marked the 10th anniversary of Proposal A,
the constitutional amendment that was intended to narrow the spending gap
between school districts, and dramatically reduce property tax rates. To
mark the date Michigan State University held a conference in Lansing assessing
the school finance initiative. The retrospective brought together a prominent
group of scholars, and many of the key players in Michigan government over the
last 10 years, including former Gov. John Engler, U.S. Senator Debbie Stabenow,
former House Speaker Paul Hillegonds, former Senate Majority Leader Dick
Posthumus, and current House Speaker Rick Johnson.
Center legislative analyst Jack McHugh served on a panel at the event that
responded to a study by MSU education policy analysts
David Arsen and David N. Plank. The study recommended increasing the six-mill
state school property tax to eight mills. Besides McHugh, five PhD’s,
the preeminent expert on the state budget, and state Superintendent of Public
Instruction Tom Watkins gave presentations. No panelist besides McHugh
expressed any misgivings in principle with the tax hike recommendation. Here is
what McHugh said to the hundreds present, who represented Michigan’s educational
and political establishments:
Thank you for the opportunity
to be here today. I’m going to come at this from a different direction. While
Professors Plank and Arsen’s study usefully points out some problems related to
school districts with declining enrollments, and those with a high proportion of
"high-cost" students, there is a huge gap between the data and the conclusion.
How can you say that a tax hike
is needed when you have only looked at the revenue side, and not how the money
is being spent? Here are five issues that were not addressed in the study:
1. The Expenditure Side
You can’t justify higher taxes unless current
revenues are getting the maximum bang-for-the-buck. There is plenty of evidence
that they are not, such as:
Michigan Education Special Services Association (MESSA) director has estimated
that if schools provided health coverage common in the private sector instead
of the current gold-plated plans, they could save $400 million a year.
"prevailing-wage" law prohibits awarding government construction contracts to
the lowest-bidding contractor unless he also pays an artificially high wage
based on union pay scales. Mackinac Center research suggests that this
increases school construction costs by at least 10 percent. Without these
inflated costs, schools could save $150 million a year.
The Mackinac Center has documented many cases in which privatizing
school lunch, janitor, transportation and other support services has saved big
money, but the MEA teachers’ union fights this at every turn.
Annual school administrative
expenses increased 6 percent a year from 1998 to 2002. That’s double the
2. Capital Spending
spending has skyrocketed and must be considered as part of the equation. School
system capital revenues statewide increased from $458 million in 1994 to $1.1
billion in 2000. Local debt, building and site, and sinking fund taxes rose from
2.6 to 4.3 mills. Between 1999 and 2002, long-term school debt rose from $6,261
per student to $8,100.
Much of this
is really operational spending, such as repairs and short-lived assets like
computers. Only under Enron-style accounting is it not counted as operational.
The study points out that capital spending is uneven across districts, but the
bottom line is that, on average, statewide school millage rates have already
risen at least 1.7 mills since 1994.
3. Declining Pupil Counts
Prof. Plank points out that school districts with
declining enrollments need transitional help. But the issue is bigger than
this. At least through 2012 there are projected to be fewer school-aged
children in Michigan. Total enrollment will
have dropped from 1,743,000 in 2000 to 1,616,000 in 2012. That is a decline of
127,000 students, or 7.3 percent.
This fact and
the debt and capital spending numbers suggest two things:
Districts are building
overly luxurious schools in order to compete with neighboring school districts
under the cross-district schools-of-choice law.
Schools are not
consolidating buildings and services, like a rational private sector business
would, when faced with these demographics. The owner of three grocery stores
in a town that just lost its major employer would consolidate, not expand and
add luxury features.
4. Reorganizing and
Modernizing for the 21st Century.
A former deputy state superintendent of schools
recently commented in the Detroit News that Michigan’s school system needs
fundamental change. He suggested:
Year round classes;
Administrators loyal to the
community, not to their profession;
Reform of the
"rule-encrusted, seat-time-based teacher preparation and credentialing
I would add that we should rationalize special-ed
delivery. An effort to do so in 2001 was annihilated when the special-ed
establishment mobilized parents of disabled children by telling them untrue
scare stories. Parenthetically, they are using the same tactic now to gut ISD
5. Getting the Incentives
We will never achieve excellence without real
competition between schools and school districts, and we’ll never achieve
genuine competition without giving parents a choice when it comes to where they
send their children to school. There is every reason to believe that
competition would bring the same excellence and value to education that it does
everywhere else. If everyone were required to shop in only one assigned grocery
store, you would find mediocre products, and high prices. That describes public
education today. Charters and inter-district schools-of-choice are just baby
steps. The Mackinac Center believes a tuition tax credit system is the best way
to bring both excellence and value to K-12 education.
This relates directly to another question that was
raised today: "What is an adequate level of revenue to fund public schools?"
is, no central planner can ever say how much would be adequate, because without
a free market in education there is no way to perform the pricing function.
Early in the 20th century economist Ludwig von Mises demonstrated how
socialism could never work because of this.
however, all kinds of innovations and bright ideas will be tried, and some bad
ones too. The market will quickly sort these out, sending more dollars to the
former, and driving the latter out of business. Only this process can truly
determine how much money is "adequate" to provide a good education.
Thank you again for the opportunity to present an
alternative point of view here today.
Jack McHugh is legislative analyst for the Mackinac Center
for Public Policy, a research and educational institute headquartered in