The major findings of this study appear in the "Executive Summary." They suggest several conclusions.
State spending on primary, secondary and higher education has been affected by Michigan’s current recession. Nevertheless, state lawmakers have protected education at all levels from the full consequences of the revenue decline. State spending on primary and secondary education even increased slightly during this period, while state colleges and universities were able to support their spending by supplementing their reduced state monies with tuition increases and funds from other sources.
Michigan has maintained its long-term practice of generous state education spending. From 1995 to 2005, state education spending, which was already high compared to the national average, has grown generously — well above the inflation rate. Proposal 5 does not appear necessary to ensure high and rising education spending over the long term.
In the short term Proposal 5 could produce results unanticipated by voters. The proposal mandates could lead to first-year reductions in state spending for certain education areas. In addition, the proposal could lead to cuts in major noneducation programs or to higher taxes. These last two pressures would likely recur with each state recession.
The largest single portion of Proposal 5’s estimated cost is related to MPSERS: $386.3 million of the projected $566.6 million (or $708.3 million) cost in fiscal 2007. As presently structured, MPSERS will cost taxpayers substantial and growing sums of money in coming decades. The MPSERS benefit has few rivals in the marketplace. Some private- and public-sector employers facing comparable pension problems have modernized the plans to make the benefits financially sustainable and sufficiently flexible to attract mobile professionals in the contemporary marketplace.
Such restructuring would not occur under Proposal 5, which merely shifts a growing portion of the MPSERS cost from one government body to another. This shift is irrelevant to the key cost problem, and until this problem is solved, taxpayers face a growing liability.
Ratification of Proposal 5 could distract from a solution if the MPSERS cost problem is seen as having been solved. Proposal 5 would also provide local districts with a payroll subsidy that could intensify the pension problem.
As with the looming MPSERS burden on taxpayers, Proposal 5 does not convincingly address the problem of improving Michigan’s education or restoring Michigan’s economic growth. Decades of relatively high education spending have not led to impressive test results or a nationally competitive state economy.
The proposal could even slow educational and economic recovery. The education spending guaranteed by Proposal 5 would reduce districts’ incentive to attract new students through better educational programs, while the proposal’s additional monies for districts with declining enrollment could encourage some of the state’s academically weakest districts to postpone classroom and fiscal reforms. To the extent that Proposal 5 ultimately added to Michigan’s above-average tax burden, the proposal could also forestall economic prosperity.