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Educator Compensation

Educator Compensation Program (27l) 

The Michigan Department of Education (MDE) advocates for all educators to be adequately compensated and respected for their professionalism (Michigan’s Top 10 Strategic Education Plan, Guiding Principles). Section 27l of the State School Aid Act for fiscal year (FY) 2027 appropriated funding to increase educator compensation. Local and intermediate school districts and public school academies will receive these funds in installments following the 2026-27 State School Aid Payment Schedule. The FY27 payment schedule is different from the FY26 payment schedule. Districts’ 27l amounts will change throughout the year as pupil counts fluctuate. Final allocations will not be available until the August State Aid Payment. See the Office of Financial Management’s October 2026 State School Aid Update for more information.

Eligible Uses

The statutory language specifies that these funds are for one-time bonus payments to educators. These payments are not considered compensation for retirement purposes and are not subject to member or employer contribution requirements under the Michigan Public School Employees’ Retirement System. For Office of Retirement Services (ORS) reporting purposes, this means that funds are not to be reported as DTL2 records but are still to be recorded as DTL4 records. See ORS’ August 2026 Employer News bulletin for further information. Questions regarding employer taxes, FICA, and other benefit costs should be referred to the districts' legal counsel. MDE cannot advise on these questions.

Eligible Populations

Eligible populations are broadly defined in the legislation. It is not confined to instructional personnel. Section 27l(7)(5) specifies: “’Educator’ includes, but is not limited to, teachers, librarians, speech therapists, language therapists, physical therapists, occupational therapists, school counselors, school social workers, school psychologists, school nurses, paraprofessionals aids, food service workers, custodians, bus drivers, and literacy coaches. Educator also includes any other school employee covered under a collective bargaining agreement.” (emphasis added) A district could limit it to instructional personnel, but the law does not mandate such a limit. Similarly, the law does not prohibit or obligate districts to use funds to increase compensation for school administrators or for educators who are directly employed by third-party service providers.

Collective Bargaining Requirement

Section 27l(2) specifies: “If there are 1 or multiple labor unions representing educators in the district or intermediate district, the district or intermediate district shall bargain any increases in compensation … with those unions. All payments to educators made by districts or intermediate districts … shall be in addition to any existing compensation negotiated in a collective bargaining agreement.” Questions regarding whether compensation increases within existing, recently negotiated, or pending contracts fulfill this requirement should be referred to districts' and/or unions’ legal counsel. MDE cannot advise on these questions.

Timeline for Expenditures

This is an FY27 appropriation, which makes the expenditure period October 1, 2026, through September 30, 2027. Section 18a of the State School Aid Act allows for funds not spent by this date to be expended through September 30 of the following fiscal year, if a report is submitted to the Department indicating the district expects to spend the funds.

MDE Reporting

Districts will report expenditures of these funds through the Financial Information Database (FID), using grant code 274. Further guidance for reporting of grant expenditures and program monitoring will be determined at a later date.

For further information, please contact MDE-EdWorkforceGrants@Michigan.gov.

Frequently Asked Questions for FY 2027

  • What pupil membership is being used to calculate FY27 Section 27l—prior-year FTE, current-year membership, or another basis? If current-year membership is used, does the Section 6 three-year average provision apply?

    It uses current year membership. The current year membership will be the standard 90/10 formula or the three-year average whichever is advantageous to the district. The current year membership blend shown on the October status report is an estimate because we do not yet have the fall counts for the 26-27 school year (which are further subject to revision as the audit process progresses).

  • Is the amount reflected in October preliminary, and will it be automatically recalculated following certification of the October 2026 pupil count or subsequent pupil membership adjustments?

    The amount reflected in October should be considered preliminary because the underlying membership blend is still an estimate. A district’s share is dependent on both an individual district’s membership as well as the statewide total membership to distribute the full $150 million appropriation, which is why the allocation is subject to change. The allocation (Annual Amount) will be recalculated automatically each month and will begin to settle as we get closer to the August payment.

  • If an adjustment occurs, when should we expect it to be reflected in State Aid, and is there any action required by the District to initiate or report the change?

    The recalculated allocation each month will be reflected on the Status Report. No action is required by the district.

  • When do you anticipate the FY27 allocation will be final for purposes of planning employee bonus payments? Also, will updated FY27 program and FID reporting guidance be issued, including confirmation of the applicable grant code?

    The allocation shown in the August 2027 status report will be the final allocation amount. Updated FID programming guidance will be issued after review of the FY26 FID data.

  • How and when will unspent funds from FY26 Educator Compensation Program allocations be recaptured?

    Monitoring and recapture of unspent funds will take place in FY27 State Aid payments once the Department reviews Financial Information Database (FID) data submitted by districts. Until then, the district will keep those funds in an Unearned Revenue or “Due to the State” liability account.”