 2002 at $16,557 in 2024 dollars, but then began a long, steady decline.

By 2014, per-pupil funding had fallen by roughly $3,800, or 23%. Funding then remained near that low through 2022.

Between 2022 and 2024, revenues nearly returned to the high point set in 2002, driven by significantly higher-than-average federal funding in response to the COVID-19 pandemic.

As federal funding dried up after 2024, district revenues began to fall again. This will likely force districts to make tough choices about which services to keep and which to scale back.

Our work shows that in the late 1990s, roughly 95% of the funding that districts received came from the foundation allowance, which provides districts with flexible dollars to use as they see fit.

By 2024, just two-thirds of districts’ funding came from the foundation allowance; the rest came mostly from state categorical grants.

Categorical grants can help meet unique student needs, but they must be used for specific purposes and often require districts to launch new programs or expand existing ones.

At the same time, categorical funding can be unstable from year to year due to changing priorities and how much money the state has to appropriate.

For instance, in 2023, Michigan appropriated a categorical grant for student mental health and safety that equaled $107 per pupil. That funding more than doubled the following year, rising to $236 per pupil, but was then initially cut by more than 90% for the 2025 fiscal year until a budget supplemental brought funding back to 2023 levels.

For 2026, the state increased this funding by more than 10%. However, roughly half of districts declined these funds because accepting them required districts to waive attorney-client privilege following a broadly defined “mass casualty event,” which many districts argued could create unnecessary legal exposure.

Michigan shifts to weighted funding

The 2027 education budget marks one of the most significant changes to Michigan’s school finance system in decades by adopting a weighted funding model.

Under the new system, districts receive an additional amount equal to roughly 19% to 26% of the foundation allowance for each economically disadvantaged student they enroll, and roughly 2% to 19% of the foundation allowance for each English learner. The 2027 budget also expresses the state’s intent to gradually increase these percentages and to extend weighted funding to students with disabilities beginning in fiscal year 2028.

A key advantage of weighted funding is that it makes it easier for districts to anticipate future revenues and plan their budgets. Additional funding is tied directly to the foundation allowance, so it automatically adjusts as enrollment and the foundation allowance change.

Public support aligns with what research shows works

Our research shows that roughly two-thirds of Michigan residents believe the state should spend more money on K-12 education. That is more than the share of residents who favor increased spending on roads, healthcare or support for Michigan’s neediest residents.

Michiganders have also broadly supported raising teacher pay in recent years, particularly for those jus