School Funding, Proposal A, and Property Taxes

This article originally appeared in the Oct. 26, 2001 issue of the MIRS newsletter in answer to the questions: "How much school funding is enough? Has Proposal A been a success or a failure?  Are schools justified in seeking new ways to tap into local property taxes?" Mr. Reed acknowledges Matthew Brouillette, director of education policy at the Mackinac Center, from whose research and writing significant portions of this essay are derived.

In 1994, Michigan citizens approved a constitutional amendment that dramatically altered the way public schools are funded. Known as Proposal A, the amendment delivered much-needed tax relief to overburdened property owners in exchange for a two-cent increase in the state sales tax and hikes in other levies—and a significant shift in control of the education purse-strings from the local to the state level.

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Now, seven years later, some officials are saying it's time to let districts again tap local property owners for more school taxes.  But what we have here, with few if any exceptions, is not a lack of money for schools from taxpayers.  Rather, it's a lack of money management by too many school officials.

Prior to 1994, Michigan's property tax burden was 35 percent above the national average, thanks in large part to frequent and irregular millage elections that depressed turnout and usually ensured narrow special interests would get the tax increases they wanted. Proposal A cut property taxes by one-third, but increased sales and use taxes by 50 percent. It also dedicated 4.2 cents of the now 6-cent sales tax to the state School Aid Fund and established a minimum "foundation grant"—a per-pupil allotment allocated by the state to schools based on their enrollment.

Public school funding, meanwhile, has become a top state priority. Revenues for public schooling since 1995 have increased by more than 50 percent, from $4,200 to $6,500 per student—double the inflation rate. The National Education Association actually says Michigan outspends 43 other states in this area.

Paul Bosquette, a school board member in Wayne County's Redford Union School District, says that a lack of "proper funding" is to blame for his district's $1.3-million deficit.  The Michigan Education Association, which almost always supports a tax hike or a spending increase, says the same thing.

But how can districts like Redford Union claim poverty when per-pupil revenues in its jurisdiction are up nearly 40 percent since 1994?  The problem there, repeated all over the state, is not so much a lack of revenue but rather, that large amounts of education dollars continue to be consumed by unreasonable collective bargaining agreements, costly non-instructional services, and inefficient management practices. (The National Center for Education Statistics reports that Michigan ranks below only two other states in the percentage of education dollars it spends on bureaucracy vs. classroom instruction.) The result is that no amount of taxpayer money is ever deemed to be "enough" to fund public schools.

Redford officials know how to cut unnecessary costs and fix the district's financial problems; they're just unwilling to make the tough decisions necessary to do it. Earlier this year, the Mackinac Center for Public Policy met with officials to discuss their options—including competitively bidding out performance of non-instructional services to private firms. The officials agreed that quality services at significant cost savings were readily available. But they also know that the MEA opposes any move that would lessen its annual revenue stream of over $700 million in compulsory dues and premiums from school employees and districts.

The Jefferson Schools in Monroe County is another example of district that poorly manages its money.  Few districts would ask taxpayers for more money with spending statistics like these:  Just 5 percent of Michigan districts spend more per student on operating expenditures, at a whopping $8,675 per student, Jefferson is well above the statewide average; less than 10 percent of districts spend more per student on administration; just 5 percent of districts spend more on operations and maintenance; less than 2 percent spend more on transportation; and central administration salaries are off the charts.  But at the same time, Jefferson's students are below the statewide average in the percentage of students rated as "excelling" at MEAP in Grade 11 and are below average in ACT composite scores. 

Yet despite exorbitant spending in Jefferson, district officials asked taxpayers to fund a 13-mill property tax that would have kept property taxes well above the state per-pupil average (Jefferson's property tax levy on a per-pupil basis was at $6,542 in 1999, while the state average is a little over $1,100.)  The voters of Jefferson have said "NO" to school officials twice this year, but parents and community members are prepared for the district to "ask" once again in the near future.

Much of the financial mismanagement in districts across the state, including Jefferson, stem from reluctance on the part of officials to make tough but beneficial decisions.  For example, dozens of districts lack either the courage or the will to jettison the MEA's costly MESSA health insurance, even though the mere introduction of modest co-pays and deductibles would save hundreds of thousands and, in the largest districts, millions of dollars.  Schools have been unwilling to implement such changes because of intimidation from the MEA.

Criticizing Proposal A is politically easier than making the tough, business-like decisions that almost everybody else makes every day of the week.  School districts that do make those tough decisions risk a highly public union protest, and many more not-so-public and underhanded efforts at harassment.   When little Arvon Township Schools in the Upper Peninsula wanted to tackle its $11 per student lunch and other outrageously expensive union-provided services, its school board was hit with threats and lawsuits.  (Details on the Arvon story are accessible at

Some districts complain that Proposal A hurts districts facing declining enrollment. Holland Public Schools claims that Proposal A helped force the closure of a popular elementary school. Officials there argue that a loss of students, without a corresponding reduction in "fixed" costs, is causing financial troubles—even though Holland receives over $2,000 more per student in 2001 than it did in 1994. In other words, Holland's budget is $10 million larger than it was before Proposal A, while at the same time the district has to educate fewer students.

Declining enrollment does make certain budgetary decisions difficult, but what enterprise is immune to fluctuations in the marketplace?  Every operation—including schools—must consider and plan for future changes in its customer base. This is simple economic reality. The fact is that most districts—including many that have received smaller funding increases than have Redford and Holland—are able to balance their budgets. Trenton Public Schools, for example, has not felt it necessary to ask for a single tax increase in over 30 years.

School officials consistently assert that it is a lack of funding that has prevented schools from being effective. Nationally between 1970 and 1997, total revenues for public schools increased from $44.5 billion to $305 billion, yet scores on the SAT have dropped by 27 points at the same time.   In addition to the incentives for improvement that would come with more choice and competition, better management of resources is sorely needed in public education.

Public schools have many opportunities to be more efficient. They can save money by privatizing support services such as janitorial, food, and transportation services. Competitive contracting can provide schools with the kind of expertise, flexibility, and cost efficiencies not always available with in-house service provision. Any savings in support services can be used to provide additional resources for the classroom. Properly designed and monitored, contracts between government schools and private providers can help school administrators do more with less.

This is not pie-in-the-sky wishful thinking.  It's reality.  School districts all over the state and country are doing it all the time and enjoying real savings and improvements in service quality when they do it properly.  Many more could do it too, and a lot of it, if they are really serious about using resources wisely.

Even the Michigan Education Association understands this when it comes to its internal practices.   The Mackinac Center has shown many times in the past that at the union's own sprawling East Lansing headquarters, it has contracted out for things like food service, janitorial services, security, and mailing—and often with non-union firms, no less!

In September, when the MEA held a news conference to announce a new front group for the purpose of attacking both the contracting out concept and the Mackinac Center, the union recommended that the legislature appropriate public funds to hire researchers to examine Mackinac Center publications.  That's right.  The MEA is opposed to contracting out, but nonetheless does it itself and, incredibly, calls upon the legislature to do it for the purpose of examining a private organization's research.  What's wrong with this picture?

This hypocritical, self-serving stance of the MEA is understandable when you realize that the MEA is much more than a teacher union.  It is the state's largest union of cooks, janitors, bus drivers and teachers.  The first order of business to pay for the incredibly high salaries of dozens of MEA officials at the top is compulsory dues money from the membership.  That's why Michigan citizens are hit with a never-ending "more money" drumbeat from the MEA.  (More detail on this is available at

The governor is right in arguing that the problem with public schools is not a lack of money.  Taxpayers are right in objecting to being soaked more and more for a product that's often mediocre at best.  Responsible school board members all over the state are right in bucking the status quo to make real change and manage their schools better.  Proposal A is working.  Making it easier to tax more is no solution to public education's woes.  Things like choice, competition, and better money management are.

"The National Center for Education Statistics reports that Michigan ranks below only two other states in the percentage of education dollars it spends on bureaucracy vs. classroom instruction."