Michigan Seeks a New Strategy For Equity in School Funding

Repealing property-tax support for education puts state out on limb

BY repealing all property-tax support for the state's public schools last week, Michigan suddenly leaped into the forefront of the nationwide school-finance debate.

The legislature eliminated $5.6 billion in annual funding for schools but did not identify another source of revenue. Lawmakers have until July 1994 to replace the money.

It's like diving off the high board and seeing if you can get water into the pool quickly enough, says Chris Pipho, a school-finance expert at the Education Commission of the States. "We've never seen a state do something like this before."

All states rely on some level of property taxes to fund schools. But critics charge that varying property values exacerbate financial inequities among school districts. In Michigan, funding ranges from just above $3,000 to nearly $10,000 per pupil.

"There is a ludicrous disparity in this state," says Richard Halik, schools superintendent in Lansing, Mich. But it was irresponsible of the legislature to act without a plan, Mr. Halik says. "It's a very high-stakes game."

For more than a decade, many states have talked about moving away from property-tax funding for education. But Michigan is the first to take such dramatic action.

The sudden legislative vote "surprised the heck out of everybody," says Robert McKerr, interim director of the House Fiscal Agency, a research group for the Michigan legislature.

State Sen. Debbie Stabenow (D) of Lansing introduced the legislation in response to a plan by Gov. John Engler (R) for an immediate 10 percent cut in property-tax funding for schools.

"It was time to set a deadline [for dealing with school-finance reform]," Senator Stabenow says. "We agreed to eliminate the property tax by next school year and really put the legislature's feet to the fire to restructure funding."

Stabenow says it was important for the state to seize the initiative on school-finance reform. Last April, a Michigan school district ran out of money and closed.

"If we were not willing to step up and resolve this, Michigan would very soon be in court, like many other states," Stabenow says.

In states such as Texas, Alabama, and Kentucky, the courts already have mandated more equitable education funding.

In Texas, state officials had a tough time satisfying the court order to create a new school-funding system. "One of the problems in Texas was that they always had to submit something to a court for approval," says Robert Schiller, Michigan's superintendent of public instruction.

MICHIGAN lawmakers simply have to agree among themselves on a new funding mechanism. But that may not be any easier. "Every proposal that has been put out there historically, either to the legislature or to the voters, has been shot down," Halik says.

Options include increasing the income tax, sales tax, or "sin" taxes on cigarettes and alcohol.

The state is "starting from scratch," Mr. Schiller says. "This is an opportunity to take some unprecedented steps forward."

Making up the nearly $6 billion lost from property taxes may require a combination of new taxes.

"I wouldn't be surprised when it's all said and done if they put some of the property tax back," Halik says. But he worries that the schools could end up with less money than they had before.

The Lansing school district, in the shadow of the state's capitol dome, will lose about 60 percent of its $120 million budget next year when property-tax revenue is removed.

"Obviously, the public schools cannot continue to exist until they correct this," Halik says. "You had a Democratic senator introducing [this legislation] and a Republican governor saying he would sign it. Both parties are major stakeholders in seeing that this succeeds and schools remain open. The public isn't going to stand for anything else."

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