In 1994, voters adopted the
state school finance initiative known as "Proposal A" because it promised to cap
their property taxes, lift spending in poor districts and end the constant
stream of local elections seeking higher taxes for school operating expenses.
Since then, public schools have relied on generous per-pupil foundation grants
from the state to pay for day-today operations.
Nevertheless, they have
diligently searched for loopholes in Proposal A’s prohibition on new local taxes
for operating expenses. With recreation millages, they appear to have found
Originally, the most common
loophole was disguising operating expenses as "capital improvements," since
Proposal A did not prohibit higher property taxes for new school buildings or
major physical plant upgrades. As a result, there has been an explosion in
school debt millages. Statewide, local school building, site and sinking fund
taxes have risen from 2.6 to 4.3 mills — a 65 percent increase.
Some of this "capital
borrowing" pays for expenses that are clearly operational, such as repairs and
short-lived assets like computers or school buses. Only under Enron-style
accounting are such items considered "long-term capital assets" that justify
But in addition to this
"capital asset" loophole, there has recently been a rash of school millage votes
to raise taxes for "recreation." These invoke a previously obscure 1917 law that
allows schools to levy unlimited property tax millage for the operation of a
"public recreation system and playgrounds." This old law is the newest Proposal
In these elections, and also
in a Michigan House Tax Policy committee hearing on repealing the 1917 law (
schools have been frank about using recreation millages to get around Proposal
A. One superintendent recited for the committee a laundry list of school
operations now supported by his district’s recreation tax revenue. In adopting
such tactics, schools are breaking not just the promise of Proposal A, but at
the very least bending the law that allows these taxes only for "public
recreation and playgrounds."
According to top Engler
administration officials who helped craft Proposal A, the continued existence of
this early 20th century law is a mistake. They have admitted that when Proposal
A’s enabling legislation was drafted, they completely overlooked the recreation
law, which otherwise would have been repealed at the time. This makes sense,
because the law is an obvious opportunity to subvert Proposal A’s promise of no
new local taxes for operating schools.
In addition to getting around
Proposal A’s tax limits, schools have another incentive to seek higher
recreation taxes. Many knowledgeable observers suspect that an ongoing school
building boom is a response to Michigan’s limited inter-district
"schools-of-choice" program. Schools get state money based on how many pupils
they serve, so they have an incentive to attract students from neighboring
districts. The suspicion is that some are competing with new gold-plated school
buildings, instead of better academic programs.
Top-flight recreation programs
funded by this tax may be another way to outshine neighboring school districts
in the competition for a finite pool of students and the state money that
accompanies them. Schools also justify their recreation taxes on broader
grounds: In the state House committee hearing, one superintendent reported that
an elderly man who swims for free in a pool funded by this tax "told me he would
be dead without it."
That’s unlikely. Even granting
his view about the health benefits, this individual would suffer only if
school-funded recreational facilities were the only ones in existence. This is
not the case, and this elderly gentleman could join a private health club or a
YMCA, rather than asking his neighbors to pay for his recreation with higher
Defenders of the tax will
claim that the elderly swimmer might not be able to afford a health club. Still,
golf is a healthy activity, yet that doesn’t mean schools should raise taxes to
build golf courses.
The mission of public schools
is to educate children, not compete with private health clubs by offering free
or subsidized recreational facilities. Unnecessary taxes like these recreation
millages break faith with Proposal A and remove resources from private
individuals and businesses, reducing their ability to provide for their own
needs and develop the economy. In the long run, such taxes make us all poorer.
Jack McHugh is a
legislative analyst for the Mackinac Center for Public Policy, a research and
educational institute headquartered in Midland, Mich. This commentary is adapted
from his invited testimony at hearings by the Michigan House Tax Policy
Committee on House Bill 5929, which would repeal the 1917 law that allows school
districts to levy unlimited property tax millage for the operation of a public
recreation system and playgrounds.