Tax more? Spend less? Reform first?

Ideas range widely at ‘Education Summit’

Michael Van Beek
Michael Van Beek

Reform, revenue and reduction have become the buzzwords in Michigan's school funding debate, but there's no consensus on which should come first or how much is needed.

School administrators, board members and business people who gathered at Saginaw Valley State University for an "Education Summit" Monday heard panelists and other guest speakers make recommendations ranging from reduced spending on school employee health care to a statewide tax on services to a rigorous overhaul of public education.

Robert Daddow
Robert Daddow
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Robert Daddow, deputy Oakland County executive, opened the three-hour event with a financial report that highlighted the state's projected $1.85 billion deficit in 2011 — a shortfall that Daddow believes will be closer to $2 billion but that in either case translates to less money for public schools.

Daddow, also an adjunct scholar with the Mackinac Center for Public Policy, predicted that at least 60 more school districts will be in deficit by the end of the year, with many next year facing payless paydays, vendor payment delays and an increased need for cash flow borrowing.

As the taxable value of property declines — Oakland County expects values to decrease by 12.5 percent in 2010 on the heels of a 13 percent drop last year — the amount that the state takes in through the six-mill education tax will decline, as will the amount schools and intermediate districts receive through local millages for such things as debt service, special education and vocational programs, Daddow said.

The $3.8 billion that Michigan received in federal stimulus money masked last year's weak state budget, Daddow said. Like a lot of school districts, the state has used equity to balance its budget in six of the last eight years, he said.

"You can solve the issue either by increasing revenue or reducing costs or both," he said. Government and school reform also are needed, but, "Reforms take time. You don't have that kind of time."


Cutting Costs

In a panel discussion that followed, health care and pensions were cited as two areas where education costs could be reduced, along with consolidation of services, privatization and expanded online education and dual enrollment.

"The bottom line is we have a fairly generous health care system (for public employees). ... We aren't going to be able to sustain that," said panelist Tom White, head of the newly organized Save Our Students, Schools and State. SOS has mounted a petition drive urging legislators to "reverse the devastating cuts to K-12 education and work on a long-term solution."

A statewide health pool for all school and state employees "has some merit," White said, as does a mandated contribution from employees toward their health insurance premiums.

On average, Michigan school employees chip in 4 percent of the cost of their premium for a policy that costs on average more than $15,400, while Michigan residents pay an average of 22 percent of the premiums for policies that cost on average about $11,000, added panelist Michael Van Beek, education policy director of the Mackinac Center. The national average is 27 percent, according to the Kaiser Family Foundation, White said.

(The Mackinac Center publishes Michigan Education Report.)

David Michelson, a panelist who works in governmental relations for the Michigan Education Association, said that the MEA does not believe a statewide pool as proposed by House Speaker Andy Dillon, D-Redford Township, would save money unless it also reduced employee benefits.

Michigan also can't afford the defined-benefit pension plan it now gives to school employees, Van Beek said. Schools currently pay an amount equal to 16.94 percent of payroll to fund the pension and retiree health care plan; White said that number might rise as high as 20 percent next year.


Increasing School Revenue

On the increased revenue side of the argument, Michigan State University economist Charles Ballard said that, "Despite our struggles, Michigan is not a poor place. The resources are there if we want to educate our children."

Ballard said the state could lower the sales tax and begin to tax services as a way to generate revenue.

"There just isn't a case to be made for taxing your kid's shoes and not taxing me when I go to a Lions game," he said.

In addition to a service tax, he also proposed a graduated income tax or, alternatively, raising the flat tax on income, as well as taxing Internet sales. The Michigan Business Tax could be eliminated by revising the income and sales taxes, Ballard said, who also recommended getting rid of a myriad of smaller tax breaks and deductions that Michigan now offers.

Like Ballard, Michelson said the state should review its tax breaks and tax incentive programs to find out if they're worth the cost. He also said that any new tax incentives or educational mandates should have a defined funding source.

Reform Ideas

Dow Corning Corp. executive Mary Lou Benecke said that the business community is "impatient to be a voice" in school reform, which does not begin by giving schools more money.

"We need to use money more wisely, and we need fundamental change," said Benecke, state government relations manager for the corporation. Citing the "Touch Choices or Tough Times" report of the New Commission on the Skills of the American Workforce, Benecke said that Michigan should do more to encourage top college students to become teachers, but pay them based on performance, not on years of service.

Top teachers should be so well rewarded that industry would have to work hard to lure them from the classroom, Benecke said.

"Make me compete for them," she challenged.

Taking another idea from "Tough Choices," she said school districts should contract with teacher groups to run schools and link to community organizations for student services.

"What if we made sure no student passed to the next grade with a 'ticket to fail,'" she said, emphasizing the need to address learning problems early and avoid the difficult and more costly problem of high school dropouts.

Classroom tests reward students for routine work, not for the critical thinking and problem solving that employers are looking for, she added. And finally, education should make use of the management tools that have served business well, like the Six Sigma program, Benecke said.



Benecke's ideas resonated with David P. Midkiff, a global leader in external manufacturing for The Dow Chemical Co.

"My interest is in trying to help identify comprehensive, long-term solutions that involve all aspects of the problems," he told Michigan Education Report.

"I think we fundamentally approach it differently in terms of accepting poor performance and status quo," he said of the business and education communities, but added, "Education is very complex. I don't think business has all the answers."

Anne Gies, who recently returned to Michigan from a teaching job in Nevada, said that, "Michigan teachers are going to have to do it on less money, and they're going to need more support and guidance."

Debate on education funding is likely to continue for months. Gov. Jennifer Granholm must submit a 2011 budget by Feb. 12. The Legislature is supposed to approve a final budget before Oct. 1.


Lorie Shane is the managing editor of the Michigan Education Report, the Mackinac Center’s education policy journal. Permission to reprint in whole or in part is hereby granted, provided that Michigan Education Report is properly cited.