Michigan's New Tax Scheme Aims To Upgrade Its Poorer Schools

Instead of relying on property tax, schools to get state sales-tax money

MICHIGAN will enact a bold education financing scheme May 1 that aims, in one blow, to quash two causes of grumbling common to voters nationwide: rising property taxes and shoddy public schools.

Michigan will finance its 3,286 public schools through sales and other taxes rather than property taxes under a plan overwhelmingly approved by voters on March 15.

The state will narrow the gap between rich and poor school districts by guaranteeing a minimum of $4,200 per pupil. Some of Michigan's poorest towns spend less than $3,200 on a student, or just one-third the outlay by wealthy school systems.

The Michigan initiative is an unprecedented effort to eliminate disparities between school systems while wrenching public education away from a longstanding dependence on property taxes.

The plan could serve as a model for states bothered by the same problem. In fact, more than two dozen states are being sued by citizen or civil rights groups for failing to close the gap between rich and needy school districts. Wisconsin and New Hampshire are already considering bills similar to the Michigan initiative and several other states are examining it.

However, it is too early to say whether the Michigan initiative will inspire similar laws in other states, says Chris Pipoh, spokesman for the Denver-based Education Commission of the States.

Critics of the plan say that by placing control of school purse-strings in the state capitol of Lansing, the plan threatens local autonomy over schools and future innovations in education at the grass roots.

Advocates say, however, that the state will encourage creative ways in teaching by licensing ``charter schools.'' These institutions would be launched by civic groups, universities, museums, and other organizations and receive the same funding per student as traditional public schools.

The charter schools would report directly to Lansing, skirting the control of local officials and school boards.

Under the Michigan financing plan, school revenues will come from hikes in the state sales tax from 4 percent to 6 percent and in the cigarette tax from 25 cents to 75 cents a pack. Meanwhile, the state income tax will fall from 4.6 percent to 4.4 percent and property taxes on most homes will be reduced.

Through the initiative Republican Gov. John Engler has made good on a campaign promise to improve the schools and curtail property levies.

By shifting revenues to state control, Governor Engler says he hopes to bypass the school bureaucracy and give the state and its citizens a chance to shake up moribund school districts.

School administrators and teachers' unions have denounced the new scheme for allegedly pinning public school funding to erratic tax revenues.

``In theory it will create greater equitabilty, but whether the money will be there over the next several years is another question,'' says Edward Shine, superintendent of the Grosse Pointe public school system, one of the best funded in the state.

Nick Khouri, the state's chief deputy treasurer, says that the sales tax will offer a reliable source of funding. Revenues from the tax have expanded in all but one of the past 20 years, he says.

Still, Lansing will subject the state school budget to the same annual scrutiny as other state programs, Mr. Khouri says.

``No one has sold the proposal as a guarantee that the money will come from these same sources at a set amount forever,'' according to Khouri.

And both critics and boosters of the Engler plan agree that the rates of growth for school funding will slow in wealthy districts and increase for the poor ones.

In Grosse Pointe, property taxes generally provided 90 percent of school funds. Under the new state measure, property taxes will account for only 15 percent of the budget. The remainder will come from the state, says Mr. Shine.

Wealthy districts unable to meet their school bugetary needs through state finances and a limited amount of property taxes allowed by the plan are likely to set up private, non-profit organizations as a source of supplementary funding, say school officials.

Grosse Pointe has already established a private, non-profit foundation for education that will solicit local funds should state disbursements fall short of local needs, according to Shine.

Ultimately, the Michigan initiative seeks to ensure that citizens receive a higher value for what they pay for schooling, says Khouri. Specifically, when school budgets were pegged to property taxes, annual spending per pupil rose 8 percent during the 1980s, he says. Under the new system though, the state - which will control most education spending - will not tolerate such increases, says Khouri.

``There are going to be greater efficiencies in the school system,'' he says.

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