note: This is the sixth in an ongoing
series examining school funding myths.)
School officials often complain (and the media repeats) that
funding for Michigan's public schools is "unstable" because it relies in part on
revenue from the 6 percent state sales tax. Additionally, many people seem to
think that a significant proportion of the money going into our schools comes
from the Michigan Lottery.
In fact, over the last 15 years, even though the proceeds
from the sales tax and lottery have increased, the portion of total school
revenue from both has steadily decreased. In 1995, they contributed 32 percent
and 5 percent, respectively. In 2010, it's forecasted
that they'll make up just 21 percent and 3.5 percent.
Misperceptions about the magnitude of the Michigan Lottery's
contribution may arise because the operation markets itself as a significant
source of school revenue. Part of the strategy behind its $27
million annual advertising budget is to convince people that gambling away
their income really isn't so reckless
given that their loss is education's gain.
The marketing includes giant yellow billboards declaring
that $15 billion has been dedicated to public schools thanks to the public's
gambling ways. What the signs don't reveal is that this amount is the total cumulative
contribution over 36 years! This is
not to say the lottery is a bust, just that it doesn't provide as much as many
The sales tax myth is also common and deeply rooted. One
reason is that a 50 percent sales tax rate hike was a key component of the
Proposal A school funding overhaul adopted by voters in 1994, with 100 percent
of the new revenue (and 60 of the revenue from the original 4 percent
levy) going into the state School Aid
Fund. All told, 73
cents of every dollar paid in sales tax goes to schools.
School board members and officials perpetuate the myth when
they express frustration at having less control over their revenues than they did before
Proposal A. An oft heard complaint during the difficult process of crafting
annual local school budgets is that the state controls funding levels and
relies heavily on the sales tax.
Like many good myths, there's more than a grain of truth to
this one. Forty-one percent of all state-based revenues for schools in 2009
came from the sales tax. Although the proportion from other state sources is
growing (the income tax, Michigan Business Tax and the 6 mill state education
property tax), the sales tax still remains the largest single revenue source
for state-based school funding.
However, the proportion falls to just 21 percent when all school revenue sources are considered, including money from
local property taxes and the federal government.
Indeed, federal money represents an ever-growing share of
school budgets over the last decade. The amount has almost tripled since 2000,
rising from $890 million to $2.46 billion in 2009. Likewise, local property tax
revenues also grew by $900 million from 2004 to 2009 (the net
increase may be less going forward due to depressed real estate values).
Finally, school officials should be grateful for state-based
sources of revenues like the sales tax. The current funding system has
produced relatively predictable and
stable income, vastly different from the pre-Proposal A era when
when school districts were forced to devote extensive resources to
passing uncertain operating-fund millages to keep their doors
open. Instead of complaining about their lack of control of revenues, school
board members should make it a habit
to focus on the things they can
control — like their district's expenses.
Michael Van Beek is director of education policy at the
Mackinac Center for Public Policy, a research and educational institute
headquartered in Midland, Mich. Permission to reprint in whole or in part is
hereby granted, provided that the author and the Center are properly cited.