Expand the Principles of Proposal A

(Note: This commentary originally appeared as an Op-Ed in the Lansing State Journal on March 16, 2008.)

By passing Proposal A in 1994, Michigan residents became school finance reform leaders, establishing a model that other states are now beginning to follow. This state constitutional amendment continues to benefit teachers, school districts and taxpayers. It could do more if its underlying principles were pushed further.

Proposal A’s most noticeable benefit was significant tax relief for property owners, including a cap on future property tax increases. Balanced against that was a new 6 mill state education property tax, and a tax on all real estate transfers. Taxpayers also are paying more — and schools are collecting more — from Proposal A-related tax increases on sales and cigarettes.

Perhaps the most significant effect was that the basis for school funding became the number of students in a district — the money follows the students. As explained in the Mackinac Center’s "Michigan School Money Primer," each student brings a "foundation allowance" when his or her family chooses a conventional school district or charter public school.

This is a huge boon for teachers because it focuses funding on what happens in classrooms. If parents in a given district are happy with their kids’ classroom experience and decide to re-enroll, the district benefits financially. Certainly other factors, such as the state economy and school safety, can be significant, but teachers on the front lines have the professional skills to make an enormous impact on a school’s success.

While most complaints about Proposal A come from school personnel feeling the pinch of declining enrollment, to some extent this is related to outstate migration and declining birth rates. However, since revenues deposited into the state school aid fund must be used for education, fewer students statewide means more money for each remaining student.

However, a particular school district’s enrollment decline relative to other districts is a reflection of parents’ choosing a school other than the one to which they have been assigned. Viewed in this way, a student exodus provides districts with a signal and an opportunity to adjust their services to what parents and children desire. Schools must compete for students and the money attached to them, which, under the right conditions, can improve educational quality.

Proposal A’s effectiveness should be enhanced in three ways. First, rather than receiving funds for "phantom students" — the effect of using a "blended count" that includes only 75 percent of the current year’s enrollment — schools should get funds only for the students actually enrolled.

Second, state funds distributed to districts for specific optional purposes — "categorical grants" — should be consolidated into the foundation allowance. Districts should decide how to spend their funds.

Third, following the logic behind Proposal A, parents should be given even more educational options, including private schools. This could be effectively implemented with an education tax credit, which would allow parents, relatives and businesses to invest their own money and take direct responsibility for kids’ education. We can already do this for early and higher education. Why should our elementary and secondary students be any less important?

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Dr. Ryan S. Olson is director of education policy at 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.