Wow! Governor Whitmer’s first budget is a bold new playbook for improving the quality of life and standard of living of Michiganders. At its core it rejects the notion that the lever that matters most to improving the well being of Michiganders is low taxes. That low taxes––combined with minimal regulation––will attract employers who will provide Michigan workers with the pay and benefits needed to pay the bills, save for retirement and the kids education.

That is the basic playbook Michigan has deployed at least since the turn of the century. It hasn’t worked and it won’t in the future. Governor Whitmer, in essence, has proposed a fundamental rewrite of the state’s playbook. One that is public investment based. That the levers that matter most are education and creating places where people want to live and work starting with quality roads.

As we explored in our last post––and as did Chad Livengood in Crain’s Detroit Business––Michigan in 2019 has become structurally a low-prosperity state. Falling from 18th in per capita income in 2000 to 30th in the 2017. Now 10 percent below the national average. This is the first time ever Michigan has been a low-prosperity state with a strong domestic auto industry.

You have already started to hear howls from the supporters of the failed low-tax strategy that the Governor’s proposed gas and business tax increases will destroy jobs. Think again!

Minnesota has the highest overall taxes in the Great Lakes, ranking 43rd in the Tax Foundation 2019 State Business Tax Climate Index. Michigan ranks 13th. When it comes to business taxes the Tax Foundation ranks Minnesota 42nd and Michigan 11th. And yet Minnesota is 3rd nationally in the proportion of working age adults with a job. Michigan is 38th. If the same proportion of Michiganders worked as Minnesotans there would be 725,000 more Michiganders working today.

As we explored its not just employment where Minnesotans are far better off than Michiganders, it is all measure of economic well being. And Minnesotans have enjoyed a stronger recovery from the Great Recession than Michiganders.

So it is clear that higher taxes have not prevented Minnesota from having better economic outcomes. Why? Because the benefits they get from the more expansive public investments they are able to make outweigh the costs of higher taxes.

Michigan’s emphasis on low taxes rather than quality roads and quality schools has left us at or near the bottom in both. The state is now characterized by crumbling roads and deteriorating student outcomes. As Governor Snyder’s 21st Century Infrastructure and Education commissions documented neither can be fixed without substantially increased funding. Combined the two commissions recommended six billion dollars in increased annual spending.

As we wrote in our A Path to Good-paying Careers for all Michiganders: A 21st Century state policy agenda:

The places with the strongest economies are those that combine high quality education systems and high quality of place that retains and attracts mobile talent. Both education and placemaking require public investments. These types of public investments, paid for by our taxes, are the state policy playbook most likely to return Michigan to high prosperity, creating an economy with lots of good-paying jobs.

… That said raising taxes is not our goal. It is a means to making the kind of public investments we think are essential to the goal of good-paying careers for all Michiganders. Getting to the goal is what is important. We are open to any and all ideas on how achieve the goal.

The evidence is clear: high-prosperity states and regions are characterized, first and foremost, by high-quality education and communities where people want to live and work. Governor Whitmer has proposed a bold strategy for making Michigan one of those states. For those who do not support her proposed tax increases now is the time to tell us how you would pay for better education and roads. We should no longer accept policymakers claiming to be in favor of better roads and schools, but not telling us how they are going to pay for those improvements.

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Which is why the state’s recent response to a lawsuit filed on behalf of seven Detroit school-children is so disappointing.

The suit claims the state failed to provide these students with the education needed to achieve basic literacy. The state’s response was to argue that literacy was not a constitutional right, and to call upon a federal district judge to say as much.

This is so disappointing because regardless of the state’s duty under the constitution, state government should surely take on as its responsibility the provision of a school system in which every student can succeed. And right now we’re miles away from that.

In a New York Times op-ed from last month, University of Chicago law professor Geoffrey Stone argues that this case should be “open-shut,” in favor of the plaintiffs. Because while the constitution doesn’t specifically mention a right to literacy, Stone writes the Supreme Court ruled in 1982 that,

“illiteracy is an enduring disability” that will “handicap” children “each and every day” of their lives and take “an inestimable toll” on their “social, economic, intellectual and psychological well-being” for the rest of their lives.

And anyone paying attention to the state of Detroit schools realizes that many students in the worst Detroit schools are currently being denied an even minimally adequate level of education.

This is, of course, demonstrated through student test scores that show a proficiency rate near zero at some schools. But more importantly, it’s evident in the extreme lack of resources students are provided. As professor Stone writes:

As the plaintiffs demonstrate, many classes lack even minimally usable textbooks; classrooms are overcrowded and have inadequate temperature controls so the students often suffer from extreme heat and cold; classrooms are infested with vermin; the drinking water in some of these schools is often contaminated; the bathrooms are filthy and unkempt; and many of the teachers assigned to these schools are asked to teach subjects for which they lack training or experience.

As I noted in an earlier post, people often make the faulty claim that money doesn’t matter in education, preferring to focus on outputs rather than inputs. But inputs matter. And they matter especially when a certain set of inputs give students not even the slightest shot at success. In an expansive legal ruling from earlier this year, a Connecticut judge cited as the lowest bar of adequacy, classrooms that provide enough light, space, heat, and air to permit children to learn. Based on the accounts of Detroit schools that filled the news last winter, it’s not clear that certain Detroit schools would even meet this incredibly low benchmark.

The high level of disrepair and lack of resources should also not be surprising based on state policy. The already low levels of per-pupil funding that cover schools’ operational expenditures are now down 15% since 2002. And in addition, Michigan is one of only a handful of states that doesn’t help districts pay for capital costs, leaving them to raise money for school buildings locally, all but assuring beautiful facilities in wealthy areas, and decrepit buildings in poor ones.

In 1988, Jonathan Kozol wrote the seminal book Savage Inequalities, documenting first-hand the gulf between the educational have and have-nots. “The urban schools he visited were overcrowded and understaffed, and lacked the basic elements of learning – including books and, all too often, classrooms for students.” It’s sad to say that almost thirty years after Kozol brought to national attention the shocking state of many urban schools, we continue to deal with the same issues.

The current focus on what’s “minimally adequate” is criminal because we have to focus on it at all. Our discussions about school-quality need to be about what curriculum, what pedagogy, and what experiences will give our students a shot at being successful in the 21^st century economy. That stuff is the hard part. But providing all Michigan children with adequate facilities, a well-trained teacher, and reasonable class sizes? That’s the easy part. And we must do it.

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But I also mentioned that there’s a significant research base demonstrating the connection between increased school funding and better student outcomes. This stands in stark contrast to the dominant narrative that school funding is disconnected from student outcomes, so I wanted to spend some time exploring some new school funding research, and how the “money doesn’t matter” myth got started in the first place.

First, the myth. The basis for the myth is that while education funding in the aggregate has increased substantially since the early 70s, reading scores on the NAEP exam, the nation’s report card, have been stagnant. These type of general observations are made by politicians on both sides of the aisle, in seemingly every state in the country.

However, these observations have three major faults. First, they fail to control for factors that have naturally caused the cost of providing education to rise, like increasing human capital costs as wages for college-educated workers have increased across the economy.

In addition, these observations focus only on test scores as the outcome-of-interest. However, it’s entirely possible that school funding increases have significant positive impacts on life outcomes without impacting test scores. It’s also worth noting that there’s substantial research demonstrating that high standardized test scores may not be as correlated with later life outcomes as we like to think.

Finally, these observations don’t account for how school-funding increases impact different populations of students differently. One would think that a school-funding increase would have a larger impact on poor student in an under-resourced school than a student who’s already receiving significant resources both at school and at home.

Which is why the results from a recent school funding study from C. Kirabo Jackson, Rucker Johnson, and Claudia Persico are so welcome. Their study, which followed a nationally representative set of students born between 1955 and 1985, through to 2011, addressed the above faults, and that school funding does, indeed, matter.

Rather than observing general increases in school funding, the researchers analyzed “shocks” in school funding – large increases that came about either through legislative action or court orders – and analyzed what effect these shocks had against students that didn’t receive the same funding. They also analyzed the effect school funding had on low-income versus wealthy children, and analyzed long-term outcomes, rather than short-term test scores.

What they found was pretty astounding. Based on their data, if a poor child attends a school that receives a 20% increase in school funding, that is maintained throughout a child’s 12 years of public education, she is likely to complete nearly one additional year of education, earn 25% more as an adult, and is 20 percentage-points less likely to be poor as an adult, compared to students who didn’t receive the same level of funding in either duration or intensity.

As educational interventions go, these are huge effects. The authors write that the size of the effects are large enough to eliminate two-thirds of the gap in these measures of life outcomes between students raised in poor and non-poor families. In other words, more school funding now has a major impact on future economic mobility.

Also interesting is that increased funding ended up having no impact on children from non-poor families, perhaps because their schools were already well-resourced, and/or the positive effects of their home lives were more important than any school effects.

These findings are not only statistically robust, but also have the benefit of making intuitive sense. It makes sense that more resources directed to low-income children, who are generally lacking resources both at school and at home, would produce significant positive outcomes.

It also makes sense that more resources may not cause dramatic improvements in test scores, but could greatly improve life outcomes. If the money is spent to reduce class sizes or hire a school social worker or college counselor, the benefit to students may not show up in test scores, but instead in stronger relationships, a better connection to their school, and more ownership over their education.

Either way, this study delivers a welcome counter to the narrative that money in education doesn’t matter. If we look at the outcomes that really matter and to which students the money goes, we find that money not only matters, but can change students’ lives.

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In a certain sense, they’re right. School funding in the aggregate certainly has been increasing, more than doubling since the early 70s, and scores on the NAEP exam, the nation’s report card, have indeed been stagnant. And of course, they’re also right that how you spend the money matters a great deal.

However, they’re mostly very wrong. First, there’s voluminous research demonstrating the importance of increased funding in schools, particularly for low-income students, particularly if used on the right school inputs, and particularly if measuring long-term outcomes instead of test score gains. I’ll devote a future post to this research.

But the most compelling argument for why school funding matters relates to what parents of means do for their own children.

Stephen Henderson, editorial page editor for the Detroit Free Press, made this same argument in a column earlier this year. Parents of means don’t look at the research to figure out if school funding matters for their kids. As Henderson writes, they simply identify what their kids need, and then figure out how to pay for it, be it moving to a district with quality schools or paying for private schools.

This, of course, should be our philosophy when it comes to the funding of public education for all Michigan students: we should identify what kids need, and then figure out how to pay for it.

So it’s worth looking at how much is spent in wealthy districts and elite private schools, and what it is parents are buying.

While the majority of districts in Michigan receive little more in state and local funding than the per-pupil foundation grant of around $7,500, there are a certain number of wealthy “hold harmless” districts that are permitted to raise significantly more in local taxes for operating revenues. One of these districts is Birmingham Public Schools, receives around $12,000 annually per pupil.

What are parents in Birmingham buying? The district’s strategic plan gives us some idea. The district’s goals center on engaging students in an expansive curriculum that allows all students to discover their passions; developing empathy in their students to create ethical leaders; and giving students unlimited opportunities for learning. All of these objectives cost money: highly qualified staff, small class sizes, and a wide array of technological tools and curricular materials.

Another example is the Greenhills School in Ann Arbor, one of Michigan’s most elite private schools, where Governor Snyder sent his children. At Greenhills, tuition is over $20,000, and a look at the Greenhills website gives you some idea what $20,000 gets you: beautiful facilities, small class sizes, a broad curriculum, a comprehensive set of extra-curricular activities, and a highly qualified teaching staff of subject-matter experts. These are the needed inputs to develop the “curious, creative, and responsible citizens” the school hopes to graduate.

Yet none of these objectives, in Birmingham or at Greenhills, can be measured by a standardized test score. We wouldn’t be able to find evidence that increased school funding “worked.” But parents know these objectives are important, and know that who teaches their children, with what materials, and in what environment matter, so they spend the money.

While there is a whole lot that goes into providing students with a quality education, school funding expert Bruce Baker from Rutgers University (who has a great post on this very issue of using parental preferences to guide education funding policy), notes that the focus should really be on two factors that are present in just about every school serving wealthy students: small class sizes and well-paid teachers.

While low-income districts like Detroit do receive significant compensatory federal funding (known as Title I funding), the money is mostly used for professional development, and either can’t be used for or fails to make a dent in the two factors listed above. So while Birmingham public schools have pupil-teacher ratios of 19 to 1 and average teacher salaries of over $75,000, Detroit schools have 32 kids in a class, and an average teacher salary just over $50,000.

Again, one can argue that these things don’t matter, and that you can make schools work with huge class sizes and poorly paid teachers. But if we seriously evaluate our education policy decisions based on what we’d want for our own kids, what matters becomes apparent pretty quickly.

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