School Funding 101


Adequacy in school funding means providing the minimum necessary resources for students to learn at high levels. For example, an adequacy argument is concerned with whether districts have the resources to provide a sufficient education system for their students.


An appropriation is the amount of money that can be spent for a certain purpose. When passing the state education budget, the legislature appropriates different amounts of money for different purposes, allowing that money to be spent on those specific purposes. Once funding is appropriated, it can also be allocated for an even more specific purpose.


Used to describe sections of the school aid budget where money is appropriated outside of the foundation allowance. For example, special grants such as funding for mental health and school safety grants are included as categoricals.


Equity in school funding means providing the necessary resources all students need to succeed. Because the contexts and challenges of each district are different, and because students have varying needs, this will mean differentiated levels of funding based on student and district need.


This is the money the school district spends. Expenditures are all district spending, including items like building maintenance, sports programs, and teacher salaries.

Foundation Allowance

The foundation allowance is the amount of money Michigan’s state government sends to school districts for each student attending school in their district. For the 2023-24 school year, the state guarantees $9,608 per pupil to school districts.

Fund Balance

The fund balance is the total amount of money left over when subtracting expenditures from revenues and the money left over from previous years. Each year, the available fund balance from the previous year will be added to the revenues in order to get the total number of dollars available for a district to spend.

Funding Gap

This describes the difference in spending (or, the “gap”) between what we are currently spending and what we should be spending to achieve true funding equity in Michigan.

Hold Harmless Districts

Hold harmless districts have higher foundation allowances than the majority of districts in the state and are allowed to raise additional local revenue to reach their foundation allowance by levying an additional hold harmless millage.

Opportunity Index

A weighted funding formula that takes into account concentrations of poverty at the district level. The Opportunity Index provides more money to school districts with greater concentrations of poverty.

Out-of-Formula Districts

These districts have high levels of property wealth and raise enough funds through the typical millages to exceed the state set foundation allowance. Out-of-formula districts keep the extra funding they raise above the set foundation allowance.

Proposal A

Passed in 1993, Proposal A was a school finance reform that guarantees all districts in Michigan a certain foundation allowance. If a district cannot raise the funds at the local level, the state makes up the difference. This change reduced local reliance on property taxes and narrowed disparities in school funding between districts.


This is a school district’s income, so to speak. Every dollar the district brings in, regardless of where the money came from, is counted as a revenue. Revenues come from local, state, and federal sources.

School Aid Budget

This is the state budget that provides funding for public Pre-K-12 education in Michigan. In addition to the foundation allowance, the budget includes many other pieces of funding and totals over $21 billion.


A weighted funding formula means that additional funds will be distributed as weights calculated by multiplying a percentage against the foundation allowance. As an example, Michigan currently allocates an additional 11.5-15.3% of the foundation allowance to students from low-income backgrounds, based on concentration of poverty, with a goal of funding higher weights over time.