To substitute an across-the-board cut of approximately $69 per pupil in all school districts for the “pro-rated” cuts contained in Gov. Granholm’s budget-cutting executive order of January, 2003. The pro-rated cut affects lower-funded rural districts more than higher-funded urban districts, due to the higher proportion in the former of "discretionary nonmandated" grants, compared to Constitutionally-mandated foundation grants. The lower-funded schools get more of the discretionary money in an effort to narrow spending disparities, so they take a relatively bigger “hit” when this funding is reduced, as under the pro-rated cuts. The executive order cuts were imposed to close an expected $127 million deficit in the fiscal year 2002-2003 state school aid fund, which is the source of school operating funds. State law requires the governor to execute the pro-rated cuts unless the legislature adopts a different formula. The pro-rated cuts for each school district can be viewed at: ESTIMATED FY 2003 Proration And Other Options to Reduce Expenditures, from the non-partisan House Fiscal Agency. Additional background information is available at Michigan's Budget Challenge and Information on Cuts to School Districts from the Mackinac Center.   Official Text and Analysis.

With the recommendation that the substitute (H-5) be adopted and that the bill then pass.

To replace the previous version of the bill with one which revises the distribution of the so that the cuts to school districts would be slightly less than those to intermediate school disticts compared to the introduced-version.

To substitute across-the-board per pupil cuts for the “pro-rated” cuts required by current law when tax revenue received by the School Aid Fund is not sufficient to cover previously appropriated state aid to school districts. Under Proposal A, the governor is required to make pro-rated cuts unless the legislature adopts a different formula. Pro-rated cut affect certain lower-funded districts more than higher-funded ones. These districts have received greater state aid increases since the passage of Proposal A, which was intended to equalize per-pupil spending. As a result of other factors, this means they also receive greater cuts under the pro-ration formula.