The major findings of this study appear in the "Executive Summary." They suggest several conclusions.
State spending on primary, secondary and higher education has
been affected by Michigan’s current recession. Nevertheless, state lawmakers
have protected education at all levels from the full consequences of the revenue
decline. State spending on primary and secondary education even increased
slightly during this period, while state colleges and universities were able to
support their spending by supplementing their reduced state monies with tuition
increases and funds from other sources.
Michigan has maintained its long-term practice of generous
state education spending. From 1995 to 2005, state education spending, which was
already high compared to the national average, has grown generously — well above
the inflation rate. Proposal 5 does not appear necessary to ensure high and
rising education spending over the long term.
In the short term Proposal 5 could produce results
unanticipated by voters. The proposal mandates could lead to first-year
reductions in state spending for certain education areas. In addition, the
proposal could lead to cuts in major noneducation programs or to higher taxes.
These last two pressures would likely recur with each state recession.
The largest single portion of Proposal 5’s estimated cost is
related to MPSERS: $386.3 million of the projected $566.6 million (or $708.3
million) cost in fiscal 2007. As presently structured, MPSERS will cost
taxpayers substantial and growing sums of money in coming decades. The MPSERS
benefit has few rivals in the marketplace. Some private- and public-sector
employers facing comparable pension problems have modernized the plans to make
the benefits financially sustainable and sufficiently flexible to attract mobile
professionals in the contemporary marketplace.
Such restructuring would not occur under Proposal 5, which
merely shifts a growing portion of the MPSERS cost from one government body to
another. This shift is irrelevant to the key cost problem, and until this
problem is solved, taxpayers face a growing liability.
Ratification of Proposal 5 could distract from a solution if
the MPSERS cost problem is seen as having been solved. Proposal 5 would also
provide local districts with a payroll subsidy that could intensify the pension
As with the looming MPSERS burden on taxpayers, Proposal 5
does not convincingly address the problem of improving Michigan’s education or
restoring Michigan’s economic growth. Decades of relatively high education
spending have not led to impressive test results or a nationally competitive
The proposal could even slow educational and economic
recovery. The education spending guaranteed by Proposal 5 would reduce
districts’ incentive to attract new students through better educational
programs, while the proposal’s additional monies for districts with declining
enrollment could encourage some of the state’s academically weakest districts to
postpone classroom and fiscal reforms. To the extent that Proposal 5 ultimately
added to Michigan’s above-average tax burden, the proposal could also forestall