Ann Arbor voters will soon decide whether or not to approve a $1 billion millage that would go towards upgrading the infrastructure of the Ann Arbor public school district. As part of that coverage, WEMU's Patrick Campion presents a retrospective on the impact of Proposal A, which was designed to improve financing for Michigan's schools.
In the state of Michigan, school funding is divided into two eras: pre-Proposal A and post-Proposal A.
Before Proposal A was passed in the state of Michigan, a majority of funding for state schools came from local property taxes. An average of about 33 operational mills were assessed on the state equalized value, which is about 50% of the market value on every home and every property in the state of Michigan. That made up about 80% of the total funding for all schools in the state of Michigan at that time. The reminder was made up from things like sales tax, cigarette taxes, lottery revenue, industrial and commercial facilities taxes, commercial forest taxes, and liquor excise taxes.
Historically, what happened in the state of Michigan was that a law was passed that removed the ability for property taxes to pay for operational expenditures in schools and gave no replacement for how to still generate the $6.4 billion in annual revenue that would now be taken away from state school funding.
In between the passage of the law, in early 1993, and the passage of Proposal A, our Legislature had just five months to come up with a new, complete-from-scratch funding proposal for schools in the state of Michigan.
In 1994, the voters of the state of Michigan, by a 69-31 margin, voted "Yes" to do the following:
- Increase sales tax revenues from 4-6% with 100% of that 2% to go to the school aid fund.
- An increase on use taxes.
- An increase on the state education tax assessed on the taxable value of all properties to be set at six mills.
- A new real estate transfer tax (0.75%).
- Increases on the cigarette tax.
All would be used to increase funding for schools past the loss of that $6.4 billion.
An amendment to this act was also passed, which limits the taxable value increase in the value of your home on a year-by-year basis to the rate of inflation or 5%, whichever is less.
With the rapid decrease in home value in 2008 and the passing years, the taxable value can go down at an unlimited rate, but it can only increase each year by 5% or the rate of inflation (again, whichever is less). This means that the taxable revenue for schools can go down percipitously, but it takes a much longer time for it to return to the normalized value where it was at.
After the passage of Proposal A, state revenue for schools versus locally-raised revenue that didn't come directly from the state became an 80-20% mix, compared to the 30-70% mix that it was before Proposal A.
Local taxation still occurs. Districts may ask voters, as Ann Arbor Public Schools is now, to finance mills for debt, for sinking funds, and--not in the AAPS case, but in the case of the WISD district--for use for operations for an intermediate school district on a countywide basis. Up to three enhancement mills can be allocated to that.
So, how did this change funding at a district level? It took a formula that had been in place in the state of Michigan for decades and changed it to a per-pupil funding allocation. This is why "Count Day" has become so important for schools in the fall and the spring each year. There are minimal levels established for what schools would get on a per-pupil basis, but that has changed over years, and there is a formula to determine and attempt to equalize that value between different districts.
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