This study analyzes financial data from fiscal 2004 through fiscal 2010 from the National Public Education Financial Survey, which is conducted annually by the federal government’s National Center for Education Statistics. The NCES receives the raw NPEFS data on Michigan school districts from the Michigan Department of Education. Neither the MDE nor the NCES makes district-level NPEFS data available online, but the data have been provided to Mackinac Center analysts by the MDE, and the figures are now part of the Mackinac Center’s publicly available Web database (see http://www.mackinac.org/depts/epi/fiscal.aspx).
Data from the NPEFS are used by the U.S. Department of Education to allocate federal funds to local school districts for a number of programs, such as those created under the federal Elementary and Secondary Education Act of 1965.[*] The NPEFS is an excellent resource for a comparative analysis, since it “provides the official revenue and expenditure statistics for public elementary and secondary education in the United States.”
To categorize school districts by location, the author used locale codes developed by the U.S. Census Bureau and assigned by the NCES to determine a district’s geographic status. There are 12 categories: city-large, city-midsize, city-small, suburb-large, suburb-midsize, suburb-small, town-fringe, town-distant, town-remote, rural-fringe, rural-distant and rural-remote. This study analyzes data from these 12 categories and data from four combined categories: city, suburb, town and rural.[†] These four categories will be referred to as the four major “locale groups,” while the constituent categories will be referred to as the 12 “locale subgroups.”
These locale designations are dynamic, not static. In other words, a particular district’s designation can shift from year to year, and each locale — city, rural, etc. — will typically include a different set of districts each year. The data in this study reflect this fact with the exception of one year. The NCES locale codes for 2010 have not been released as of this writing, even though the 2010 fiscal data are available. In order to include this financial data, this study assigns a district its 2009 locale code in 2010. (See Appendix C for a list of districts’ locale codes.)
The current methodology for assigning locales was developed by the U.S. Census Bureau in 2005. The NCES adapted this approach for schools and school districts and applied it retroactively to school data, beginning with the 2003-2004 school year. Thus, the data provided throughout this study begin with that earliest year and conclude with the 2009-2010 school year, the most recent year for which such data are available.[‡]
In general, this study adopts the convention of referring to a school year, which spans parts of two calendar years, by the latter of the two years. This convention corresponds to the standard fiscal year typically used by schools: For example, the 2009-2010 school year is usually referred to in school finance as fiscal 2010.
In the discussions below, district locale groups’ revenues and expenditures are frequently compared using per-pupil figures. These per-pupil calculations use NCES average daily attendance figures to represent pupil counts. These NCES daily attendance data for Michigan are supplied by state government, and by law, Michigan defines its average daily attendance as 92 percent of total pupil membership, which is based on the state’s two annual count days.[§] Also note that a locale group’s per-pupil revenues and expenditures are calculated by dividing the locale group’s total revenues and expenditures by its total average daily attendance; the figures do not represent an average of the individual districts’ per-pupil revenues and expenditures.
The dollar figures in this study are nominal; they are not adjusted for inflation. The purpose of this study is not to compare school district revenues and expenditures with price increases over time, but rather to compare different locale groups to each other using financial data. As noted earlier, this study does not attempt to determine what expenditures or revenues are “justified” or “appropriate.”[¶]
One final note: The districts discussed in this study are conventional local school districts; both intermediate school districts and public charter schools are omitted. Intermediate school districts generally provide support services to local districts, particularly for special and vocational education services. The ISDs’ revenues, spending and activities are therefore significantly different from those of conventional local school districts.
Charter schools, which are considered individual school districts under Michigan law,[**] are omitted for a somewhat similar reason. Charter schools’ revenue and expenditures differ substantially from those of conventional school districts, and these differences could confuse the analysis. For instance, Michigan’s charter schools, unlike Michigan’s conventional school districts, do not have the taxing authority to raise revenue through local millage elections. Compared to conventional districts, charter schools must therefore commit a larger portion of the revenue they receive from state government to spending on facilities and other capital assets.
Using the NPEFS data to compare charter schools is also challenging, since charter schools may report financial data differently. Some charter schools hire private “educational management organizations” to supervise their day-to-day activities. Since many charter schools report expenditures related to EMOs in a lump-sum “purchased services” category, the charter schools’ reporting of expenditures in NCES categories is less uniform, and comparing data for specific types of expenditures among charter schools is difficult.
[*] The federal No Child Left Behind Act of 2001 reauthorized the Elementary and Secondary Education Act of 1965.
[‡] The NCES did assign locale codes to school districts prior to 2004, but it used the Census Bureau’s earlier methodology for doing so. Hence, data for previous years exists, but the pre- and post-2004 locale assignments are not consistent with each other.
[§] MCL 388.1603(1). For more information on Michigan’s “count days,” see Ryan S. Olson and Michael D. LaFaive, A Michigan School Money Primer: For Policymakers, School Officials, Media and Residents (Midland, MI: Mackinac Center for Public Policy, 2007), 53-55. Because the Michigan Department of Education uses district membership figures when it calculates per-pupil spending and revenues, the per-pupil figures the department publishes will be lower than those published by NCES and provided in this study.
[¶] Inflation adjustments that accommodate differences in locales are not necessarily straightforward. Transportation and food prices, to name two examples, can vary substantially depending on location and population density.
[**] Known legally as “public school academies,” charter schools are authorized by public universities, local school districts, intermediate school districts or community colleges to receive state funding to provide educational services, and are held accountable to performance-based “charters.” These schools must comply with state regulations, may not charge tuition or deny a student admission if space is available. MCL § 380.501 et seq.
 Frank Johnson, “Comparison of the NPEFS and the F-33 Surveys: Should NCES Replace the NPEFS with State-Aggregated F-33 Data,”(National Center for Education Statistics, 2008), 1, http://www.reginfo.gov/ public/do/DownloadDocument?documentID=136944&version=0 (accessed Feb. 21, 2011).
 Tai Phan and Mark Glander, “Documentation to the NCES Common Core of Data Local Education Agency Locale Code File: School Year 2005-06”(National Center for Education Statistics, 2007), http://nces.ed.gov/ ccd/pdf/al051agen.pdf (accessed Feb. 22, 2011).
 Ibid., 1.
 “Common Core of Data (CCD): Local Education Agency (School District) Locale Code Files,” (National Center for Education Statistics, 2010), Common Core of Data, http://nces.ed.gov/ccd/CCDLocaleCodeDistrict.asp (accessed May 17, 2011).