The MC: The Mackinac Center Blog

How to Make Michigan Schools More Expensive

Mark Schauer's education plan protects the status quo

Gubernatorial candidate Mark Schauer has released his plan for Michigan education. Rather than propose innovative solutions to Michigan's changing school environment, Schauer's plan appears to be largely directed toward protecting the status quo and making education more expensive.

The proposal calls for an "adequacy study" to determine the “true cost” of educating a child in Michigan. Adequacy studies are typically veiled efforts to increase education spending. There is overwhelming evidence that the problem with Michigan school funding is not a lack of money — but that the money is wastefully spent.

Indeed, a comprehensive study commissioned by the Michigan Department of Education itself concluded that per-pupil instructional expenditures have an "indeterminate effect" on student outcomes and that there might be evidence of over spending. 

A quick look at districts in financial distress shows how little funding matters to education. Pontiac spends more than $16,400 per student. Buena Vista, a district dissolved due to its financial troubles, was spending nearly $18,000 per student. Clearly, the problem with those districts was not a lack of revenue.

Schauer also proposes creating statewide maximum class sizes. Not only would this make it more difficult for Michigan school districts to respond to student enrollment shifts, it would also increase the cost of education in this state without improving student outcomes. Michigan average class size has declined substantially in recent years, with no discernable impact on student achievement. And if the state were to reduce the average class size by 10 percent, the cost to state taxpayers would be more than $1 billion.

The candidate's plan also calls for requiring all charter schools to participate in the Michigan Public School Employees Retirement System. Schauer states that this will "ensure the long-term solvency of retirement funds."  

But the real problem with MPSERS is the political inclination to over promise and underfund. Schauer should know this since he — and every other Michigan Senator at the time — voted to underfund MPSERS in 2007 in order to spend money elsewhere.

In addition, the overly optimistic assumptions the state is using to estimate future MPSERS performance mean that the system continues to be underfunded. With such systematic underfunding, every employee who is not in MPSERS is actually helping the state avoid racking up additional unfunded liabilities

Rather than fixing the problem, this proposal simply seeks to burden charter schools with what some have called the "zombie that ate school funding."

Schauer also states that "The state should halt the unrestricted expansion of poor quality charters and cyber-only schools that aren't educating children..." What this statement ignores is the fact that attending a charter school requires parents to make a conscious choice to change the school their children attend. There is a reason parents are opting for charter schools, and it is likely because their local district is not providing the education their children need.

Disturbingly, Schauer's call for increased accountability disregards conventional schools. If he is concerned about low-quality schools, why not also consider some of Michigan's conventional districts that are producing poor results? For too long, conventional schools with abysmal performance have been the default educational option. In comparison, 77 public charter schools have been closed in the past decade. 

It is hard to look at these proposals and not be concerned that they are an attempt to preserve the status quo instead of improving educational outcomes for students. Michigan schools are certainly struggling, but the answer is not to limit choice — especially when charter schools have proven to produce better results for students

A more serious proposal to help Michigan's struggling school districts would include a plan to fix MPSERS, and give conventional school officials increased flexibility to react to enrollment changes. 

 

More Good News for Michigan

State climbs to 12th place in economic outlook rankings

Over the past decade, Mackinac Center analysts have pointed out that the Great Lake State ranked at the bottom of a number of economic measures and indicators. In the last couple of years though, there has been far more good news to report than there used to be.

Last week the American Legislative Exchange Council released the 7th edition of its “Rich States, Poor States” review. We have cited their findings before. According to ALEC, Michigan’s “Economic Outlook” rank leapt from 20th to 12th in the space of a year. The authors point to passage of the state’s right-to-work law as the driving force in that dramatic change.

Center research shows that from 1947 through 2011 states with right-to-work laws experienced a 0.8 percentage point annual average increase in personal income, adjusted for inflation, compared to what those states would have experienced without such laws. That may sound small but consider: If the growth rate would have otherwise been 2 percent, and adding a right-to-work law made it 2.8 percent, then the rate of personal income growth leapt a whopping 40 percent.

In 2009 Michigan’s rank in this index hit an all-time low of 34th before steadily climbing to 20th last year. The Economic Outlook rank is based on 15 variables including tax, labor and welfare policies.

This is not the only index in which Michigan has seen improvements. As one example the Tax Foundation has long ranked the business tax climates of each state. In 2014 Michigan was 14th best, up from 36th in just 2004. Our corporate tax ranking alone went from dead last to 9th best.

After a lost decade of good economic news, it is worth pointing to reasons for a Michigan comeback. Let’s hope the momentum continues.

It's All in How You Ask the Question

Three polls on Detroit bailout, three outcomes

The Michigan Legislature is currently debating whether or not to send extra state money to Detroit. There have been three polls taken on this issue with fairly different results.

Lambert, Edwards & Associates/Denno found very high support, depending on how the money will be spent. I cannot find the exact language of how the question was asked, but this was in the press release:

Sixty-one percent of the 600 likely voters polled statewide said they backed Snyder’s proposal to offer the funds so that Detroit pension cuts wouldn’t exceed 34 percent. A quarter of those polled opposed the move, while nearly 14 percent were undecided.

The same LE&A/Denno Research poll asked voters if they would support offering the state funds as part of a deal that would protect the DIA from having to sell any of its art collection. Slightly fewer voters backed that plan, with 53 percent favoring spending the money and 30 percent opposing it. Seventeen percent were undecided.

Marketing Research Group showed 51 percent support, 37 percent opposed by asking:

"Would you support or oppose the State of Michigan using $350 million dollars of tobacco settlement money over the next 20 years to help the City of Detroit meet its pension contract agreements and prevent the city from having to sell any of its Detroit Institute of Arts paintings and artwork collection?”

The Mackinac Center commissioned a poll through Mitchell Research and found 44 percent support to 49 percent opposed. Here’s how the question was asked:

Governor Snyder has proposed, and the Legislature is considering, passing a $350 million partial bailout of Detroit — paid over 20 years — using state money. Do you support or oppose using state money to bail out the City of Detroit?

We believe that to be the easiest and fairest way to ask the question. Tobacco settlement money is completely fungible as state dollars — that is, it can be used for anything. So make no mistake, the money is coming from the state budget.

But the big dispute is whether or not this money is a “bailout.” Well, here is the definition of the word: “An act of giving financial assistance to a failing business or economy to save it from collapse.”

These are the poll results. You decide which is most meaningful.

Perry: Ticket Resales Should be Unregulated

Tickets to games or concerts are personal property

Dr. Mark J. Perry, an economics professor at the University of Michigan-Flint, creator of the popular blog Carpe Diem and a member of the Center’s Board of Scholars, writes in the Lansing State Journal about House Bill 5108, which would remove restrictions on selling tickets to sporting events or concerts for more than face value.

Perry explains that the practice should be allowed in a free market because the tickets are personal property and the amount of the transaction should be determined solely by the buyer and seller.

Detroit Should Sell Some Paintings

Unfair to make the many subsidize amenities for the few

As the prospect draws closer of a state bailout of Detroit at the expense of other critical needs, voters might want to examine more closely politicians’ skittishness toward selling off city assets. In particular, artwork owned by the city’s museum, an institution sustained by tax dollars (including a regional property tax favored by many of those same politicians in 2010).

Lawmakers should reject a bailout and instead insist that Detroit — whose problems are the product of its own fiscal malpractice — take responsibility for cleaning itself up. It is fundamentally unfair to make other Michigan residents pay for such infamous mismanagement. If avoiding this inequity requires the city to sell some assets, including paintings from the museum, so be it.

In fact, government support for the arts is itself another form of inequity: Tax dollars taken from the many subsidize the highbrow recreation of a relative few. Now Lansing politicians want Michigan taxpayers to give up another $350 million for a bailout that proponents admit is largely about preserving an amenity for the elite.

Selling off some art could go further to reducing bankruptcy pain than bailout advocates admit. They downplay this potential by pointing to a low-ball value estimate of $867 million for the art, but one bond insurer has solicited bids that could generate $2 billion. Putting a ring-fence around this asset leaves money on the table that could reduce the hit to the city’s pensioners and others.

Among those others are people and institutions who have lent money to the city and for whom there has been little sympathy. In some cases that may be understandable, but stinging creditors could increase future borrowing costs for all Michigan communities, making needed infrastructure improvements that much harder, plus adding another obstacle to Detroit’s own long-awaited Renaissance.

The first priority of legislators should be to protect their constituents from a misguided bailout of Detroit. Sell some art and other assets, contract out many services and end unnecessary ones. Any other solution would be fundamentally unfair and would encourage more bad behavior in Detroit and other poorly managed cities.

More State Favors for Detroit

Deferment through borrowing

The city of Detroit gets more revenue than every other Michigan city because of special treatment in state revenue sharing, casino taxes and utility taxes.

This extra money has not been enough to prevent its bankruptcy, nor were these the only favors extended to Detroit. The state also helped the city fight off insolvency by changing the rules for municipal borrowing.

Given this history, bailing out the city again to the tune of $350 million would be unfair to other Michigan residents and communities, and is unlikely to prevent future problems in Detroit governance.

All cities are creatures of state policy. The state determines how they operate, what they can do and what they have to do. These rules govern how cities can raise revenue and whether they can borrow money.

Among these rules is a law that allows for emergency borrowing through "fiscal stabilization bonds" that cover spending in excess of current revenue, and are secured by state revenue sharing payments. Note that this debt is not intended to finance long-lived infrastructure projects but simply to pay current bills while the underlying causes of the fiscal imbalance are fixed. Cities used to be limited to $125 million in borrowing with these bonds. The Legislature increased these limits in 2010 to allow Detroit to borrow up to $250 million. The city proceeded to borrow the maximum amounts.

The state’s review panel found that the city had been covering cash flow shortfalls with $610 million in borrowing. This allowed the city to pay its bills as they come due, but it also trades current solvency for future payments that drain the ability to provide services to residents. The city did not fix its basic problems and this further contributed to the debt that it is seeking to mitigate in bankruptcy.

In addition to providing extra revenue to the city, the state also helped it borrow more.

Bailing out the city is unfair to Michigan taxpayers. They have in effect already done so courtesy of greater revenue sharing and special state treatment. Despite this, Detroit slipped into bankruptcy. In other words, the state has already bailed out Detroit and should not do so again.

There is a better way: more aggressive use of asset sales — including part of its artistic holdings — contracting and ending unnecessary services. 

Several Michigan Capitol Confidential reporters won awards from the Detroit chapter of the Society of Professional Journalists at its annual “Excellence in Journalism” dinner Wednesday night.

Jarrett Skorup won second place in the “Consumer/Watchdog” category for his stories on corporate welfare, asset forfeiture laws and government waste, while Jack Spencer took third place in the same category for his coverage of legislators attempting to define the term “journalist.”

Tom Gantert took third place in “Feature Reporting” for his coverage of unions. Judges’ comments on Gantert’s work called it “Strong, persistent reporting. Great series of stories on an issue that the reporter makes clear deserves the spotlight. Tough, dogged work.”

Anne Schieber received honorable mention in the “General News Reporting” category for her series on townships threatening to raise people’s taxes if they were not allowed into certain homes. Judges said the story was “Well-told in both print and video.”

The full list of award winners is available here.

Michigan Capitol Confidential staff last year won two awards from the Michigan Press Association.

Minimum Wage Hike About Politics, not People

Jarrett Skorup Op-Ed in Detroit News

Research Associate Jarrett Skorup writes in a Detroit News Op-Ed today about why support for a minimum wage hike is more about politics than people.

Center Experts in Detroit News

City should privatize transportation department

Mackinac Center analysts Michael LaFaive and Michael Farren write in a Detroit News Op-Ed today that Detroit could save millions of dollars by privatizing its transportation department.

The News yesterday cited LaFaive, director of the Center’s Morey Fiscal Policy Initiative, about other privatization efforts Detroit Emergency Manager Kevyn Orr is considering, including several that Center experts have suggested for years.

Detroit EM Considering Center Proposals

Privatization could help stabilize struggling city

Detroit Emergency Manager Kevyn Orr is considering several outsourcing options that Mackinac Center analysts suggested the city should pursue as long as 14 years ago, according to The Detroit News.

Among options being considered for privatization are Detroit City Airport, the water and sewer department and garbage collection.

Fiscal Policy Director Michael LaFaive said Detroit should also consider selling Belle Isle.