Interview with Dr. Ryan Olson from the Mackinac Center for Public Policy
Announcer: Welcome to Inside Michigan Education, a weekly show featuring interviews with community leaders, school administrators, school business officials, and individuals who are passionate about the future of Michigan Education. Now, here is your host for Inside Michigan Education, Rob Huisingh.
Rob Huisingh: Welcome to Inside Michigan Education. This week we are joined in the Foxbright Podcast Studio by Dr. Ryan Olson. Ryan Olson is the Director of The Education Policy with Mackinac Center for Public Policy. He is the co-author of a book entitled 'Michigan School Money Primer for policy makers, school officials, media and residents'. Welcome Ryan, it is great to have you on the show.
Dr. Ryan Olson: Thanks Rob, it is great to be here.
Rob Huisingh: I was wondering if you just take a few minutes to tell our listeners about the Mackinac Center for Public Policy and what is its function?
Dr. Ryan Olson: The Mackinac Center for Public Policy is a non-profit, nonpartisan research and educational institute. We are headquartered in Midland, Michigan; it is over in the other side of the state. We work on public policies, solutions to public policy problems.
Now, there are a lot of people who are looking at political solutions to problems, looking at solutions by Government for public policy problems that we face. We really are looking at and testing market based solutions to public policy problems.
So, that is really what we bring to the table, we are celebrating our 20th anniversary this year. So, we have been around for a long time now and really are doing hard work in the areas of labor policy, education policy, science, environment and technology policy, private property and fiscal policy, looking at the state budget, taxes and those kinds of things. So, there is a lot of work there to be done.
Rob Huisingh: I can imagine, Ryan, take a few minutes and tell us about yourself. I understand you received your doctorate while traveling overseas or while living overseas.
Dr. Ryan Olson: Right, yeah, I received my doctorate last year from Oxford University over in the United Kingdom and my wife and I lived there for a few years. While I was finishing that, my doctorate is in classical languages and literature. I got very interested in education policy while I was teaching.
I actually came back to Michigan to finish up from here and was teaching in a private college here at Michigan and was really shocked by the low level of skills of students coming out of high school. My head students in a first year English Composition Course who did not know parts of speech, could not write a complete sentence, did not know how to use punctuation, could't spell and it really was a wakeup call to me.
I had been planning a career in higher education and it really made me take a step back and think about what are the problems that we are facing in education today and what can we do to address them. As I surveyed the scene, I saw that we have tried a lot of different things. We have tried to increase resources for education.
We have tried to improve regulations and changed the rules by which we operate schools in Michigan and as a country. What we really have left largely untried are incentives based solutions. Solutions that give parents choices about where they send their kids to school and so the Mackinac Center's research approach and questions really intrigued me and that is why I got into education policy.
Rob Huisingh: Excellent, excellent, now as part of that process, you publish a quarterly report which is also published online at www.educationreport.org and it is called Michigan Education Report. Tell us about that.
Dr. Ryan Olson: Michigan Education Report is a quarterly newspaper that we send to every school board member, administrator and teacher in the state. We also send it to interested residents in Michigan, people who are concerned about the issue of education. We focus on stories that perhaps other members of the media are not talking so much about, we bring a unique statewide perspective. So, we can look at trends that are happening statewide and interview of broad range of school districts and people involved in education.
That is something really different from any other media source in the state. We also offer a diverse viewpoints feature on the back page of every issue, where we let two sides square off on a particular issue. So, for example, the effectiveness of teacher certification and one issue we had one teacher squaring off against another about whether teacher certification is a good thing or not.
So, these are the kinds of things that we can do with Michigan Education Report and there is a web component as you said www.educationreport.org and on that site, we also offer a forum for teachers and others who are interested in education to talk about the issues that we are raising in education.
Rob Huisingh: Excellent, you are the co-author of a book which is titled 'Michigan School Money Primer for policy makers, school officials, media and residents'. I found this book to be very interesting. Would you tell us a little bit about the book and how can people get it?
Dr. Ryan Olson: Sure, when I started working on education policy in Michigan, I very quickly realized that school finance, how are schools funded, How they spend their money, How the state appropriates money; That these were all very, very important issues, important to Michigan residents as tax payers, important to public school officials, school boards, teachers and all kinds of people in the state.
As we surveyed the scene for an introduction, we saw information about parts of this system, but no resource that described the whole system in the kind of detail that we wanted to see. So, what we did is we surveyed, we went through, poured over Michigan statutes looking at The Revised School Code, The State-School Aid Act, we looked at court decisions, we obtained documents from local school districts, intermediate school districts, the state department of education, the US department of education, poured over these documents.
So that, we could really understand how the system works in basically three stages. First taxation, where does the money for educating kids in Michigan come from? What are various taxes? Secondly appropriation how does the state hand out money, essentially, to schools and other agencies to educate children? Then finally, how do schools budget money? What do they do with the money once they receive it?
In the area of taxation, I found that there are more than thirty taxes, that fund education in Michigan. There are our local property taxes that fund the schools for operating purposes, the general property tax. In some school districts, there is an additional property tax on those properties and additional properties. There are millages for capital expenditures, sinking funds, debt retirement. There are intermediate school district taxes which we do not hear so much about but we describe them in the book. Those are for operating purposes...
Rob Huisingh: Special education?
Dr. Ryan Olson: Tax for special education, for vocational education, capital costs again. So, that is another area of property tax that we looked at. Then we have state taxes and there are a number of state taxes that go to education in the State of Michigan. We hear a lot about the sales tax for example, 60% of the original 4% of the sales tax revenues go to education. One hundred percent of the additional 2 percentage points are added to the sales tax in '94 go to education.
One-third of the Use Tax Revenue goes to education, about 26% of the Income Tax Revenue, there is the Real Estate Transfer Tax, 100% of that tax goes to the State School Aid Fund. The Cigarette Tax, proceeds from the lottery which we also hear quite a bit about in news stories, go for education as well.
So, there are a number of taxes and then some taxes on smaller groups of properties like mobile home trailer coaches; $2 or $3 tax on mobile home trailer coaches go to The State School Aid Fund. So, there are a lot of taxes feeding into the system and then finally we looked at the federal portion of money for education which has being increasing interestingly over the last several years.
So, we looked at the taxes that contribute to that, the Corporate Income Tax, the Federal Income Tax, Personal Income Tax and a number of other taxes and tariffs that go to education. So, we really try to pull all this together and track more than $19 billion in the system that are spent every year.
So, that is the tax portion, then we looked at how does the state appropriate the money? Once the money, the state's tax has come in, which include a statewide property tax, I forgot to mention The State Education Tax. Once those funds are in, how does the state hand them out? So, we describe how pupils are counted in the system. We describe the Foundation Allowance, the Foundation Grant that we hear a lot about in the news that districts receive. There is a local portion and there is a state portion, so we tease all of that out and look at that.
Then we look at various categorical grants for middle school math for example or grants for bus safety and those kinds of things. So we looked at all those and then school budgeting. What is the process that districts use to budget money? A lot of districts, we learned start more than a year in advance looking at revenue projections, figuring out exactly how much payroll will increase, how much benefits will increase, how much the pension contribution will increase.
These are all variables that school districts have to account for and really it gave us a great deal of new respect for what school officials faced having to deal with so many different variables and nail down a budget before the state does essentially. So, that is in a nutshell I guess, what we have found.
Rob Huisingh: Well, I was amazed at the breadth of coverage; you really went into great detail. I found the book to be exceptionally well thought out and free from opinions.
Dr. Ryan Olson: Yeah, we really worked hard on that. We did not want analysis, we did want commentary, we wanted people just to be able to understand how the system works. There is sometimes talk about reforming school finance in the state and before you start tweaking a policy, it is really important to understand the status quo. How does it work on the ground?
Rob Huisingh: A snapshot.
Dr. Ryan Olson: Exactly, and so that is why we included lots of references you will notice on the bottom of the page and in the back, footnotes and endnotes more than 400 footnotes and endnotes combined referring directly to Michigan Law.
So that, if somebody thinks, I do not think they got that quite right or maybe there is another way to interpret that or that is not quite how it works, they could actually look the statute up themselves. We put information on the front of the book, so they could do that. So, we really tried to make it accessible so that citizens, school employees and others could understand it.
Rob Huisingh: Well, as I said I think it is an excellent resource and how can people get a hold of the book?
Dr. Ryan Olson: They could come to our website www.mackinac.org and they will find the book link there. We also have special site just for the book called www.michiganschoolmoney.org. You can order a copy of the book there, you can also get it online as a PDF or in HTML. We also have an online database that people may find very interesting and that reporters and school officials and residents have found very important since we released the book in June or in late May.
They can also find that at michiganschoolmoney, it is a database, an interactive database of school revenues and expenditures for every district in the state, every local district, every intermediate school district, every charter school and the state as a whole. So that, you can compare one district in two different years to see whether revenues are increasing or decreasing, whether local property tax revenues are increasing or decreasing, whether state portion is increasing or decreasing.
Then look at every category of expenditures from benefits to salary, to what is spent on school lunches, those kinds of things. We really wanted to put it out there, so that people had all the information they needed to understand exactly how the system works and where the money is going. There are a lot of questions in the media about where school funding is going. Is it going up, is it going down? Schools are facing budget crunches because of health insurance and various other issues.
There is lot of confusion about what the revenues are doing, is the state portion going up or down? So you can actually look district by district to see what is going on. On the whole, school revenues are increasing since proposal A in 1994. Revenues for operating purposes have increased by about 17%, even after adjusting for inflation.
So, overall revenues are going up, the real question I think that the database drives home, just presenting the data is, what are school doing with the increases and how can schools manage their money more effectively to direct more dollars to the classroom, which is really the point of education in the first place.
Rob Huisingh: Excellent, now there are other books which I see here, 'A Collective Bargaining Primer', 'A School Privatization Primer'; it looks like you guys have been very busy.
Dr. Ryan Olson: Yeah, it was a very busy last year, we put these all out last year. We really are just trying to put tools into resident's hands, into school board member's hands. So, they can have a handle on how these systems work, how these policies work and how solutions for budget problems work.
The privatization primer for example, which is also available at www.mackinac.org, walks school board members through exactly how contracting works, for support services in school districts. It an issue that draws a lot of media attention, it is hotly debated in school board meetings, public meetings when union members show up and some times the public shows up and the school board has to face all these issues.
This book really addresses the nuts and bolts of how does it work, how does contracting work, how do you monitor a contract, what have the trends been nationally and what are the trends been in our state for competitive contracting. What we find is that districts, about 89% of all districts that contract for one of three major non instructional services. Food transportation and janitorial services save money doing it and are satisfied by the services they receive.
This is also available at www.mackinac.org. I have estimated that if school districts, the ones that have not contracted for one of these three major non instructional services did contract, put the services out for a bid and received the market based price for those services. We could save as much as half a billion dollars a year. That is all money that could then go directly to classrooms, directly to instructing students. So it is a solution that people really need to consider carefully.
Rob Huisingh: Now, I was just hearing a statistic recently and I do not remember the exact number but it had to do with the fact that as a state we have a net declining enrollment in our schools. Many schools are suffering from this net declining enrollment. It would seem that this would be a fairly large looming issue on the horizon.
Dr. Ryan Olson: Yeah, it is one that the state demographer has addressed and that comes up in revenue estimating conferences and as economists try to figure out exactly what tax revenues are going to be for the coming year, so that the state legislature can plan for the budget and school boards can plan their budgets and so on.
Enrollment decline is an issue that has been talked about, I think what is important to realize with enrollment decline is that it is not kind of a faceless trend that decline in enrollment represents people making real decisions. Whether it is to leave state because the tax environment and the regulatory environment are not favorable for their business or better opportunities elsewhere or it may mean that people are choosing to attend one school district instead of another.
So, the school district that is being left, the one that some students were assigned to that are now leaving. They are experiencing an enrollment decline or students maybe choosing charter schools, parents maybe choosing charter schools. One of the opportunities that this raises, that this provides really for school districts is it gives them a chance to look at what they are doing, to look at their educational programs, where their budget priorities are and to make decisions based on what parents are telling them.
So, if parents are taking their children to a charter school for example, a school district can step back and can say "What is that charter schools offering, that we are not offering as district and could we offer that to attract some of the students assigned to our district back to our district?" So, enrollment decline in one sense can be negative, but in other sense it is a positive because it really gives schools an opportunity to assess what they are doing and assess whether they are really providing what parents are looking for.
Rob Huisingh: When I think of the traditional school, when I think about a school, so much of what I think about is a very large physical facility. Which is a building and there is all sorts of upkeep that needs to be taking place in that building and then I think about net declining enrollment and while per student the amount can actually be going up with increase in funding, the actual amount of money the schools are receiving quite often times is decreasing.
So, many of their costs appear at least for me that they would be fixed. Is there some measure of understanding of that within the funding process?
Dr. Ryan Olson: Yeah, I think what a lot of districts around the state are finding is that all the costs are not fixed. The building cost, the capital cost which are to a certain extent fixed, though it is hard to understand exactly to what extent. There has been a lot of research done on that. But a lot of district around the state are finding that they can adjust in areas that are within their control.
For example, employee benefits, a lot of districts in the state of Michigan, a majority of districts purchase health insurance through a third party administrator called the Michigan Education Special Services Association, MESSA. Again this is another issue...
That is in the news. MESSA is essentially a middleman in the insurance industry established by the MEA, the Michigan Education Association in 1960 and what a lot of districts are facing is insurance premium that is sometimes more than $16000 per employee per year.
If you compare that to the national average premium which is around $12000, you see a huge gap in what a market price would be and what many school districts are paying and nationally according to the Kaiser Family Foundation, a quarter of that about $12,000 premium is paid by the employee. In many school districts employees contribute nothing toward the premium.
So this is an issue that many districts are facing and what districts are finding is that they can save significant money if they put the insurance, the benefits out for bid and get a truer market price. So for example, The Pinckney School District; 97% of the teachers in Pinckney voted to get rid of MESSA Administered Insurance. The district has been saving $800,000 a year which translates to about a $164 per pupil per year.
Now what superintendent would say, "No, I do not want a $164 in case per pupil," that is real savings. One of the things that is often claimed is that the benefits just are not as good, but what a lot of school districts are trying to do is offer comparable benefits responsible high quality benefits, but at a lower cost.
That Pinckney example I used; when teachers had a chance to look at MESSA Administered Insurance again or going directly with Blue Cross Blue Shield, they decided to stay with the insurance they were with i.e. not the MESSA Administered Insurance because they were satisfied with the quality of the benefits they were receiving. So they got great benefits and the school districts saves significant money that is a win-win situation.
Rob Huisingh: It is a win-win; that is exactly right.
Dr. Ryan Olson: There is a lot more money that can be saved that way around the state. So, this is an area that many districts need to look at.
Rob Huisingh: Ryan, as you look out over the next couple of years, what is the largest issue that our Michigan Schools are facing and what can we as Michigan residents do about it?
Dr. Ryan Olson: The largest issue that schools are facing is stagnant or declining outcomes, results. We can see this in graduation rates, which in Michigan we graduate about 75-77% of students. So, quarter of all students don't graduate from high school. That is the most basic requirement for college and everybody is talking about how important college is. Well, many students, they need a diploma in order to get into college. So, they have not met the most basic requirement, a quarter of all students.
That is a real serious issue. If we compare Michigan to other states, so how is Michigan doing nationally? Our student achievement, our measure of teaching and learning are stagnant or decreasing. The National Assessment for Educational Progress, a national test released a couple of months ago, found that Michigan's ranking in eighth grade math and science is falling.
So, other states are getting better at a faster rate and in fourth grade reading and math, I should have said reading and math, we are either stagnant or falling. I think there is one subject in fourth grade where we increase by a couple of scale points, but it is a very small increase.
So, these achievement trends, the graduation rates are something that we really need to address. In Michigan we have tried a couple of different approaches; we have tried to increase resources, we have said "Let us spend more money on schools," with a hope that we will get better results and decade after decade that has been shown not to work.
Even though we have more than doubled what we spend on education since 1970, even after adjusting for inflation, more than doubled what we spend. Our achievement rates are flat, we are not getting better student results for all the money we are spending, our graduation rates are flat.
So, these are issues that we have to address. We have tried to change teacher certification, we have increased graduation requirements, we tweaked rules and that has not seemed to produce a whole lot of result. The area that we really need to address in Michigan is incentives-based reforms. These are reforms that give parents more choices about where their children go to school. What this does, is it creates competition among school districts.
So, that if students are going to a charter school as I said earlier, a conventional school district can look and say why are parents taking their kids over there? This is exactly what happened in Detroit. The outgoing CEO of Detroit Public Schools, Dr. Kenneth Burnley said that One reason Detroit improved a little bit in the area of reading instruction and in school safety is because the district consciously looked at what charter schools in the metro Detroit area were offering and they decided to compete.
That is what can happen and we see it in many states around the country, we see in many nations around the word that when parents have more choices, parental satisfaction increases, student achievement increases and overall the system just gets better.
That is really the challenge we need to address in Michigan and there are number of ways we can do that. We can take the arbitrary cap of the number of charter school that are allowed to be established by public universities in the state. Right now, it is limited to 150 and people want to start more schools and there is demand for more schools. But there just is not the opportunity; there is not a supply for schools there.
So, that would be one area. Another would be to provide broader choices to include independent schools, private schools into the mix of choices that parents have and really a best way to do this would be to offer an education tax credit. Which would basically be tax break for parents, relatives, businesses that take personal responsibility for children's education and that is another opportunity that we could look at in Michigan.
Rob Huisingh: Dr. Ryan Olson, I want to thank you for taking the time to be with us today. Thank you for sharing your knowledge and for the work you are doing with the Mackinac Public Policy Institute and I just want to thank you for being here.
Dr. Ryan Olson: Sure. Thank you very much for having me. It is good to be here.
Rob Huisingh: If you would like to contact Dr. Olson, he can be reached by telephone at (989) 631-0900, again that telephone number is (989) 631-0900. If you would like to learn more about Mackinac Center for Public Policy, you can visit them online at www.mackinac.org, again that URL is www.mackinac.org. Until next week this is Rob Huisingh with Inside Michigan Education.
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