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Background on school funding

To understand the current debates about school funding, it really helps to know how the current system works, how it came about, and earlier attempts to fix it. In this document we'll provide links for more information on how school funding currently works in Michigan, and proposals for change.

System created by Proposal A

In 1994, Michigan voters approved changes to the state school aid program that dramatically revised how schools are funded. The twin goals of the changes were to reduce property taxes and to increase equity in school funding. Experts agree that the first goal was achieved, but that progress on equity has been more mixed. More importantly, much of the burden of school funding was shifted from property taxes to things like the sales tax, which are more sensitive to economic conditions. (About half of the revenue for the state School Aid Fund comes from sales taxes, and a further 20% from income taxes.) The changes also prevent local districts from increasing their own taxes for school operating expenses; school funding depends on statewide tax revenues. Lastly, increases in the taxable value of homestead property were capped at the lesser of the rate of inflation or 5% (until a property is sold); as a result, the taxable value of homestead property now significantly lags SEV overall, so that property tax revenue has not risen as fast as property values.

For an overview of the history of the changes introduced by Proposal A, and some of its effects, see this article on the Burns Park PTO discussion site:
This article also includes links to important background documents.

A detailed backgrounder prepared by the Legislature's Senate Fiscal Agency can be found here:
A Senate Fiscal Agency evaluation of Proposal A after ten years can be downloaded here:
This issue paper makes clear the tradeoff between lower taxes for property owners, and revenues for school districts, that the current system represents - with the benefits clearly going to property owners.

Other general background information can be found on the website of the Legislature's House Fiscal Agency: http://www.house.mi.gov/hfa/schoolaid.html, and the Senate Fiscal Agency: http://www.senate.michigan.gov/sfa/Departments/DPk12_web.html

Current school budget issues

We will be collecting information about school districts around the state; to begin with, you may find an overview of the Ann Arbor Public Schools' budget situation enlightening:
It reports on one of Supt. Todd Roberts' public budget forums last fall, describing the financial situation facing AAPS. An important part of the picture is problems with school aid from the state.

See also here for letters from Dr. Roberts and the superintendent of the Farmington Public schools describing the bind their districts are in: http://www.miparentsforschools.org/?q=node/7

Proposals for change

Most recently, Governor Jennifer Granholm has proposed restructuring several state taxes that would be earmarked in part for school aid. Our summary of the proposal can be found here:
More detail can be found on the State Budget Office's website: http://www.michigan.gov/budget/

One of the recent attempts to change school funding was the Proposal 5 initiative, on the ballot last fall. While the proposal was defeated, the debate over it highlights some of the problems with the current system and outlines various ideas for change. You might begin with this article:
It contains links to some important resources, and the comments to the story have further information (you must be registered on Penguin Talk to view the comments).



It's not entirely fair to look at just the school aid part of the budget picture; in most cases, the state School Aid Fund is supported by taxes which are earmarked for both school aid and general state spending. The deficit in school aid is very much part of the larger budget crisis facing Michigan. Governor Granholm formed a bipartisan panel, led by former governors William Milliken and James Blanchard, to develop emergency recommendations on the taxes and the state budget. In its report, the panel criticizes the permanent tax cuts that were enacted when the state economy was in a temporary boom, and calls for a combination of tax changes and spending reforms to put the state budget on a solid footing. Notably, they argue that simply cutting education spending during hard times will only damage the state economy's ability to grow in the long run.

Michigan's Defining Moment: Report of the Emergency Financial Advisory Panel
2 February 2007

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