Research at a Glance

Research Findings from Funding Michigan’s Future

September 2025

New EPIC report examines three decades of Michigan school finance to see what’s changed, what money reaches classrooms, and what that means for students:

• Michigan saw a decades-long decline in inflation-adjusted funding, which has begun to rebound in recent years, thanks in part to educational investments in response to the COVID-19 pandemic.
• At the same time, a smaller share of dollars reaches classrooms now than in the past and demographics have shifted in ways that drive up the cost of providing an adequate education.

Read MSU coverage of the report at https://msutoday.msu.edu/news/2025/09/michigans-k12-funding-rebounds-yet-buying-power-classroom-dollars-lag

Demographics:

Understanding Michigan’s K-12 funding story starts with demographics: statewide enrollment has fallen since it peaked in the early 2000s. Smaller systems have higher per-pupil fixed costs, but in Michigan when enrollment falls, revenues do too.

Rising student needs:

Understanding Michigan’s K-12 funding story starts with demographics: statewide enrollment has fallen since it peaked in the early 2000s. Smaller systems have higher per-pupil fixed costs, but in Michigan when enrollment falls, revenues do too.

The big picture:

Adjusting for inflation, funding rose through the early 2000s, fell for an extended period, and has partially rebounded since 2022. Even with recent gains, totals remain below the early-2000s peak, and some growth came from time-limited aid related to the pandemic.

Fewer flexible dollars + lower buying power:

Flexible dollars declined. The foundation allowance buys less than it did two decades ago, and it now makes up a much smaller share of district revenue. This has been replaced by more restricted funds, which makes budgeting harder.

Composition and unfunded actuarial accrued liability (UAAL):

Research shows investing more, especially on instructional salaries, improves student outcomes. In Michigan, instructional spending is mostly flat and a larger share now goes to legacy retirement costs, meaning fewer dollars reach classrooms.

Why it matters:

With student achievement in the spotlight, what matters is both the level of funding and how it is used. Demographic shifts mean schools require more resources today. Despite recent gains, over the long term real funding has generally trended downward, especially the dollars reaching classrooms. These patterns reflect policy decisions. To inform the discussion around K-12 finance in Michigan, the report outlines several steps policymakers could consider to increase funding, make funding more predictable over time, and enable a more informed public conversation about how well schools are and should be resourced.

“Families feel funding choices in class sizes, course offerings, and student supports. When needs rise and dollars don’t reach classrooms, opportunity narrows.”

— Dr. Jason Burns — Epic Research Specialist, Lead Author