The Michigan economy has been in a continual decline since the economic recession began in 2001. First and foremost, it must be recognized as reality that Michigan's state government confronts significant short-term and long-term financial challenges. Michigan has an immediate budget crisis—an estimated $1.75 billion of services and programs are unsupported by revenue for the 2007-08 fiscal year. The School Aid Fund is the largest single program in the state budget. Therefore, when the total state budget is struggling, funding for public schools will be negatively impacted. When school funding is not sufficient to outpace the increased costs of operating a school district, the general assumption is that academic achievement will decline. This research will be centered on testing this assumption to determine if there is a significant correlation between revenue, spending, district enrollment size, and test results on the annual Michigan Educational Assessment Program (MEAP) test during the 2001 to 2006 time period. Although tax increases most likely will be required to provide necessary state services, the state risks creating an economic instability that will drive Michigan out of competitiveness for jobs and greatly dampen economic investment if they rely solely on tax increases to balance future budgets. This research will examine alternatives other than raising additional revenue through increasing income tax rates and implementing new tax programs. Based on the results of the correlation analysis performed on the variables, the research will focus on recommendations to modify the current spending policies of public school districts to reallocate financial resources to the areas that have the most significant positive effect on MEAP scores. State legislative and school district leaders should work collaboratively to address the current and future financial crisis facing Michigan while still maintaining or improving MEAP test results. The method in which they respond to the current crisis will—in large measure—define the quality of education in the State of Michigan for both this and future generations.