Friday, April 25, 2008

Why I Don't Like Ballot Initiatives

Graphic from the Citizens for Equity site

In 1995, Michigan voters passed Proposal A, an initiative to lessen the reliance on property taxes as the primary funding source for Michigan's schools, and to provide more stable and more equitable funding of all students throughout the state.

I campaigned for Proposal A, even though my own district, Leland Public Schools, would become a “donor district”, with our property taxes contributing more to the state fund than we got back in school aid. We had a ringside seat when Kalkaska Pubic School ended its school year in April because voters wouldn’t agree to another millage and they ran out of money. It was clear to me that my kids would be much better off living in a state where everyone had access to quality public education, not just the kids in certain districts. The ballot language of Proposal A was pretty straightforward:

A proposal to increase the state sales and use tax rates from 4% to 6%, limit annual increases in property tax assessments, exempt school operating millages from uniform taxation requirement and require 3/4 vote of Legislature to exceed statutorily established school operating millage rates. The proposed constitutional amendment would:

1. Limit annual assessment increase for each property parcel to 5% or inflation rate, whichever is less. When property is sold or transferred, adjust assessment to current value.

2. Increase the sales/use tax. Dedicate additional revenue to schools.

3. Exempt school operating millages from uniform taxation requirement.

4. Require 3/4 vote of Legislature to exceed school operating millage rates.

5. Activate laws raising additional school revenues through taxation including partial restoration of property tax.

6. Nullify alternative laws raising school revenues through taxation, including an increase income tax, personal exemption increase, and partial restoration of property taxes.

Should this proposal be adopted? Yes___ No__.

Everyone would pay slightly higher sales tax, real estate taxes would be more uniform and be insulated from rising too quickly, schools would have a stable source of funding, and school aid would be more evenly distributed.

Proposal A should have worked. It could have worked. But, even as folks like me were campaigning for the idea of equitable funding for Michigan schools, at the expense of our own districts, there were certain districts who were quietly arguing that all that equity was fine for others, just not them.

Sometime around the vote on Proposal A, a little known piece of legislation, the Public Act 283 of 1994, gave the 51 highest funded districts of Michigan the right to ask their homestead taxpayers for “hold-harmless millages” that let them opt out of the equalizing effects of Proposal A. These millages are levied on homestead property first, and the districts are not allowed to levy an amount that would increase their per-pupil spending faster than the rate of inflation. 51 districts (out of about 500) "qualified" for this privilege by spending $6500 or more per student in 1994.

Although it was contrary to the promise of Proposal A, there is nothing inherently wrong with giving communities the choice to support their local districts above the average level. There is something wrong about giving the privilege to some districts and not others. The $6500 cutoff was arbitrary, and some people have described it as rewarding districts who were not so frugal with taxpayer's money.

There was something going on in the background at the time of Proposal A.

Prior to the implementation of Proposal A in 1995, the State of Michigan and public school districts shared in the financing of the employers’ shares of contributions to Michigan Public School Employees Retirement System (MPSERS) for public school districts. Those contributions, expressed as a percentage of active employee payrolls, prefunded the actuarial costs of the defined benefit plan provided to public school employees plus the costs of health benefits for retirees on a pay-as-you-go basis. After Proposal A was approved, full responsibility for financing the employers’ contributions passed to the school districts.*

At first glance it seems that the yearly increases in the per-student grant, which keep up with inflation for the most part, ought to be sufficient to keep schools properly funded. In reality, the annual increase is overshadowed by spiraling retirement and health care costs, leaving less each year to actually educate kids.

How did this happen? There was no mention of pension or health care funding in the Proposal A ballot language. And even after Proposal A passed, the stock market was paying off so the schools' contributions were not that onerous. Would we knowingly have approved a system that worked great in good economic times but fell apart when times got tough?

For years, I could get nowhere talking to my state legislators about school funding. legislation by ballot initiative was the perfect cover for them. They would just say "We can't do anything about that, it's an amendment to the state constitution." even though they were happy to pass all sorts of exemptions to the taxes that were supposed to support the school aid fund.

Last Saturday there was a woman standing in front of the Post Office collecting signatures for the Health Care for Michigan ballot iniative. I asked her "Why a ballot initiative?" and she said, "So the legislature can't mess it up." I signed her petition, but I'm really hoping we can elect some state legislators with brains and backbones.

*Quote from the Citizen's Research Council of Michigan's 2004 report, Financing Michigan Retired Teacher Pension and Health Care Benefits)

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