When Marios Demetriou does the math for the governor’s proposed 2015-2016 school budget, it sounds good–at first.

“All Michigan schools would see an increase in their [per-pupil] foundation allowance of $75,” says the Ann Arbor schools’ CFO. But then things quickly go downhill: “However, the money we used to get for following the governor’s best practices is being reduced from $50 to $20, and the $100 we used to get based on academic achievement is being eliminated. The net impact will be a negative $55 per student. We’re at 16,855 enrollment this year, so the total negative impact is a little over $900,000.”

“And the conversation has only just begun about final numbers,” warns school board chair Deb Mexicotte. “We won’t know them until end of May, beginning of June. That makes it hard to plan our budget that’s due June 30. And anything can happen. Last year we were expecting $83 more per student, and the legislature took $33 away overnight and outside of any funding formulae. So a net loss of $55 could be our best-case scenario.”

At $9,100 per student, Ann Arbor schools are still better funded than most in the state. “Ann Arbor has a higher foundation grant because our community invests almost 4.5 mills per year through our ‘hold harmless’ millage,” explains Demetriou.

But the extra money comes with a downside. “Though our schools have one in four students living in poverty based on our 24 percent free and reduced lunch applications, we are not receiving any At Risk money because of our hold harmless millage,” Demetriou says. The proposed budget calls for “a significant increase of $100 million to $300 million in state [At Risk] funds available, but Ann Arbor will not be able to receive any of it.”

“People outside of Ann Arbor think of us as wealthy, but that completely [ignores] the fact that twenty-four out of every 100 students should be receiving that support,” says Mexicotte. “But the irony is that even without At Risk money we are seeing greater diversity in higher academic achievement. We’re succeeding at the highest level in the state and the country. Imagine what we could do if we were well supported!”

What can AAPS do with the limited support it does have? “Trim around the edges, look for economies, look for partnerships, and hope for more dollars from the bond [renewal vote] in May,” replies Mexicotte. If approved, the millage on the May 5 ballot will allow the district to borrow about $31 million over ten years for new school buses, classroom furniture, and better building security–expenses that otherwise would have to come from the already-squeezed general fund (see “School Millage Jitters,” p. 37).

The district is also hoping to attract more students–and with them, more state dollars. Last year, the AAPS opened 750 Schools of Choice slots and filled half of them, enrolling 353 additional students. “Most came from within the AAPS boundaries,” Demetriou says, “from charter schools, private schools, and [pre-kindergartners in] the Young Fives program. From outside the boundaries, we got about 170.”

“It was the largest single rise in enrollment in a decade,” says Mexicotte, “and we’re hoping for something similar this year.”

The AAPS started the current fiscal year with a balance of $8.8 million in its $203 million general budget. It expects to end the year with a balance of $10.9 million. “We worked very hard to manage and control expenses and increase revenues,” says Demetriou, “though most revenues are not under our control, since they’re controlled by the state.”

And the state has other priorities at the moment. “It is estimated that there will be a few hundred million left this year and a few more hundred million left next year in school funding,” Demetriou says. “Based on the current model, it could have been given to K-12. That’s where the money is supposed to go. But the general fund would have a deficit this year and next year of $500 million, and the money for the state school aid fund is being used to eliminate the deficit in the general fund.”

“State revenue fell well below expectations, but not for the school aid fund,” Mexicotte explains. “It was the state tax breaks for job incentives that were cashed in [by employers] that brought the rest of the state [budget] down. And they plugged the hole by taking money from the schools.”

State rep Adam Zemke, who serves on the state house’s appropriations committee, thinks the entire school finance system needs an overhaul. “I’ve yet to find a person who likes Proposal A [the 1994 ballot initiative that centralized school funding]. That was twenty years ago, and it’s time to do revisions.”

While Zemke believes reforming the funding system is possible, he doesn’t expect it soon. “Proposal A was a long time coming, and the revisions will take equally as long,” he says. “We need to start the conversation, so by the time I’m done in the House [in three years], it’ll be done.”

What about increasing incentives for school district annexations or mergers? Though the legislature wants to encourage consolidation, funding to support them is currently so limited that both Ann Arbor and Dexter recently rejected mergers with struggling Whitmore Lake.

“I can’t comment on a specific proposal because I don’t know what the specific proposal will be,” the state rep says. “But I’d say there’s more than a 50 percent chance some additional financial incentives may be made available.”