If Proposal A ain’t broke …

By MICHAEL VAN BEEK
The ongoing budget debate, once again, has been fueled by attacks on Michigan’s school funding system. Led by the Michigan Education Association, the public school establishment is blaming Proposal A and Michigan’s so-called antiquated tax structure. But a closer look reveals these accusations are unwarranted.

Proposal A has met all the goals it set out to meet. It reduced tax burdens for homeowners, increased state revenues on the whole, and reduced the funding disparities between school districts. Yet it’s criticized for supposedly relying too heavily on sales tax revenue and being unpredictable.

Contrary to popular belief, the state sales tax plays a smaller role in providing revenue for the School Aid Fund (SAF) than it has in the past. In 1983, state sales tax revenue made up 60 percent of the SAF. In 2008 only 38 percent of the SAF came from the sales tax, and this is not due to a drop in actual sales tax revenue.

The Senate Fiscal Agency reports that revenue generated from the Michigan sales tax going to the SAF has increased by 27 percent since Proposal A was passed by voters in 1994 — basically staying on par with inflation. It might not be growing, but it’s definitely not sinking.

This is a remarkable feat when you think about it. While sales tax revenues for schools remained constant, Michigan’s per capita GDP dropped from 16th nationally to 41st between 1999 and 2008, according to the Bureau of Economic Analysis. The state has hosted the nation’s highest unemployment rate prize for 43 consecutive months and counting. Even in times of economic distress for the state, Proposal A creates a predictable generator for school revenue.

In a 2004 report, ironically critical of Proposal A, Kathryn Summers-Coty of the Senate Fiscal Agency writes:

“One downside to pre-Proposal A funding for school districts was the reliance on the often unpredictable nature of millage elections to determine the districts operating revenue and budgets; now, that dependence has been virtually eliminated and a more stable source of revenue exists.”

Altogether, Proposal A has spurred unprecedented growth in the SAF. From 1980 to 1994, the SAF actually decreased 8 percent in revenue when adjusted for inflation. Since then, the SAF has grown from $7.7 billion to $13 billion, an inflation-adjusted increase of 13 percent.

Proposal A introduced a slew of other taxes that broadened the base of SAF revenue and provide for a more predictable funding model. Now the SAF draws from use, state education property, real estate transfer, income, business, casino and several other taxes that heretofore it had not.

While the sales tax total contribution to the SAF has remained steady over the years, the amount the Michigan Legislature appropriates from the general fund fell off a cliff. In 1994 general fund appropriations contributed 9 percent, or about $665 million, of the SAF. Today it puts in only $29 million, or about 0.2 percent. This is a 97 percent real decrease since Proposal A.

Those holding out hope that more money will improve our schools and looking to overhaul the school funding system or raise taxes are misguided. A much simpler way of procuring more public school funds would be to get the Legislature to appropriate general fund monies to the SAF at the same level it did in the past.

Of course that opens up schools to compete with the hundreds of other line items in the state’s budget. The more the state spends on subsidies to film makers, incentives for targeted businesses, state-run prisons or “prevailing wage” contracts, the less there is available for schools. If public schools want further funding increases, they should appeal to the general fund’s coffer and not the pockets of taxpayers.

(Michael Van Beek is director of education policy at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland.)

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