DEARBORN, MICH., AUG. 19 -- At a ceremony outside a one-room schoolhouse once attended by Henry Ford, the state of Michigan embarked today on a potential revolution in public education. Gov. John Engler (R) signed legislation that next year will eliminate local property taxes as a source of funding for public schools, a radical and unprecedented step that many here hope will lead to a fundamental restructuring of the school system.
How to replace some or all of the $6 billion a year in lost revenue -- two-thirds of the money spent for elementary and secondary education here -- is the most immediate and pressing task facing legislators in Lansing in coming months. As part of that debate, Engler and his allies hope to push through a far-reaching overhaul of the education system and adopt a version of school "choice" plans long advocated by conservative Republicans.
Calling for a system that would "empower our families with {a} choice" of schools that would compete among themselves to attract students, Engler declared: "We can no longer accept in this state a monopoly of mediocrity."
The battle lines have been drawn for a bruising legislative battle, with the strongest opposition to Engler's plans expected to come from the Michigan Education Association (MEA) and the Michigan Federation of Teachers (MFT), the unions that represent teachers and other school employees. Minutes after Engler signed the bill, the MFT filed suit in Wayne County Circuit Court seeking to force the Legislature to adopt a new funding mechanism immediately.
"We are appalled. We think this is a big joke," said Delores Smith, a coordinator with the Detroit public schools, at the signing ceremony outside the red-brick Scotch Settlement School, which was built in 1861. Like other critics, Smith assailed Engler for agreeing to eliminate the main source of school funding without proposing a replacement system.
Local property taxes are the financial bulwark of the public schools in most states. According to the Education Commission of the States, local revenue accounts for about 50 percent of the money spent on public elementary and secondary education in the United States, with the rest coming from the federal and state governments. Most of the local revenue comes from property taxes.
Schools have relied on property taxes in part because they are generally stable sources of revenue, easy to collect and difficult to manipulate, said Mary Fulton, a policy analyst with the commission. But they are also highly visible taxes, often requiring a local vote to be raised, and as such they have become the focus of anti-tax campaigns and vehicles to express voter discontent with government in general and the quality of public schools in particular, Fulton said.
That certainly has been the case in Michigan. This week alone, voters in three Michigan school districts rejected higher property taxes to close school funding gaps for the 1993-94 school year. One of those votes was in the rural Kalkaska school district, which attracted national attention last spring when it closed its schools 10 weeks early because it had run out of money.
Earlier this year, Engler campaigned vigorously for a proposal that would have increased the state sales tax by 50 percent, cut property taxes and guaranteed a minimum of $4,800 spending for every Michigan pupil to ease the fiscal crisis and close the huge spending gap between rich and poor school districts. Voters rejected the plan in a statewide referendum by 54 percent to 46 percent.
It was against this backdrop that in July state Sen. Debbie Stabenow (D), an MEA ally and candidate for the Democratic gubernatorial nomination next year, proposed the property tax elimination as an amendment to a bill supported by Engler that would have cut property taxes by 20 percent but not replaced the lost revenue. To the surprise of many in Lansing, Engler and legislative Republicans seized on Stabenow's proposal and it sailed through both houses of the Legislature in two days.
"It was just sort of a stampede, a lot of it born of frustration with 25 years of trying to do something about this problem," said Robert Kleine, a senior economist with Lansing-based Public Sector Consultants, a public affairs consulting firm.
Stabenow insists her amendment, which does not affect property taxes that fund local government functions other than education, was not a bluff but a means to force the Legislature to overhaul the school funding system under the pressure of a deadline -- the start of the 1994-95 school year. "We decided to stop this whole process of continually chipping away at the schools without being accountable for the funding," she said.
"No question this is bold," she added, but with more than 40 school districts teetering on the brink of bankruptcy "to do nothing was a formula for disaster."
Engler said today he will introduce a plan to revamp the school system and provide a new funding mechanism by early October and hopes for final legislative action by the end of the year. He has not proposed a way to close the $6 billion gap, but he has suggested that a new funding formula should include an increase in the state's 4 percent sales tax. That, however, could be risky near the start of the new school year because it would require voter approval in a statewide referendum.
Engler also has not detailed the type of choice plan he favors except to suggest that it would involve a system of uniform state grants to parents that could be used to enroll students in any public school in the state. But critics charge that this would not address the most pressing problem facing Michigan schools -- a funding gap in which per pupil expenditures range from $3,000 in poor, rural districts to $9,000 in the wealthy Detroit suburbs.
"Until the inequity issue is dealt with, choice is an unrealistic proposal," said MEA President Julius Maddox. "What the governor needs to do is to make sure every school has a quality program."