Michigan’s Status Quo:
An Unfair School Funding System
Progressing Beyond A Regressive Funding Formula
1 Million Opportunities
Over 1 million children attend school in Michigan’s K-12 education system, each with their own unique and valuable experiences, knowledge, and potential. Yet, for too long, Michigan has had an unfair school funding system, fraught with barriers to student success in and beyond school.
Research shows that money matters in education, especially for students who are the most underserved. Poverty and other external factors affect student outcomes, yet our schools lack the resources schools need to provide all students with a high-quality education.
Indeed, Michigan has long had one of the most regressive school funding formulas, according to state and national research. Our state is also underfunding students from low-income backgrounds by an estimated $5.5 billion annually compared to what research indicates is needed for those students to succeed, according to an analysis by The EdTrust-Midwest for FY 26.* Moreover, Michigan is underfunding students with disabilities by hundreds of millions annually.
The inequities in our state’s school funding system build upon a long history in Michigan of drastically underfunding students’ needs for more than two decades. This unfair funding system has dramatic and far-reaching consequences for Michigan’s students, especially those who are the most underserved, including Black, Latino, and Arab-American children, those living in concentrated poverty and rural districts, students with disabilities, and multilingual learners.
Our students deserve better, and our state can do better.
Funding Gaps for Students from Low-Income Backgrounds
But how did we get here — and where do we stand against what leading states practice and research recommends?
As of FY 2024-25, compared to states with similar school finance systems, Michigan fell woefully behind in what we provide students, ranking 23rd out of 30 states in our funding levels for students from low-income backgrounds. While the most recent budget has made significant investments, it will take more to address our decades of underfunding.
Between what is provided through the FY 26 budget and what research shows students from low-income backgrounds need in terms of funding, Michigan still falls $5.5 billion behind.
Funding Gaps Between the Highest and Lowest Poverty Districts, By State
As of 2020, Michigan was also one of only 15 states providing less funding to the highest poverty districts than the lowest poverty districts, as shown in the graph below. This means that when it comes to state funding, Michigan was in the minority of states with a regressive formula for students from low-income backgrounds.
Notes: Hawaii was excluded from the within-state analysis because it is one district. Nevada is excluded because its student population is heavily concentrated in one district and could not be sorted into quartiles. Alaska is excluded because there are substantial regional differences in the cost of education that are not accounted for in the ACS-CWI. Vermont is also excluded. Because so many New York students are concentrated in New York City, we sorted that state into two halves, as opposed to four quartiles.
Falling Short for Multilingual Learners and Students with Disabilities
In the FY 26 budget, Michigan spends a total $62.7 million on multilingual learners. While this is an improvement over FY 25, it still leaves a gap of $438.2 million dollars between what we are spending and what we need to spend to fully meet multilingual learners’ needs, according to an analysis by EdTrust-Midwest for FY 23.**
Students with disabilities do not receive appropriate levels of funding either. In fact, one recent estimate of the shortfall gap was $616 million dollars. Although Michigan’s fiscal year 2024-25 budget invested deeply in closing this gap, there is much more work necessary to achieve true funding equity for students with disabilities.
Consequences of an Unfair System
We are fundamentally denying many students in our state a quality basic education, and students from certain groups are even more likely to face barriers to academic success. The chart below shows how drastically we are failing in providing all Michigan students with the education they deserve.
Third grade reading is a key indicator for success, and we cannot ignore the ways in which our current system fails many bright and hopeful Michigan children. We see that both students from higher-income backgrounds and White students perform above the statewide average in 3rd grade reading proficiency, while other student groups do not read at the same levels.
2024-2025 3rd Grade Reading M-STEP Scores by Subgroup
These opportunity gaps do not only exist in reading. The graph below shows alarming and similar results for 7th grade math performance, another important indicator of future success. Knowing that every student in our state possesses the innate ability to succeed, we must ask ourselves what barriers to academic success our current system creates for certain students.
2024-2025 7th Grade Math M-STEP Scores by Subgroup
Michigan Underperforms Nationally
Our inadequate funding hasn’t only led to gaps in academic outcomes within our state. Michigan also performs poorly on a national level. For example, Michigan is among the bottom five states for students from low-income backgrounds’ performance in 4th-grade reading, based on 2024 NAEP scores. We also rank in the bottom 10 states in terms of 8th-grade math for Black students, further hitting home the dismal outcomes created by an unfair system.
NAEP Grade 4 | Reading | Students from Low-Income Backgrounds (2024)
Again, nationally, this low performance doesn’t just show up in reading. Michigan ranks among the bottom five states for Black students in 8th grade math. We cannot continue to fail our students in this way, leading to opportunity and achievement gaps for Michigan students.
NAEP Grade 8 | Math | Black Students (2024)
How Did We Get Here?
In the early 1990s, Michigan’s property taxes were well above the national average – in large part because they provided almost two-thirds of school funding. Then, Proposal A shifted the responsibility for school funding from the local level to the state government.
Despite some positive outcomes around lowered property taxes and more equal funding between districts, school funding increases since 2003 lagged well behind the rate of inflation, yielding a net decrease in real dollars.
Prop A also had limitations from the start, in that the costs of infrastructure and services for students with disabilities fall largely on the shoulders of districts and counties, making for deeply inequitable facilities and profoundly inadequate special education services. These inequities further demonstrate the need to provide additional funding based on the concentration of poverty within districts. All districts should have the resources to upgrade buildings and technology, as well as reliably identify and provide services to students with disabilities.
Looking to the Future
We have an opportunity as a state to provide all students in Michigan with a high-quality education. We can tackle inequities based on income and race and improve Michigan’s national performance through the reduction of opportunity gaps. We can also focus efforts on providing additional funding for multilingual learners and students with disabilities.
Through additional investments into Michigan’s education system, we can transform our public schools and provide a high-quality education to all students in the Great Lakes State.
Further Reading
http://educationnext.org/boosting-education-attainment-adult-earnings-school-spending/
Michigan lawmakers boosted special education funds. Did it help? (freep.com)
Michigan Legislature – Section 388.1631a
State Education Funding: The Poverty Equation – FutureEd (future-ed.org)
School Aid Section by Section Highlights – Executive Recommendation (mi.gov)
Michigan School Finance at the Crossroads (msu.edu)