House subcommittee advances school-aid and education budgets that roll up categorical funding into larger per-pupil payments

LANSING — The Michigan House Appropriations Subcommittee on School Aid and the Department of Education on June 3 adopted substitute versions of two budget bills that would increase the foundation allowance and consolidate many categorical grants into a larger per-pupil payment while also changing several Department of Education operations and boilerplate requirements.

The panel adopted the House substitute for HB 4577 H-1, the school-aid appropriations bill, and the House substitute for HB 4576 H-1, the Department of Education appropriations bill, then voted to report both bills to the full Appropriations Committee with recommendations that they pass. Representative Jenkins Arnold, the subcommittee chair, moved the school-aid substitute and led discussion of the package’s intent to shift funding into a larger foundation allowance and reduce the number of line-item categorical accounts.

The package would raise the per-pupil foundation allowance from $9,608 to $10,025 (a $417, or 4.3%, increase) in the House plan and creates a new Section 22f that consolidates multiple categorical appropriations into an additional per-pupil payment. The summary provided to the subcommittee estimates the roll-up could raise effective per-pupil funding “up to $12,000” for districts; the subcommittee’s materials show the roll-up also allocates separate buckets for intermediate school districts (ISDs) and nonpublic schools (an estimated $228 per pupil for ISDs and $40.8 million total to nonpublic schools). Noel Benson, fiscal analyst with the House Fiscal Agency, told the subcommittee the roll-up includes one-time additions totaling about $370 million for school safety and mental-health supports, of which roughly $350 million in School Aid Fund dollars would go to district per-pupil payments and $20 million to nonpublics.

The House plan also moves balances from several reserve funds into the School Aid Fund and closes those accounts. Jacqueline Mullins, senior fiscal analyst for the House Fiscal Agency, listed the amounts the House would lapse into the School Aid Fund: $147.4 million from the MPSERS reserve; $120.3 million from the School Transportation Fund; $235.2 million from the Educator Fellowship Public Provider Fund; $50.8 million from the Educator Fellowship Private Provider Fund; $193.6 million from the Enrollment Stabilization Fund; $138.6 million from the School Meals Reserve Fund; and $265.8 million from the rainy day fund, leaving an estimated $209 million remaining in the rainy day balance.

The subcommittee’s published summary and staff testimony emphasized that the House plan preserves the current MPSERS (Public School Employees Retirement System) employer cap at about 20.96% of payroll, rather than lowering it to the alternative 15.22% figure that would have increased state costs. Mullins told members the proposal assumes a policy change to maintain the 20.96% cap and lapses remaining balances in the MPSERS Reserve Fund back to the School Aid Fund.

The substitute adds several new statutory “boilerplate” provisions that change conditions for districts and for the Department of Education. A new Section 22h would provide a $138.8 million hold-harmless payment to districts and ISDs to mitigate reductions caused by the roll-up where calculations are possible. A separate new boilerplate provision (described in the summary as section 16) would impose a penalty equal to 20% of a district’s discretionary portion of the foundation allowance if the district: uses a curriculum that the text describes as including “race or gender stereotyping” (with enumerated examples), uses state funding for diversity, equity and inclusion initiatives, allows transgender girls to participate in girls’ sports or provides multi-stall unisex bathrooms. The summary lists that penalty as a statutory funding reduction tied to noncompliance with the new provision.

The school-aid substitute also includes one-time spending from the School Consolidation and Infrastructure Fund (the House’s estimate of remaining FY26 balance), divided among (1) competitive grants prioritizing roofing and HVAC projects, (2) competitive grants for facility or service consolidation, (3) a per-pupil incentive for reducing class sizes, and (4) a per-pupil incentive for implementing a read-by-3 program requiring at least one literacy coach.

In questions from members, Representative Gladwell and others raised concerns about the roll-up’s effect on districts with special, localized costs. Using Flint as an example, Representative Gladwell asked whether funds previously targeted at Flint’s declared emergency would continue to reach the district. House Fiscal staff explained the Flint allocation — $8.1 million in the current year, split in the current-year appropriation between $5 million School Aid Fund and $3.1 million general fund — was rolled into Section 22f: the $5 million went to the district per-pupil bucket and the $3.1 million was included in the nonpublic allocation. A subcommittee member said that change meant the money would be distributed through the per-pupil mechanism rather than remain as a labeled, district-specific appropriation.

Members also questioned transportation and other high-cost services that districts incur unevenly. House leaders argued the roll-up simplifies funding and “trusts” local educators to allocate the increased foundation allowance; Representative Jenkins Arnold said the plan seeks to provide as much per-pupil funding as possible and called the package a way to “give a shock to the system” and “restore some sort of sanity” to school financing, with additional emphasis on career and technical education and reading instruction.

On the Department of Education side, the House substitute for HB 4576 H-1 reduces the department’s gross budget from year-to-date by about $31.7 million, including a $17.3 million general fund reduction, $8 million in restricted funds and $6.3 million in federal funds, and removes authorization for roughly 118 FTEs. Noel Benson summarized changes that include elimination of teacher certification fee revenue (following HB 4150, which the fiscal analyst said the House passed earlier this year), removal of authorization for a number of currently vacant FTE positions, elimination of a library services and technology program (about $5.6 million and 1 FTE), reductions to partnership-district support (about $3.6 million and 13 FTEs), and other IT and program reductions. The substitute also reintroduces or adds several boilerplate items governing department operations: reestablishing authority for inter-transfer of funds through a state administrative board concurrent resolution, requiring a quarterly departmental performance scorecard online, limiting department use of funds for court-approved judgments above $200,000, requiring employees to work in-person five days per week, conditioning contractors to use E-Verify, restricting state or federal funds for services to noncitizens except qualified aliens (with enumerated exceptions), and prohibiting use of funds on diversity, equity and inclusion programs.

The substitute also makes programmatic changes: it adds nonpublic schools as eligible recipients of educator preparation funds (the fiscal analyst said a set-aside amount would be included in the language but that he needed to double-check the precise figure) and strikes implicit bias training as an eligible expense for school board training. Staff told members the department would be required to report on grant distributions quarterly and to follow additional conditions before awarding certain grants.

Votes at a glance: the subcommittee took multiple formal actions. Representative Borton moved to approve the minutes of the June 3, 2025 meeting; with “no objections” the minutes were approved. Representative Jenkins Arnold moved to adopt the H-1 substitute for HB 4577 (school aid); the roll call recorded five yes votes (Kelly; Jenkins Arnold; Markkanen; Beeson; Wharton) and two passes/abstentions (Glanville; Steckloff); the substitute was adopted. The subcommittee then adopted the H-1 substitute for HB 4576 (Department of Education); roll call recorded a majority in favor with the same pattern of passes by some members; the substitute was adopted. The panel voted to report both substitutes to the full Appropriations Committee with recommendation that they pass; those motions were carried, with two members voting no on each report vote.

Committee staff told members the House numbers would still go to negotiations with the Senate and the governor, and staff repeatedly noted the bills include a mix of one-time fund transfers and ongoing appropriations, and that some policy changes would require separate legislative action. Members said they need additional time to review the large packet of changes and to work through details such as how transportation and other categorical services would be funded under the roll-up.

The meeting record shows the subcommittee’s action was procedural: both substitutes were adopted and reported to the full committee for further consideration. The staff summaries and exchanges at the hearing are the basis for the budget line-item numbers and boilerplate language described here.