1. K-12 Education Funding What reporters need to know

2. K-12 Funding Governed by Proposal A, a constitutional amendment approved by the people in 1994.

3. Before Proposal A Schools were funded by combination of Local property taxes State funding if property tax revenue fell below a certain level Level of funding mostly depended on Local tax base Local decisions on tax rate Millages above certain level  subject to voter approval and periodic renewal

4. Before Proposal A Two main flaws in funding mechanism High property taxes -- 33% > U.S. average But! -- sales tax 32% < U.S. average Wide disparity in per-pupil spending Richest districts spent almost four times as much as poorest.

5. Funding disparity example Per-pupil spending in 1993-94 Lowest: Sigel Township, Huron County $2,762/pupil Highest: Bloomfield Hills $10,294/pupil Gap: $7,531 or 3.7:1

6. What caused disparity Funding depends on local tax base Which depends on land value, in descending order Industrial Commercial Residential Agricultural Non-taxed (state, federal, Indian)

7. Funding realities High tax-base districts can raise more $$$ per mill. High tax base = industrial and/or commercial development High tax base = less tax burden on homeowners for a given level of funding

8. Example District X $1 billion taxable value, half of it industrial Tax required to raise $1 million -- 1 mill Owner of house with $100,000 TV pays $100 District Y Community of same population $500 million taxable value, mostly residential and commercial Tax required to raise $1 million -- 2 mill Owner of house with $100,000 TV pays $200.

9. Politics of local funding Industry, big business Incorporate taxes as cost of doing business Pass costs on to customers Don’t vote Homeowners Pay taxes out of pocket Can’t pass on Vote

10. Impact: Funding disparity Constitution guarantees free public education to every Michigan child At a 4/1 funding disparity, was that guarantee being met? Many Michigan residents said no.

11. Impact: High residential taxes Tax creep for people with fixed incomes Taxes rise each year with rise in property values Income increases less rapidly than tax bill Impact is particularly heavy on elderly A high proportion of the elderly vote. Result: Tax revolt

12. The crisis By early ‘90s Many districts struggling to make ends meet Kalkaska Public Schools Largely rural district, low tax base Couldn’t pass operating millages Ran out of money Shut down three months early

13. The crisis Kalkaska galvanized Legislature Property tax abolished as primary K-12 funding source Voters given a choice Return to income tax as primary funding source Or Pass Proposal A

14. Proposal A of 1994 Established state as primary funding source Raised sales tax from 4 to 6 percent Levied 6-mill state education tax Big tax decrease for homeowners Guaranteed a minimum per-pupil funding level Big increase for poorest districts Didn’t immediately reduce funding for well-off districts Capped growth in taxable property value Established schools of choice and charter schools

15. The political calculus Building a constituency Voters in poorer districts Increased per-pupil funding Voters in wealthier districts Didn’t cut per-pupil funding Elderly, property owners in general Cut property taxes Capped growth in taxable value Shifted tax burden to less noticeable sales tax Reformers Schools of choice, charter schools

16. Proposal A Adopted in March 1994 Margin of 61 to 39 percent

17. Next Implementation and impact of Proposal A

18. Questions? Today’s PowerPoint design is ‘Network’