The Michigan Daily - Friday, March11.1994-- 3
Voters to choose
which taxes they
would like to pay
By JAMES M. NASH
DAILY STAFF REPORTER
WT hen Michigan residents go to
the pols Tuesday to cast their
votes on Proposal A, they won't
be voting to reform the state's public edu-
The Legislature has already done that.
When voters choose between sales
taxes and income taxes as the primary
meansof funding the state's public schools,
they won't be voting to overturn a system
of taxation that relies on property tax.
The Legislature has done that, too.
And when voters pull the levers Tues-
day to cement the final detail of a finance
reform process that has stumbled and
stalled for 20 years, they won't be handing
themselves a long-awaited tax cut.
The Legislature didn't do that.
Instead, voters will choose to rebuild
the state's system of school taxation based
on either higher sales tax or income tax.
School funding was effectively gutted
when the Legislature voted last July to
wipe out more than $6.1 billion in prop-
erty taxes without specifying replacement
This time lawmakers were charting a
path from which there was no turning
back. Michigan voters had struck down 14
proposed constitutional amendments on
property taxes and school funding since
1964, approving only the Headlee Amend-
ment in 1978. Headlee placed a limit on
the growth of property taxes, but school
districts often found ways to bypass the
amendment with special elections and
Headlee, it turned out, did not contain
the frustration of Michigan taxpayers over
skyrocketing property taxes. Talk of a
taxpayer revolt was spreading last spring
when the Legislaturepresented voters with
a plan to raise the sales tax to compensate
for a promised property tax cut. Although
the plan - also called Proposal A - was
initially popular, it fizzled at the polls,
apparently the victim of voter distrust of
the Lansing government.
In a stroke of bipartisan cooperation
the next month, Democratic state Sen.
Debbie Stabenow proposed the massive
property tax cut, a move that won wide-
spread support from Democrats and Re-
publicans alike. The bill - later signed
into law by Gov. John M. Engler - was
greeted outside of Lansing with a mixture
of enthusiasm and skepticism. School of-
ficials wondered whether their source of
revenue would quickly dry up; voters
wondered what new taxes the state would
They got their answer Christmas Eve.
After 26 hours of jockeying over deatils of
their plan, bleary-eyed lawmakers emerged
from legislative chambers with a two-
track ballot issue and an agenda for educa-
tion reform to carry the state's schools
into the next century. Legislators hailed
the plan as a model of bipartisan team-
It didn't last long. Proposal A has been
sucked into the politics of this year's gu-
bernatorial election, with incumbent
Engler supporting the ballot plan and
Stabenow -the Democratic front-runner
- leading the charge against it. The first-
term Republican governor has pinned his
re-election hopes on a successful conclu-
sion to the education funding debate.
Now in its final days, the bickering
over Proposal A has intensified on both
sides. Tobacco manufacturers - who
would undoubtedly suffer from Proposal
A's higher taxes - and labor unions are
pouring money into a campaign to defeat
the ballot issue, while business groups
have lined up behind the proposal. Both
Comparing the plans
On March 15, Michian voters wil go to the polls to decide how they wish to fund the state's
535 public school districts. The referendum comes as a compromise the Legisature hammered
out in a rmarahon session Chri-tmas Eve. if the ballot plan is defeated, the backup statutory plan
automatically takes effect, Either way, the new taxes will show up on this sumre's tax bills.
Gettng the new revenue
Neither plan will replace all of the $6.1 billion cut in July when the Legislature eliminated proaerty tSxe 3s a
source of school funding. The ballot plan would raise about $56 billion from its new taxes while the statutory
plan generates aproximately $5.9 billion from new sources. Here is the total fundng package under each plan.
- $10.597 billion
Federal Aid: $92 million.
Local Property Taxes: School
Districts can still levy additional
taxes to fund programs, This year
that level may not exceed 18 mills
and assesment increases would be
limited to 5 percent or the inflation
rate, whichever is lvver, In 1991,1
districts could ask voters for an
additional 3 mills.
Other State sources: Range from
General Fund grants, adjustments
to the school aid fund by apre-
exsiting formula, liquor taxes and
taxes on industrail and commercial
Lottery: In addition to the current
lottery funding, a new Keno-type
would be established, generating
an estimated $35 million.
Tobacco tax: Increases 50 cents
State property taxes: Would be
limited to 6 mills on first homes, 24
mills on other property.
Real Estate Transfer Tax: Beginning
January 1, a 2 percent tax would be
imposed on all transactions.
Income tax: Sore money from the
current income tax goes to fund
Sales Tax: On May 1, the sales
would inct'ase from 2 cents for
evert dollar of a purchase, not
including unprepared food. The
increase would not pplyto
residential electricity, gas or heat
Federal Aid: $92 million.
* Local Property Taxes: School
SDistricts can still levy additional
taxes to fund programs. This year
that level my not exceed 18
mills and assesment increases
wecld be limited to 5 [ercent or
the inflation rate, whi chever is
lower. In 1997, districts could ask
voters for an additional 3 mills.
Other State sources: Range from
General Fund grants, adjustments
to the school aid fund by a pre-
exsiting forrula, liquor taxes and
taxes on industral and
commnercaal facli tes.
Lottery: Current funding would
Y Tobacco Tax: Increase 15 cents
State Property: W ould be limited
to 12 mils'
Real Estate Transfer Tax: would
b e established of 1 percent.
linale Business Tax: would
increase by 0.4 percent.
In come tax: would increase by
. 1.4 percent frorn 4.6 percent to 6
percent. The revenue from the
in cresewould be dedicated to the
State School Aid F und.
Sales Tax: Some existing money
goes to education, The use tai
would be expanded to include
interstate telephone calls at the
current 4 percent rate.
new role in1
wring the 1960s, the University
dabbled in public school science
academies during an experiment
that was shelved shortly after its inception
when it became too expensive.
Now the University is poised to re-
enter grade-school education in aprogram
that remains sketchy but has the strong
support of President James J. Duderstadt
Administering newly chartered grade
schools is one of many ways the Univer-
sity can help reshape education in Michi-
gan, aprocess hastened by the Legislature's
move last summer to find a new source of
funding for schools.
But the University lags far behind
Wayne State University, which already
runs a charter school in Detroit. Charter
schools are spin-off institutions autho-
rized by community colleges, universi-
ties, intermediate and local school dis-
tricts. Any non-religious group can estab-
lish a charter school and receive state
funding if it meets educational standards.
Legislation signed into law by Gov.
John M. Engler last December encour-
ages the creation of charter schools and
promises a stream of money to set them
up. In a recent discussion with Engler,
Duderstadt said he was "very excited"
about the concept of establishing charter
schools, according to a spokesperson for
Press Secretary John Truscott said the
University's role as a research institution
makes it an ideal match for technology-
starved public schools.
But University officials balk at estab-
lishing their own charter school. "There
are an awful lot of questions that still need
to be answered about our potential liabili-
ties and where the University's role termi-
nates and the secondary school's role be-
gins," said Keith Molin, associate vice
president for government relations.
Instead of chartering its own school or
schools, the University may channel its
resources into other newly created educa-
tional institutions. Accounting personnel
from the University, for example, could
administer the finances of charter schools.
Or the University could evaluate the ef-
fectiveness of these new schools.
"There's not a lot of evidence to be
sure (charter schools) will be successful,"
said School of Education Prof. Philip
Kearney. "These schools will need agood,
solid third-party evaluation, which is where
we could come in."
Whatever form the University's role in
education reform takes, it will be a large
"We're going to be very much in-
volved," Molin said.
The financial aftershocks of the
Legislature's vote last July to eliminate
property tax funding of schools may ripple
through the University's budget as well.
If voters approve Proposal A, the sales
tax increase on next Tuesday's ballot, the
state budget will experience a shortfall of
$600 million, according to budget projec-
tions. If the ballot plan is rejected, the state
budget still will be $350 million short of
the funds raised under the former system
"This should have a fairly modest ef-
In contrast to Gov. Engler's strong
support of Proposal A, members of the
College Republicans expressed only luke-
warm enthusiasm for the plan. "I don't
like either side of the proposal," said John
Damoose, head of the University chapter.
"Both are raising taxes."
The group hasn't taken an official po-
sition on Proposal A, but is promoting the
plan with flyers around campus. LSA
sophomore Mark Fletcher, leader of the
College Republicans' campaign for Pro-
posal A, said the ballot plan is the "lesser
of two evils." He echoed Damoose's sen-
timents against any tax hike.
"But the backup plan has many more
Engler's press secretary. "One of the most
relevant things to college students is, 'Will
there be ajob when I graduate'?' The ballot
plan will help ensure low taxes and a
strong economy, which is something stu-
dents should consider."
The ballot proposal would increase the
tax on property transfers by a factor of
nearly 20, to $21.10 per $1,000 of prop-
erty value. The statutory plan also would
boost the transfer tax, to $11.10 per $1,000.
The sharply increased transfer tax un-
der Proposal A would place home owner-
ship out of reach of most college gradu-
ates, said state Rep. Mary Schroer (D-Ann
Arbor). Schroer said renters lose under
"regressive" nature of the sales tax.
But most Michigan residents will vote
with their pocketbooks, said Edward
Gramlich, director of the University's In-
stitute for Public Policy. Here Proposal A
enjoys a comfortable lead in Washtenaw
County and many Detroit suburbs, which
could tip the scales next Tuesday.
Gramlich and public policy Prof. Janet
Weiss downplayed the significance of next
Tuesday's election. Gramlich called the
vote "icing on the cake" of a process that
will raise the standards of public educa-
tion in Michigan.
And Weiss said the process of reform
the Legislature embarked on last year by