In 1994 Michigan fundamentally changed how public schools were funded. In a joint effort by the Michigan Legislature and Governor John Enlger, Proposal A was developed and placed on the 1994 Michigan ballot. The overarching goal of the proposal was to address the concerns of school quality across districts in the state. There were three main intentions of the proposal. One was to find a new way to fund school operations, other than property taxes. Next, was to create a funding system that limited the disparity in per pupil spending. Finally, they set out to ensure “stable” and “adequate” revenues for school operations. Its guarantee was to provide per pupil funding for all Michigan school districts in an equitable way. A need for such proposal was established over the course of about three decades. Proposal A was not the first attempt to change the tax codes that distributed money to schools. Since 1964 there had been 14 constitutional amendments proposed..
Prior to 1994, per pupil funding was largely supplied by local property taxes. If a local district had the means to exceed the state guarantee of per pupil funding then, those districts were denied state aid. The exception however was that these districts still did receive funding for special education, transportation, vocational education and other specific services. Thus, about 39% of school districts did not receive additional state aid in 1993.
The gap present in per pupil funding in the 1993-1994 school year was quite significant. Per pupil funding ranged from $2,800-$10,400 in 1993. Overall about $6.1 billion was collected every year in property taxes and used for schools. A goal was to make sure all schools were being given equal per capita to spend on each student to lessen the educational opportunity gap.
The Legislature preempted the need for Proposal A in 1993 by exempting all property in the state from millage’s to be used to support school operations unless they obtain an alternative school funding plan. After intense lobbying by the MEA (Michigan Education Association) and the Chamber of Commerce, the people of Michigan approved the amendment by a great majority, 69% of voters supporting Proposal A.
The amendment did a number of things that greatly changed the way taxes are collected and fund Michigan schools. A major change was the sales tax increasing from 4 to 6%. There was a cap on property assessments at 5% or the rate of inflation. It additionally put restrictions on the legislatures influence on school spending by requiring a 3/4 vote to change laws relating to property taxes and school funding. Proposal A also put a restriction on the number of times a district can request a millage, to two times per year.
In addition to the amendment to the constitution, 24 state statutes were included in the proposal. They included a statewide property tax levy of 6 mills on all property for educational purposes on homesteaded property. Furthermore, a tax levy of 18 mills was put on non-homestead property. Later to be reduced to .75% was an original 2% real estate transfer tax on the sale of real estate. The cigarette taxes were also increased and an interstate phone tax set at 6% was additionally established. The contributions of money collected by these new or increased taxes lessened the amount residents had to pay through property taxes to fund schools.
The result of the proposal was an extreme new distribution of funding for schools. Prior to the change, 57% of the school operating costs were funded by local property taxes, after 1994, that proportion was down to about 35%. Those areas that were helped most by the proposal seem to be residents of more rural areas who saw significant increased funds. Some people on the extreme ends of the spectrum were most negatively affected by the proposal it would seem. Those of extreme urban areas, such as Detroit lost money from this reform. Additionally, schools in the rich suburbs that typically voted in millage’s to fund operating cost were no longer able to procure such high per pupil spending totals. While there was a decrease in the per pupil gap that was apparent in the 1990s, the Michigan Legislature realized that Proposal A was a solution to the concerns in the 90s and was a step in the ongoing necessity of “dynamic” funding reform.
"1994 Michigan School Finance and Property Tax Reform." Jan. 1995. By Lynn Harvey at Michigan State University.
“Centralization of School Finance in Michigan” by Paul Cournat. Journal of Policy Analysis and Management, Vol. 16, No. 1, 114– 136 (1997)
“Revolution and Evolution: Michigan’s Proposal A School Finance Reform.” Policy Recommendations. September 2005. By The Michigan Prospect.