Legislative Update, March 2004

Proposal A: What You Need to Know

In 1994 Michigan voters approved Proposal A, which revamped the way the state funds K–12 education. Voters reduced the state's relatively high property taxes, which had been about 35 % above the national average before the reforms and now are about the same as the national average. Proposal A not only gave property tax relief but reduced funding disparities among school districts—spending had ranged from $3,400 to $10,300 per pupil.  Local property taxes for schools were largely replaced with new state education taxes. The reforms

§                     increased the state's 4 % sales tax to 6 % and earmarked the increase for the School Aid Fund;  created several new revenue sources for schools, including a 6-mill state education property tax and a 75-cent per pack cigarette tax;

§                     limited annual property tax increases on each parcel of property to the lower of (1) the inflation rate or (2) 5 percent;

§                     stipulated that school districts on the low end of the funding spectrum would receive bigger annual funding increases than would the “richer” schools; and

§                     eliminated a number of categorical (special) grants and rolled the funds into the foundation allowance.  Source: Michigan in Brief, Public Sector Consultants http://www.michiganinbrief.org/

As funding of public schools continues to be a hot issue in Michigan, research on Proposal A has examined its impact. The report Michigan School Finance under Proposal A: State Control, Local Consequences reviews the changes that Proposal A has brought about in the level and distribution of educational revenues in Michigan, and how these changes have affected local school districts. The research covers the political background to Proposal A, explains how it works, and provides data on how the adoption of Proposal A has affected the revenues available to Michigan schools. The data confirm that school spending increased in Michigan in the years immediately following the adoption of Proposal A, and that Proposal A has made the distribution of revenues across Michigan school districts more equitable. The research also shows:

§                     Proposal A has slowed the growth of total revenue available to Michigan’s public schools.

§                     Proposal A has affected different school districts in different ways.

§                     Proposal A creates a mismatch between the revenues that the state provides to school districts and charter schools and the costs that they face. The full report and Policy Recommendations are available at http://www.epc.msu.edu/

For more information about Proposal A and other issues, http://www.grassrootsnetwork.org/