The Skillman Foundation

On October 7, Governor Whitmer signed a state budget that included $20+ billion for Michigan’s public schools. The highly anticipated School Aid budget comes three months late—after legislators missed their self-imposed July 1 deadline earlier this year. For context: school districts operate on a July 1 fiscal year, unlike the state, which begins its fiscal year (FY) on October 1. Legislators work to meet a July 1 deadline for the School Aid budget each year so that school leaders can appropriately plan their budgets and hire staff in time for the beginning of the new school year.

Below is a breakdown of how the newest state budget impacts K-12 students and schools across Michigan.

The FY26 School Aid budget looks similar to past budgets and contains increases for K-12 education funding.

Despite a proposed House budget that combined many different pots of money into single per-student payments to districts, the final version closely resembles past years, containing individual budget items for designated uses. These line items, known as “categoricals,” include dollars for things like school meals, out-of-school time programming, as well as funding for “at-risk” students and English language learners.

The budget increases the foundation allowance—general fund dollars per student—by 4.6% for a total of $10,050 per student, which is the highest level ever. In this year’s budget, virtual charter schools receive the same foundation allowance as traditional brick and mortar school districts, unlike last year, when they received fewer dollars per student. The new language in the budget includes a suggestion (but not a requirement) that school districts invest additional dollars into permanent educator and staff compensation, prioritizing starting salaries, in any year where the foundation allowance amount increases.

These foundation allowance dollars are “unrestricted” funds and can be used for a variety of purposes. An annual increase helps school districts keep up with rising costs and provide critical services, pay teachers, and support instructional needs. The language encouraging school districts to use increased foundation allowance payments on educator compensation highlights the legislature’s desire to address persistent educator shortages and low starting salaries across the state.

Special groups of students with additional needs see positive momentum, but more investment is needed.

The budget increased state spending for the Opportunity Index by 25%, $258.7 million, for a total allocation of $1.29 billion. The Opportunity Index is a funding mechanism which drives additional dollars to school districts based on the concentration of students from low-income families in their districts. School districts can use up to 30% of their Opportunity Index dollars to reduce class sizes, and higher poverty school districts may use an additional 30% to support educator recruitment and retention efforts. New language this year requires school districts to provide a report to parents describing how the district spent the Opportunity Index funding and allow opportunities for parents to offer feedback and learn more about available services and interventions.

English Learner funding saw a similar 25% increase of $12.5 million, for a total investment of $62.7 million. Special education dollars increased by $205 million, bringing the total investment in students with disabilities to $2.8 billion. All of these increases represent strong investments in students with additional needs.

Despite these increases, more is still needed to truly support our students with the greatest needs. For example:

• The Opportunity Index is still underfunded by approximately $2 billion annually.
• Proposed cuts to federal Title III funding, which supports English language learners, are nearly equal to the state budget increase this year.
• Advocates in Michigan argue that far more is needed to truly transform special education funding and are presenting recommendations from the MI Special Education Finance Reform Blueprint to the legislature later this month.

One-time dollars and transfers to support higher education cause some concern.

While the overall School Aid budget increased by 2.5% this year, the presence of many one-time dollars—meaning that the state has only committed to fund something in this singular year, not future years—and the transfer of approximately $400 million from K-12 education to support higher education indicates that next year’s budget may include more cuts to important programs. 

The controversial DEI language did not make the final cut.

The proposed language to impose substantial financial penalties on districts maintaining so-called “diversity, equity, and inclusion initiatives or programs” was not included in the final budget. Some examples of these DEI initiatives included curricula that include race or gender stereotyping; use of state funding for DEI initiatives; allowing transgender girls to participate in girls’ sports; and providing multi-stall unisex bathrooms.

Free school meals will continue, but the local produce program has been axed.

The budget includes $201.6 million to cover the costs of school breakfasts and lunches for students who don’t qualify for free meals through federal programs. Of this total, $1.6 million is earmarked to support meals in private schools. While schools are encouraged to buy local produce where possible, the $4.5 million local produce budget item was eliminated. Funding for school meals has been hotly contested in recent months, with some school districts preemptively canceling universal free school meal programs this fall due to the legislature missing its July 1 deadline to finalize the School Aid budget.

An increased mental health budget is available to both public and private schools.

Lawmakers allocated $312 million in one-time dollars to maintain student mental health and safety supports, which both public and private schools can apply for. Of those dollars, $107 million is set aside for multi-year competitive grants for student mental health needs and school resource officers.

Out-of-school time programs see increased competitive grant funding.

In Michigan, out-of-school time programs take place during the summer, as well as before and after school, and provide students with the opportunity to gain important academic and life skills. These programs are run by community-based nonprofit organizations, schools, early childhood centers, and faith-based groups. This year’s budget includes $75 million in one-time dollars for competitive grants, which is an increase from $57 million in competitive grants last year, to support out-of-school time programs across the state.

New funding is available for Grow Your Own programs, CTE deserts, and smaller classes.

The new budget also contains funds for several new items, including $70 million for Grow Your Own teacher preparation programs. Grow Your Own programs work to increase the number of individuals in the teaching profession by recruiting and supporting individuals to pursue teaching in their local communities. An additional $70 million in the budget is earmarked for a new Pathways to Success program aimed at addressing Career and Technical Education (CTE) deserts in Michigan. This program consists of competitive grants for school districts to create and sustain high-skill and high-demand CTE programs. Finally, the legislature allocated $65 million in one-time dollars for grants to higher-poverty school districts for piloting programs aimed at reducing class sizes in grades K-3.