"Proposal A," 10 Years Later

March 15, 2004, marks the 10th anniversary of a watershed event in recent Michigan history: the approval by voters of a sweeping change in the way the state’s public schools are financed. Known as “Proposal A,” the constitutional amendment was intended to increase overall funding for schools, narrow the gap between the highest- and lowest-spending districts, and raise the sales tax from 4 to 6 percent to pay for a dramatic rollback in property tax rates. Has it lived up to its promise?

In 1995, many public schools received $3,000 to $5,000 per student. The wealthiest school districts — the highest spending 10 percent — received $6,500 per pupil or more. By 2001, all districts in the state received more than $6,500 per pupil. Patrick Anderson of the Anderson Economic Group (AEG) in Lansing points out that “in less than a decade, the taxpayers made every single school district a ‘high-spending’ district.” Even in Bloomfield Hills, spending per pupil is up by 16 percent since 1994, to nearly $12,000.

AEG’s research shows that operating funding for public schools increased by 45.2 percent from 1994 to 2001, more than double the inflation rate. That jump, however, was dwarfed by a whopping 147.8 percent increase in infrastructure funding, including property tax millages for new buildings and technology.

Ten years ago, the choice on the March 15 ballot was not between Proposal A or the status quo. It was between Proposal A or a so-called “back-up plan” consisting of a set of statutes that would have been triggered by voters’ refusal to adopt the reform measure. If the back-up plan had passed, Michigan’s personal income tax today would be at 6 percent instead of 4 percent. The sales tax would have been kept at its old rate of 4 percent and property taxes would have been cut slightly, with no guarantees that either tax couldn’t go higher in subsequent years. Given our traditionally high-tax, anti-competitive business climate vis-à-vis other states, Michiganians made the right choice when they voted for Proposal A by a vote of 69 percent to 31 percent.

Better funding for schools has not, unfortunately, produced better results. Far too many Michigan school districts harbor poorly managed and poorly performing schools. The State Board of Education’s low standards accept high schools in which 56 percent of students are not proficient in math, and 48 percent are not proficient in English, as meeting “adequate yearly progress” goals. Too many districts don’t take advantage of competitive bidding in order to save money on services from janitorial to food service to teacher health insurance.

The 10th anniversary of Proposal A is already prompting numerous assessments and, not surprisingly, some are using the occasion to make a case for higher taxes and more spending. But if the 1994 amendment needs amending at all, it needs it in the form of changes that would increase options for parents and produce greater accountability in the ways that education dollars are spent. There is a way to do this, while actually increasing funding for those schools that can make a convincing case for it. The Mackinac Center calls it “Proposal A+.” It could make schools — especially good ones — fundraisers instead of tax raisers.

What if parents, friends, neighbors, even businesses, or just any Good Samaritan citizen, could receive a tax credit if they made contributions to public or private schools, or to public or private scholarship funds? Offset dollar for dollar by a credit against the income or Single Business Tax, those contributions would not cost the donor a penny, and nobody’s taxes would increase as a result. Cap the credit at half what the state spends per pupil and savings would be generated for the School Aid Fund every time a child migrated from the public to the private sector.

Parents who believe a nonpublic school is the best bet for their child would no longer have to pay twice for schooling, and public schools could reap new revenues simply by convincing citizens to make a costless, tax-credited donation. The increased competition between public and private schools in this environment would work to improve education in all schools. Tax credits for public and private K-12 education already are on the books in Florida, Pennsylvania, Minnesota and Arizona.

After 10 years of operation, Proposal A has worked well and shouldn’t be scrapped. But it can be improved. Empowering citizens to assist both public and private schools through voluntary contributions is one promising way to do that. In any event, let’s be thankful Michigan voters made the right decision in 1994.

(Lawrence W. Reed is president of the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Michigan. More information is available at www.mackinac.org. Permission to reprint in whole or in part is hereby granted, provided the author and his affiliation are cited.