Decades of Dollars and Disappointment

(Note: For more information on Proposal 5, see Braun's study, "An Analysis of Proposal 5: The ‘K-16’ Michigan Ballot Measure.")

It is not surprising that Michigan voters might hope more spending would improve the quality of public education. A July opinion poll revealed that 79 percent of us believed that spending "whatever it takes" to make Michigan's workforce the nation’s best-educated would be at least "somewhat effective." The survey also revealed that 70 percent supported Proposal 5, which would guarantee inflationary state spending increases for public schools and public higher education.

However, the survey's results actually reveal a multibillion-dollar failure. After spending more than most other Americans for decades, Michigan voters are not convinced the state has exceptional schools.

And for good reason: Michigan’s rankings for public school performance reveal mediocrity. In 2005, the American Legislative Exchange Council ranked states by various student test scores for 2003. Michigan college-bound high school students ranked only 25th on ACT scores. Our eighth-graders scored 34th in math on national exams and 27th in reading. According to U.S. Census Bureau data for 2005, Michigan ranked 34th in the nation for persons over age 25 with a bachelor’s degree and 21st in the percentage of high school graduates over age 25.

But Michigan has few spending rivals. ALEC compared per-pupil public school district spending among the states and ranked Michigan seventh highest in 1984, seventh in 1994 and ninth in 2004. Our teachers were the nation’s third highest paid in 1984, fifth in 1994 and second in 2004. The average Michigan teacher salary for 2004 exceeded $54,000 — 25 percent above the national average. Since implementation of Proposal A in 1995, state spending on public schools has increased nearly 44 percent, compared to an increase of about 31 percent in inflation. State government will spend more than $11 billion for Michigan public school districts in 2006 — the largest state spending program.

So what do taxpayers get for decades of top-dollar spending?

Just one-third of private employers offer a health care benefit to their retired employees, and those who do – such as General Motors and Delphi – are being forced to cut back because skyrocketing costs are creating financial crisis. Likewise, the health care benefit for retired public school employees is consuming rapidly escalating percentages of public school budgets. Total retirement fund cost increases over the last three years cost the average school district $178 per pupil, exceeding the state’s total basic foundation allowance increases during the period by $3 per pupil.

Health benefits for active employees also carry excessive cost. Most school districts still purchase this service through the Michigan Education Special Services Association (MESSA), a third-party administrator affiliated with the Michigan Education Association. Some districts spend $16,000 per teacher annually for health insurance, but a Kaiser Family Foundation survey shows an average cost of $11,900 for American workers as a whole. Districts that have dropped MESSA in favor of competitors report hundreds of thousands of dollars in annual savings, and the Michigan Legislature estimates that hundreds of millions of dollars per year could be saved under various forms of competitive bidding and bulk purchasing.

Likewise, despite credible evidence of cost savings, more than 60 percent of school districts do not competitively bid out transportation, custodial or food services. East Lansing schools report saving between $680,000 and $800,000 annually after privatizing the district's custodial services, a per-pupil savings of roughly $200.

Michigan’s prevailing wage law requires that state-funded construction projects, including public school buildings, must pay a wage that is established through a collaboration of labor unions, unionized contractors and state government. This is a mandate to waste money. In 1997, Ohio exempted public school construction from a similar requirement and saved 10.5 percent. A 2001 Mackinac Center estimate projected $150 million annual savings if Michigan enacted this reform.

Proposal 5's spending mandates would actually reduce the pressure on public education to spend money more effectively. Absent a requirement for spending reform, which is not part of Proposal 5, more money would be a mandate for more disappointment.

Kenneth M. Braun is a policy analyst specializing in fiscal and budgetary issues for the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.