As state shutdown looms, St. Joseph County districts brace for uncertain school aid

Michigan lawmakers have yet to finalize the 2025–26 School Aid Fund, leaving districts and Intermediate School Districts (ISDs) across the state operating on projections more than a quarter into their fiscal year. A standoff between the Democrat-led Senate, Republican-led House, and Gov. Gretchen Whitmer has raised the risk of a government shutdown on October 1 if no budget deal is reached.

School districts must adopt budgets by July 1, often relying on assumptions about the per-pupil foundation allowance and categorical grants. Normally, those budgets are amended after the state finalizes its numbers and the first state aid payment arrives October 20. With no resolution in Lansing, administrators warn that delays could disrupt payroll, contracts, and services.

“It’s complex, and without answers, it’s hard,” said St. Joseph County ISD Superintendent Teresa Belote. “We’re a quarter of the way through our fiscal year and hoping our conservative projections hold.”

One concern is the Great Start Readiness Program (GSRP), Michigan’s state-funded preschool for four-year-olds. The ISD typically sends contracts to its partner providers by now, Belote said, but has been told to wait for state guidance tied to the budget. “We can’t send what’s required to run the program until we get answers,” she said.

The uncertainty extends to Career and Technical Education (CTE) and other categorical programs. The House plan would consolidate many of them — including universal school meals, English learner support, mental health, early literacy, and CTE — into a single funding line, while the Senate and governor’s proposals differ. Districts say they can’t yet plan staffing or contracts without knowing which version will pass.

To prepare, Belote said districts are following guidance from the Michigan School Business Officials, reviewing fund balances to determine how long they can cover payroll if October or November state aid is delayed, and weighing whether borrowing would be possible without a budget in place.

Beyond state dollars, Belote warned that some programs are exposed to overlapping risks from federal cuts. Early childhood services that combine federal and state funds could “hit double,” she said, forcing districts to consider scaling back programs that families rely on.

Her biggest concern, however, is for working families if free school meals lapse. “When families prepare for their year and suddenly face a new cost, it strains their bottom line,” Belote said. “I worry about my families, I worry about the fact that there’s discussions about whether there’ll be free lunches for kids this year.”

The broader budget fight includes debate over diverting School Aid Fund dollars to higher education. The Michigan Department of Education says $461.7 million was shifted this year, and the House plan would raise that diversion to more than $1.9 billion, while negotiations over $3 billion in road funding also remain unresolved.

Legislative leaders have voiced optimism that a deal can still be reached before October 1, but with the deadline approaching, Belote said districts can only wait and prepare for backfilling later in the year. “We’re not panicking — we have great students and communities,” she said. “But the longer this goes, the bigger the backfill challenge becomes.”

Maxwell Knauer is a staff writer for Watershed Voice.