State School Aid Budget Continues Strong Investments in Helping At-Risk Students, but Decreases Funds for Student Mental Health

LANSING – Michigan’s 2025 school aid budget continues recent investments in education in many categories but includes a concerning reduction in student mental health funding, State Superintendent Michael F. Rice said.

Gov. Gretchen Whitmer signed the budget today for the upcoming fiscal year from Oct. 1, 2024, through Sept. 30, 2025.

“While we appreciate the additional investments by the governor and legislature in categories that assist economically disadvantaged students, students with disabilities, English learners, and students in rural or isolated districts, I am concerned about a significant reduction in funding for student mental health and school safety,” Dr. Rice said. “This reduction will slow Michigan’s recent momentum in addressing student mental health challenges. A $300 million reduction in funding for children’s mental health services and school safety fails to recognize the physical and mental health needs of our students.

“While we knew the budget could not match the last two due to the end of federal pandemic funding and a flattening of state revenue growth, the large decrease in funding dedicated to helping students with mental health challenges is disappointing,” Dr. Rice said.

MDE appreciates additional investments in these sections of the state school aid act:

• 31a At Risk (economically disadvantaged students): An increase of almost $83 million (9%) over the current year (fiscal year 2024) and a rise of $522 million (102%) compared to funding in fiscal year 2022.
• 32d Great Start Readiness Program for preschool: An increase of almost $112 million (20.6%) over the current fiscal year and a rise of almost $358 million (120%) compared to funding in fiscal year 2022.
• 41 Bilingual Education (English learners): An increase of more than $10 million (26%) over the current fiscal year and a rise of almost $25 million (99%) compared to funding in fiscal year 2022.
• 51e Special Education Foundation: An increase of $8.4 million over the current fiscal year. Overall, special education funding has increased from $90.2 million (Sec. 51f) in fiscal year 2022 to $499.6 million (Sec. 51e) in fiscal year 2025, a $409.4 million or 453% increase.
• Funding for students in rural and isolated districts: An increase of $705,000 in Sec. 22d funding over the current fiscal year and up almost $3.9 million (46%) compared to funding in fiscal year 2022.
• 22l school transportation funds: Continuation of $125 million in funding. The fiscal year 2024 budget was the first time that funding was allocated to reimburse general education district transportation costs, a funding category recommended by the School Finance Research Collaborative and MDE.

At the same time, MDE is concerned about the sharp decline in dollars for section 31aa, which provided funding to prioritize mental health and safety in schools.   

Last month, in recognition of the profound challenges that children have faced before, during, and after the pandemic, as well as of the murders at Oxford High School and Michigan State University, the State Board of Education approved a resolution urging the legislature to make recurring the $328 million in Section 31aa funding for children’s mental health and school safety that had been nonrecurring in the fiscal year 2024 budget. Four months earlier, the Michigan Department of Education had urged the legislature similarly in budget testimony.

Instead, the state legislature made recurring $25 million of this funding for public schools, appropriated $1.5 million in nonrecurring funds for nonpublic schools, and failed to fund at all the other $301.5 million.

Over four years, increased state funding in multiple sections of the budget has permitted schools to add more than 1,000 helping professionals—social workers, guidance counselors, nurses, and school psychologists.

“We had hoped to continue to add helping professionals this school year. Instead, these numbers will be flat in most cases, with some districts unable to retain the staffing that they have,” Dr. Rice said.

While the budget continues to provide more equitable funding, it includes no increase in the per-pupil foundation allowance for traditional public school districts. A new categorical budget line of $598 million provides what would roughly be a 4% increase in the foundation allowance for traditional public school districts, money that is supposed to represent financially an implicit reduction in the retirement contribution rate. While the 4% increase in base funding for traditional public school districts is approximately the equivalent of the 3.9% increase in the per pupil foundation allowance for charter schools, the new categorical for traditional public school districts in lieu of a per pupil foundation allowance increase, juxtaposed against the charter school per pupil increase, has generated a lot of confusion. In fact, both traditional public school districts and charter schools that educate roughly the same children will gain similar resources as a result of this budget. They will gain these resources in different ways but will have similar percentage increases.  

That said, the retirement contribution rate has been too high for many years, Rice said, and has long been a financial burden that has adversely affected students, staff, and schools. The state needs to commit to reduce this rate markedly over the next several years, in much the same way that it has committed to reduce the unfunded liability of the educators’ pension system. The rate rose over a period of years, and it will take years to return the rate to single digits.

“We will continue to work with the governor, the state legislature, educators, education organization partners, and others to address funding and staffing challenges to help improve Michigan children’s education,” Dr. Rice said.

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