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A Parents’ Guide to School Funding
View Washtenaw Intermediate School District's Award Winning Video "Facing Michigan's School Funding Crisis
What Is a "Structural Deficit"?
What Is Proposal A and Why Does It Affect Schools?
What Is a "Structural Deficit"? It has been widely reported that Michigan has a "structural deficit" when it comes to our economy. A structural deficit means that a deficit will be posted regardless of how well the economy is functioning - recession, boom, or anything in between. A deficit occurs when a government unit spends more than what they take in. So: Expenses > Revenues = Deficit
In a structural deficit, things are so out of balance that a government unit will post a deficit regardless of how well the
economy is doing. In a strong economy, revenues (tax receipts, etc) rise due
to increased economic activity (more jobs, more spending, etc). With a
structural deficit, the strength of the economy is irrelevant - a deficit
will be posted regardless. Countries, states, or municipalities get rid of structural deficits by: 1. Cutting spending on a permanent basis. 2. Raising revenues (usually through tax increases). Neither of these options are appealing for politicians, which is why many structural deficits continue to linger. (source www.davemanuel.com) What Is Proposal A and Why Does It Affect Schools? Before 1994, Michigan relied solely on local property taxes to fund schools. More than 60% of education revenues came from local sources, with the remainder provided by the state and federal governments. Michigan property taxes were among the highest in the nation. In March 1994 Michigan voters approved Proposal A: A dramatic change in the way our state funds its schools. Proposal A shifted the main source of education revenues from the local property tax to the state sales tax with support from property taxes (6 mills). The financing shift was accompanied by a shift in administrative and policy-making control to the state level. Decisions once made by local voters and local officials are now made by the Michigan Legislature. This shift reduced the property tax paid by a home owner by as much as $2,000. Proposal A also attempted to “level the playing field” between wealthy, impoverished, rural, and city school districts by introducing an allowance per child enrolled in each school district. The State decides, through a complex calculation, how much per child each school district receives. The 6 mills home owners pay for schools do not necessarily come back to the district in which the home owner lives. That tax money could very well be sent half-way across the State to another district, depending on the calculation in Proposal A. While some equality of funding has occurred under Proposal A, there is a long way to go to completely “level the playing field”. Proposal A also limited the growth of property tax assessments with another complex financial calculation. What you really need to know is that the formula used can keep taxable value from growing as fast as property value. It limits the growth in taxable value to 5 percent a year or less. This limit on taxable value assumes no significant change to the property. (i.e. no new family room or other type of addition). The cap comes off when a parcel is sold. In the year after the sale, taxable value kicks up to the State Equalized Value (SEV), but just for that year. Then the limit applies to future increases, until there is another sale. A parcel’s taxable value is printed on the annual tax bill and assessment notice sent out by each homeowner's municipality. This all sounds reasonable: Keep property taxes low; shift funding to sales taxes, and use lottery proceeds to fund schools. Unfortunately, this model only works well when the economy is strong and booming as we have found out from the last few years in the State of Michigan. “Proposal A fails to ensure either fiscal stability or financial adequacy for Michigan schools,” informs the study from Michigan State University, Michigan School Finance under Proposal A, State Control, Local Consequences. “The revenue base for the state’s School Aid Fund (SAF) is dangerously vulnerable to cyclical fluctuations in the economy. Revenue from sales and income taxes generally fall when the economy goes into recession. Because the SAF relies so heavily on sales and income taxes, economic downturns can lead to rapid declines in the revenues available for schools.” We need look no further than the current headlines in the papers to see that the statements in this study are true. So far we have seen that, Proposal A:
One of the main shortfalls of Proposal A is that the School Aid Fund generated by sales tax and lottery proceeds has never covered the cost of what the Michigan Legislature has promised the schools. The Legislature’s solution to the growth in education spending was supplementing School Aid Fund revenues with money taken from the General Fund and the Budget Stabilization Fund (BSF) commonly know as the “rainy day” fund. The School Aid Fund has been short an average of $500 million per year since the adoption of Proposal A, even during the economic boom of the late ‘90s. This shortage is known as the "General Fund Gap.” Michigan schools, both Public and Charter, are now faced with the prospect of significant and sustained funding reductions, even as their operating costs continue to grow. Should Proposal A be abandoned for a new way of funding schools in Michigan? Not necessarily, but it does need to be evaluated and amended. On one hand, Proposal A has accomplished the key goals for which it was designed: It has provided substantial benefits for Michigan tax payers and promoted a more uniform funding across local school districts. However, the critical problems with school funding, identified above, need to be addressed or all of our schools in Michigan, Public and Charter schools alike, will fail. (Source: Michigan School Finance Under Proposal A, State Control, Local ConsequencesDavid Arsen, Professor of Educational Administration, College of Education, Michigan State UniversityDavid N. Plank, Professor and Co-Director, The Education Policy Center, Michigan State University.)l 87% of the district’s funding is from state and local sources; our district’s budget is approximately $53 million. l The state of Michigan’s general fund is suffering because of a structural deficit. l For the last 7 years, the state has experienced declining revenues, slow economic growth, and no long range plan to balance the budget. l Lottery revenues have NOT increased the School Aid Fund; the lottery money has REPLACED other revenues for funding schools in Michigan. l Under Proposal A, districts CANNOT raise additional operating dollars for more teachers and teaching materials. By law, bond dollars or sinking fund dollars may NOT be used to pay for staff or materials. l In spite of its original intent, Proposal A has NOT achieved its goal of reducing the spending gap between the “haves” and “have not” districts; yet, it has reduced reliance on local millages for public school funding. l Despite budget tightening measures, Van Buren Public Schools is facing approximately $4 million budget shortfall for next year. l Law requires districts to present a balanced budget to the State by June 30th of every year. l Districts, including the Van Buren Public Schools, must find ways to raise revenues AND cut expenses and solve their own structural deficit. Contacting Your Public Officials The following is a list of legislators that represent the Van Buren Public Schools community. We have listed the communities represented by the name of the legislator for your convenience of identifying who you would need to contact to voice your opinion on school funding.
Jennifer Granholm, Governor 2nd Floor Romney Bldg. P.O. Box 30013 Lansing, MI 48909
Bruce Patterson, State Senator for Belleville, Canton, Sumpter, and Van Buren Township, 7th District P.O. Box 30036 Lansing, MI 48909
Raymond Basham, State Senator for Romulus, 8th District P.O. Box 30036 Lansing, MI 48909
Liz Brater, State Senator for Ypsilanti and Ypsilanti Township, 18th District P.O. Box 30036 Lansing, MI 48909
Dian Slavens, State Representative for Belleville, Canton, and Van Buren Township, 21st District P.O. Box 30014 Lansing, MI 48909
Douglas A. Geiss, State Representative for Romulus, 22nd District P.O. Box 30014 Lansing, MI 48909
Deb Kennedy, State Representative for Sumpter Township, 23rd District P.O. Box 30014 Lansing, MI 48909
Alma Wheeler Smith, State Representative for Ypsilanti and Ypsilanti Township, 54th District P.O. Box 30014 Lansing, MI 48909 |
