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The supreme courts of Arkansas and Ohio ruled late last year that their respective states’ public school funding systems are inequitable, inadequate and unconstitutional. Both states have property-tax-based funding systems similar to Michigan’s before voters in the Great Lakes State passed Proposal A in 1994. The same sort of remedy that solved many of Michigan’s school funding problems might work for Arkansas and Ohio.
Prior to passage of Proposal A, Michigan’s school funding system was blamed for vast inequities between school districts located in poor areas and those in more affluent neighborhoods. Wealthy areas, being better able to withstand higher taxes, were able to raise far more money for their schools than were poorer neighborhoods. In 1994, local per-pupil expenditures ranged from $3,277 to $10,356, with 55 percent of districts spending less than $4,500 per student.
Similar situations have evolved in Ohio and Arkansas. For example, last year, CNN reported that the rural Meigs Local School District in rural Ohio was able to raise only $1,190 per student in local property taxes, while suburban Solon school district, also in Ohio, raised $7,585 per student in the same fashion.
Proposal A eliminated much of this sort of inequality in Michigan, in favor of a system partially funded by an increased sales tax. Each school is guaranteed a certain amount of funding per Michigan student, an amount that comes to $6,700 this school year. Any of that money not raised by a district through property taxes is supplied by the state.
Arkansas and Ohio also would benefit from lower property taxes, a major plus conferred on Michigan taxpayers since passage of Proposal A. Before the measure was passed, the average annual property tax in Michigan was 35 mills for schools alone (this amounts to $3,500 for a house valued at $100,000). Proposal A has reduced that level to an average of 18 mills. A 2-cent hike in the state sales tax, earmarked for the state’s School Aid Fund, makes up the funding difference. Currently, both Ohio and Arkansas allow city and/or county to add their own sales taxes.
Arkansas’ troubles are more complex than Ohio’s. It has a constitutional amendment that compels districts to set a property tax levy of no less than 25 mills for maintenance and operation of schools. But according to news reports, in order to keep the millage at manageable levels in poorer areas, school districts have been including debt-service millages in their millage totals, giving the illusion of a 25-mill tax for operating and maintaining schools. The Arkansas Supreme Court has ruled that debt service millages are not to be counted toward the 25-mill total, while the amendment’s authors claim they specifically worded it to allow such a practice.
Legislators in Ohio and Arkansas currently are debating how to meet the requirements laid down by their respective supreme courts for constructing school funding systems that are equitable and fiscally adequate for meeting the needs of school districts. They would do well to take Michigan’s Proposal A as an example of how to go about it. By prohibiting districts from constantly raising local property taxes, Proposal A encourages frugality and accountability in local school districts, in addition to helping resolve funding inequities.
Neil Block is managing editor of Michigan Education Digest, a service of Michigan Education Report, a quarterly news journal published by the Mackinac Center for Public Policy.
The Mackinac Center for Public Policy is a nonprofit research and educational institute that advances the principles of free markets and limited government. Through our research and education programs, we challenge government overreach and advocate for a free-market approach to public policy that frees people to realize their potential and dreams.
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