Michigan School Funding System Pits Small Districts Against Large Ones, Leaving West Michigan Students Behind
Michigan's complex categorical grant system is leaving small rural districts at a disadvantage, with school leaders saying students miss out on essential programs because administrators lack time to compete for funding
State's Categorical Grant System Disadvantages Rural Schools
By West Michigan State News
A new report from Michigan Public reveals that Michigan's complex school funding system is leaving small districts — including those in rural West Michigan — at a competitive disadvantage against larger school districts. The state's reliance on categorical grants means students in districts like Plainview Community Schools in Presque Isle County are less likely to have access to essential programs like welding and computer programming courses.
Minnows Competing Against Sharks
According to the report, Michigan currently has 50 categories of school funding — five times the national average. Many of these categorical grants are designed to reduce disparities by directing money to underserved populations, including schools that enroll more low-income students or English language learners. There are also categorical spending funds that specifically funnel money to small districts, such as dollars for transportation costs in rural areas.
However, the system continues to harm small school districts. In Plainview, situated among pine forests in Presque Isle County, some grants don't get completed because the superintendent doesn't have the time. Others only get attention late at night after basketball games or before sunrise across nearby potato fields.
"It kills me that I have to do these between zipping coats and recess duty," said Michelle Wesner, a school leader in the district.
The Numbers Behind the Problem
In the 2024-25 school year, there were 102 state grants totaling about $7 billion available to districts. That's an average of almost three per school week for grants that, for some, can take days to complete.
Superintendents, state officials and policymakers agree the system continues to harm small school districts.
"They're minnows competing against sharks," said Craig Thiel, research director at Citizens Research Council, which published a report last year criticizing the reliance on some grants.
Growing Agreement on Systemic Issues
Even before the state's huge increase in funding buckets, a 2013 study found that Michigan had 50 categories of school funding — five times the national average. Many categorical grants are meant to reduce disparities by directing money to underserved populations.
There are also categorical spending funds that specifically funnel money to small districts, such as dollars for transportation costs in rural areas. But in practice, small districts often don't have time to complete the forms to compete for the $351 million (1.7% of total state funding) in state competitive grants available this year, and a portion of the $1.1 billion in formula grants for which payouts are determined by a formula established by the Legislature.
"There's growing agreement that the budget is too categorical (grant) heavy," said Vanessa Keesler, former deputy superintendent at the Michigan Department of Education and now president of education advocacy group Launch Michigan.
Small Districts Likely Get Less Than Their Share
The Michigan Department of Education doesn't track how small, rural schools fare with competitive grants compared to larger districts. Still, local and state school leaders who spoke to the report were unanimous in their belief that small districts — with enrollments of less than 1,000 students — likely get less than their share.
About 87,000 students attend those schools, about 6% of all public school students but almost a third of Michigan's traditional public districts (170 of 539). In those schools, administrators often do multiple jobs, like Katy Xenakis-Makowski, superintendent of Johannesburg-Lewistown Community Schools in Missaukee County.
A System That Hurts Students
The Michigan Public report highlights how rural students, who have fewer opportunities than many of their peers in more populated school settings, are further disadvantaged by the state's reliance on competitive grants. School leaders say that means students in districts like Plainview are less likely to have access to classes from welding and computer programming to advanced placement courses for college credit.
Competing Against Big Districts
The problem isn't just about time — it's about resources. Many bigger districts across the state have an administrator or a team of staffers who craft grant applications. But in the many small districts in rural areas, school leaders squeeze such work between lunch supervision, substitute teaching and, in at least one district, running a front loader to remove snow from the parking lot.
The Unstable Nature of Grants
Beyond the competitive nature of grants, the system creates instability for schools. Michigan Public notes that numerous studies show investing in preK-12 schools results in better student outcomes — everything from test scores and graduation rates to future educational attainment and wages.
Despite what some may say, that's not "throwing more money" at schools — it's investing in the future. That's especially true when extra funding is directed to under-resourced districts and used to reduce class sizes, provide additional support to the growing population of at-risk students, and ensure educator quality through higher compensation.
The Need for Reform
Proponents argue these grants help level the playing field and increase accountability for school districts that apply for and receive grants. However, this funding is extremely unstable and can swing back and forth every year, depending on the political climate. That makes it nearly impossible for schools to plan for even the near-term future.
For instance, a million-dollar categorical grant awarded to a school district to hire more school social workers and paraprofessionals can be eliminated the very next year. Not only is this a logistical nightmare for school districts, but it also causes upheaval for students who had access to support one year but not the next.
That's not fair to our neighborhood schools, and it's certainly not fair to our kids. As many other states are proving, student success is built on providing schools with a clear and predictable long-term funding system.
What the Future Holds
Funding must also be flexible, since every local school district has different characteristics and needs. Instead of the current funding system, state leaders should gradually implement a research-based weighted formula that assigns a base per-pupil amount to each student, with additional per-pupil funding for students who need more support.
By providing a more robust and predictable state funding stream for local school districts, educators can be better equipped to provide students with much-needed stability and meet their individual needs.
After all, every student deserves an opportunity to succeed in school and life.
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