During the development of the Universal Tuition Tax Credit, the proposal was presented
to numerous education, business, and government leaders and organizations. Below are
answers to specific questions commonly asked about the UTTC.
How will the UTTC impact non-educational expenditures in the state budget?
The UTTC will reduce state revenues in two areas. Some of the loss will be of revenues
dedicated for the state School Aid Fund, including revenues from 6-mill education property
tax and the state Individual Income tax. The remaining revenue loss will be of
unrestricted revenues which are used to pay for non-educational programs. The UTTC,
however, provides significant savings to the School Aid Fund. This savings means that less
unrestricted funding will be required to supplement the School Aid Fund, therefore
providing more overall resources that may be applied to non-educational
expenditures or used to lower taxes for citizens and businesses.
How will the UTTC impact local property tax revenue?
The UTTC will not affect local property tax revenue in any way. Since the passage of
Proposal A in 1994, not all property taxes are local taxes. In addition to local property
taxes that are levied by cities, counties, townships, villages, and school districts,
there is also a 6-mill education property tax levied by the state (which is collected as
part of the local property tax bill). The UTTC affects only this state property tax. It
does not affect the local property tax revenue of cities, counties, townships, and
villages. Also, since the state is required to provide public schools a minimum per-pupil
foundation allowance, the UTTC will not affect the per-pupil revenue of public school
districts.
The UTTC sounds too good to be true. How can we expand parental choice in education
and save significant money at the same time?
The UTTC is a carefully crafted plan that is both simple and effective, yet it will,
without a doubt, draw opposition from many in the education establishment who are fearful
of giving parents the ability to choose alternative schools. This is the main reason why
expanded parental choice has been such a long time in coming and why even common-sense
proposals like the UTTC have been outside our reach. However, with nearly every state in
the nation now considering expanding parental choice, the climate of public opinion will
support further innovation. With barriers to reform removed, the UTTC simply takes
advantage of lower-cost alternatives to the traditional public school system. Since
alternative schools charge roughly half of what public schools receive to educate a
student, and since the tax credit is limited to 50 percent of public school per-pupil
revenues, each student who transfers to an alternative school saves the state money. As
long as enough students transfer to alternative schools during the UTTC phase-in period,
the program will result in significantly lower state educational expenditures. The
estimates in this study are very conservative and indicate that sufficient transfers will
indeed occur to produce net savings to the state.
How do you know how many students will migrate from traditional public schools to
alternative schools?
There are two ways. First, the model used to project enrollment trends incorporates a
widely accepted method of calculating consumer demand for services and uses a conservative
estimate of this demand. The model also takes into account the availability of alternative
school capacity. Secondly, we have experience with the demand for parental choice. CEO
Michigan, the private foundation that gives $1,000 scholarships to low-income children to
attend an alternative school, currently has 3,000 students on their waiting list. This
reflects considerable demand even for this modest amount. Also, in two years of experience
with Michigan’s charter school law, and with only 50 schools operating, parents of
more than 14,000 students chose the new schools. When Michigan’s first charter school
opened in Detroit, over 5,000 students applied for the 300 openings. Given the fact that
there are over 1,090 private schools alone, the estimates provided in this study are very
reasonable.
The above may be true, but during the first part of the phase-in period the maximum
credit is quite small. Is it sufficient to allow and motivate parents to choose
alternative schools?
Yes. There is ample evidence to show that even a slight reduction on the penalty of
paying twice for education allows parents to choose alternative schools. For example, a
Mackinac Center for Public Policy study of nonpublic schools in inner-city Detroit showed
that even very low income parents sacrifice to pay $1,000 tuition to send their children
to these alternative schools. Many parents care deeply about their children’s
education and want them to have the best opportunity to learn; they are willing to
sacrifice.
