Running Head: Proposal A Analysis

Proposal A Analysis

Brian Zawislak

Oakland University

EA 8840 – School Business Management

Proposal A Analysis 2

Prior to the 1993-1994 school year, many Michigan school districts were levying huge,

local property taxes to help fund their schools. Subsequently, Michigan residents were seeking

property tax relief and, although there were nearly a dozen attempts to reform public school

funding in the state of Michigan prior to that school year, Michigan legislators took a giant step

forward when they voted to eliminate local property taxes as a source of revenue for funding

schools. In response to this, they developed two plans to fund public schools Proposal A or a

statutory plan. A few of the variances between the two plans included differences in the

amount of income tax collected, potential revenue from an increase in the sales tax, an annual

cap on the property values, and differences in the number of mills levied through a state

education tax (Lockwood, 2002).

Proposal A was approved and thus incorporated an additional 2% in sales tax completely

dedicated to the State School Aid Fund that offset the 1.4% increase in the state income tax

proposed by the statutory plan. In addition, Proposal A is funded with a total of 24 mills on

non-homesteads. This is made up of a state-wide millage rate of 6 mills on all property and 18

mills on non-homestead property like industrial, commercial, some agricultural properties, and

vacation homes. Homestead properties, or primary homes pay 6 mills to the state education

tax. This is in stark contrast to the 12 homestead and 12 additional non-homestead mills

proposed in the statutory plan. In addition, there were taxes from real estate transfers and

cigarettes dedicated to schools. Districts are required to run a millage for non-homestead of 18

mills. The non-homestead total value is divided by the enrollment to determine the local, non-

homestead funding in a district. The difference between the district’s allowance and the non-
Proposal A Analysis 3

homestead funding is calculated and the state provides aid for the difference. Nevertheless, as

with any new reform, it has become divisive ever since it was proposed

Proponents of Proposal A are pleased with several factors that have developed since its

passage. First off it dramatically lower property taxes. In fact, 122 school districts were within

4 mills of the 50-mil maximum allowed by the Michigan Constitution (Price, 2019). In fact, the

statewide average at the time was approximately 34 mills (Lockwood, 2002). Therefore,

Proposal A decreased the amount of money collected on property for most people by 28 mills.

To put that into perspective, if a homeowner paid taxes on a piece of property with a taxable

value of $100,000, prior to Proposal A, they would have pay $3,400, but after Proposal A it was

only $600, which is an annual savings each year of $2800. In addition, Proposal A placed an

annual cap on the value a property can increase. This cap equates to the lesser of 5% or the

rate of inflation. As a result, Proposal A’s impact on property taxes have saved home owns

billions of dollars over the life of the proposal. In addition to alleviating the burden local

governments put on its homeowners through property taxes, Proposal A set out to improve

school funding equity.

School funding equity would be enhanced through a constitutionally-granted minimum

funding level per pupil. Prior to Proposal A, the top ten spending districts spent three times as

much as the lowest ten spending school districts (Arsen, Plank, & MSU, 2003). Now, however

the highest spending schools only spend approximately 1.55 times as much as the lowest

spending schools. Beyond the tax and equity strengths, advocates of Proposal A also enjoyed

the options it provides for families by offering schools of choice and charter public schools.
Proposal A Analysis 4

In schools of choice, students are provided with additional enrollment opportunities

which range from allowing students to determine which school within the resident district they

will enroll, to allowing non-resident students to enroll in a district other than their own or a

public charter school. Participation is optional for districts, and they can develop their own

parameters for implementing the process. Since funding is tied to the pupil, most districts offer

some sort of schools of choice because the money moves with the student. Besides offering

choices to families, the State believed that making schools of choice and charter schools an

option might motivate school districts to enhance and innovate instructional practices that

positively impact student learning; however, opponents suggest there is no proven research

that the policy has done so.

Ultimately, Proposal A continues to move in the direction of its original objective. It is

reducing the funding gaps between the poorest and wealthiest districts, it has reduced the tax

burden on its property owners, and it has provided choices to families that seek out a better

educational experience for their children. Finally, supporters for Proposal A suggest that since

allocation of funds has become a responsibility of the State, it has centralized the funding

system, and consequently redefined state and local relations by limiting the number of

property tax millage elections, which frees up local resources, and eliminating the tie between

state aid and local tax effort.

Nevertheless, sometimes when a problem is solved, it creates unintended issues or

sticking points from another perspective. That is the case for opponents of Proposal A. An

analysis of Proposal A pointed out a few issues worthy of consideration regarding Proposal A.

Among these including, the shift in power from local communities to state officials, the
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inadequacy of the revenues, the instability of the revenue stream, and the varying impact it has

on different school districts (Arsen, et al., 2003). Although the shift in control of funding is not

good or bad, the real question comes in how well those in control allocate the resources. The

fact of the matter is that each district has its own individual needs, so while trying to create an

equal playing field in allocations is admirable, some district require unique resources that

cannot be covered by the general fund allowance. Therefore, opponents of Proposal A will

argue that one size does not fit all! The shift has eliminated much of the control the school

communities prefer, and it has also eroded the identity and autonomy of local school districts.

Furthermore, the unique needs of each district is something the School Finance Research

Collaborative dove into when they created recommendations for reforming school funding.

The School Finance Research Collaborative addresses the concern that there are

inadequacies in funding as a result of Proposal A (School Finance Research Collaborative, 2018).

The top industry experts in the education field used multiple approaches to develop a plan to

fund schools with a higher allowance and address additional financial factors students need to

be adequately educated. A goal of Proposal A is to create a funding system where all students

are valued equally, however students with added needs like those that are economically

disadvantaged or in special education would receive additional funds to adequately meet the

student’s needs under the School Finance Research Collaborative. Unfortunately, to make this

happen would require additional revenues on top of the already instable funding system

currently in place.

Sales tax accounts for approximately 46% of the total school aid fund (Price, 2019). In

addition, approximately 15% of the school state aid fund comes from the state education tax
Proposal A Analysis 6

(Price, 2019), which is generated through property assessments. That means that over 60% of

the funding for schools is at the mercy of the economy, and this is an issue due to the elasticity

of the two sources. If the economy performs well, then the school aid fund will benefit.

However, when there are economic downturns, like we are currently experiencing, where

Michigan residents are not purchasing goods at the same rate as they had previously, it creates

a large issue for school funding.

Overall, Proposal A creates a mismatch funding the needs of a particular district.

Although Onaway was dead last in fund in 1994, they have experienced an 81% increase in

funding under Proposal A compared with Bloomfield Hills, who was first in funding in 1994 and

has experienced an approximate 15% increase. Rural district are making out better than non-

rural in terms of funding. While Bloomfield Hills is not necessarily getting the increases in

funding, they have experienced overall revenue increases due to enrollment increases. This is

contrast to the urban districts that are losing revenues due to enrollment decreases. As a

result, Proposal A has varying impact on different school districts.

In my opinion, Proposal A was brought forth to highlight changes that were needed to

Michigan’s educational funding system. At that time those changes includes shifting power

from local to state controls, providing tax relief to property owners, creating a system that is

more equitable, and offering families choices for their child’s education. While it is debatable

whether the shift in powers was a good thing, we can all agree that property owners felt the

relief. Furthermore, there is still work to be done to make things equitable, yet Proposal A did

bring about awareness of equitability. Moreover, it developed a dialogue about what is more

essential for school funding, equity or adequacy. There is no arguing that charter schools and
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schools of choice have definitely given options for education, however, whether they have

proven to be effective options is a whole other story. Proposal A has brought to light an

awareness for these changes, however more work needs to be done to raise the educational

bar in the state of Michigan. Therefore, it is my belief that Proposal A needs revisions to do just

that.

First, Proposal A claims to have shifted the power of control from the local communities

to state officials, however there are still local communities with some control. The hold-

harmless districts are able to levy mills on their local communities pending a millage election.

So, while Proposal A set forth to bring about equity, it was an uphill battle since some districts

will be out of formula. As a result, there is really a two-tiered system, those that can tax and

those that can’t. Therefore, to level the playing field and develop a sense of local community

and accountability, the State should consider providing options for district to levy taxes with a

cap on how many they can levy. While an enhancement millage is an option and provides some

sort of revenue for a local district, it is a countywide vote and not as customized to the needs of

an individual districts.

Next, the State should take a deeper dive into equity and adequacy. While some

schools can take a funding dip because they counter this dip with an enrollment increase, there

are districts across the state that are impacted by Proposal A due to enrollment and funding

declines. Not surprisingly, these districts rest in the urban areas of the state. As a result, the

educational experience for these students is brutally impacted. What’s more, these students

tend to be the ones with added needs. Whether they are economically disadvantaged, come

from a home where English is not their spoken language, or have some sort of disability, these
Proposal A Analysis 8

students require additional supports with less funding. Furthermore, there is a trend for all of

these categories to continue to rise. Therefore, more needs to be done address this

discrepancy brought on by Proposal A. State lawmakers need to develop categories and

classifications for students with added needs so that this issue is address. The lawmakers

should use the recommendations published by the Michigan School Finance Collaborative that

endorses funding to schools and school districts based on the actual cost of educating these

students with different needs. To do this though, would require additional funding.

Finally, while Proposal A has generated increasing per pupil allowance, albeit slowly,

over time, the state needs to generate a steadier stream of revenue. Currently, the source that

generates the most revenue is the sales tax. Sales tax is elastic, which means it has a tendency

to change. Subsequently, the State should look at generating revenues off of other sources.

These include the state education tax and income taxes. Since 2011, state and local taxes as a

percentage of personal income have been considerably lower in Michigan compared to the rest

of the country (Arsen, Delpier, & Nagel, 2019). Furthermore, Michigan ranks dead last among

states in total education revenue growth since the passage of Proposal A (Arsen, et al., 2019).

On top of this, the Michigan School Finance Committee recommends a pupil allowance of

$9,590, which is well above the 2019-2020 allowance of $8,111. Therefore, state lawmakers

need to put students over political parties and consider raising taxes on both the state

education tax and the income tax. It is understood that increasing taxes is not the most popular

choice, but in the word so Albert Einstein, “What is right is not always popular and what is

popular is not always right.” So, it goes for education and lawmakers as well.
Proposal A Analysis 9

In summary, Proposal A transformed the education funding system in the state of

Michigan. Its financial framework provides a reliable foundation for continued improvement in

Michigan’s educational funding system. The merits of Proposal A were well intended at the

time and were productive for several years, however they have lost credibility in the last 15–20

years. As a result, it is time for state officials to set party beliefs aside and compromise on a

bipartisan, educational funding plan that moves Michigan in a positive direction.

Proposal A Analysis 10

References

Arsen, D., Delpier, T., & Nagel, J. (2019). Michigan School Finance at the Crossroads: A Quarter

Century of State Control. Lansing, MI: Michigan State University, January.

Arsen, D., Plank, D. N., & Michigan State University. (2003). Michigan school finance under

Proposal A: State control, local consequences. East Lansing, Mich: Education Policy

Center at Michigan State University.

Lockwood, A. (2002). School finance reform in Michigan, Proposal A: Retrospective. Office of

Revenue and Tax Analysis, Michigan Dept. of Treasury.

Price, W. J. (2019). Taking the mystery out of Michigan school finance: A handbook for

understanding state funding policy for Michigan public school districts. ICPEL

Publications.

School finance research collaborative announces findings of comprehensive school

funding study. (2018, January 17). Retrieved June 03, 2020, from

http://www.fundmischools.org/press-release-school-finance-research-collaborative-

announces-findings-comprehensive-school-funding-study/