Without warning and with no plan for the future, the Michigan Legislature and Gov. John Engler eliminated the state’s public school finance system, which funded all public schools statewide through local property taxes. With the system scrapped and no plan from the legislature and governor to replace it, Michigan schools faced the dire prospect of having no funds to operate starting in fall 1994.
It’s important – even encouraging – to know and remember what happened next.
Let’s start this story of the 1993-94 Michigan school finance reform effort with a bit of context. Over the previous 25 years, growing reliance on local property taxes resulted in local property taxpayers carrying over 65% of K-12 school funding. During this same period, the spending gap between so called “high-spending” and “low- spending” districts created increasingly dramatic inequities in educational opportunities. The system generated significantly more revenues to students and schools in wealthier school districts, and far less revenues for students in poor urban and rural areas. And the gaps were growing.
To try to change the system, Michigan legislatures, governors, education advocates, and citizen organizations worked to place 12 reform proposals on statewide ballots between 1967 and 1993 for voters to consider. Michigan voters rejected each and every one of them. Not surprisingly, education finance proposals were major subjects of intense partisan debate, campaigns, and conflict.
In the 1990 Michigan gubernatorial campaign, the successful Republican candidate (state Sen. John Engler of Beal City) promised a hefty property tax cut if elected. Once elected, he launched a petition drive to put a constitutional amendment on the November 1992 ballot – designed to provide an across-the-board cut in local property taxes, accompanied by a cap on future increases in the assessed valuation of property. The Legislature also placed its own plan on the November ballot. It would limit annual assessment increases on homestead property to the lesser of 5% or the annual inflation rate.
On the November 1992 ballot, both proposals failed by large margins. As a result, voter approval of property tax relief and school finance reform proposals had failed 11 times in the 21 years prior to 1993.
At the beginning of the 1993-94 legislative session, two more school finance proposals were taking shape. One of them was the product of an informal bipartisan group of 12 state House members, and the second was an effort by Engler to work through the legislature to enact the provisions of the property tax cut, which voters had just rejected in November 1992.
In 1992, two Republican members of the House of Representatives – Glenn Oxender (R-Sturgis) and Michael Nye (R-Litchfield) – frustrated by the continuing failures of ballot proposals to gain voter support, proposed reducing the property tax for school funding with a shift to the income tax. In response to their suggestion, I agreed to work with them to form a bipartisan team of House members who would attempt to develop a school finance proposal. Six Republican and six Democratic legislators agreed to meet every Tuesday afternoon in the office of state Rep. Susan Munsell (R-Howell) for several months before and after the November 1992 elections.
These discussions fashioned what became known as the Bipartisan Legislative Team (BLT) school finance proposal. Unlike Engler’s plan, the BLT proposal linked property tax reform with school finance reform, rather than dealing only with the former. Property tax relief was to take the form of a rollback of property taxes for school operations on residential and agricultural property. Schools were to be reimbursed for lost revenues through an increase in the state personal income tax from 4.6% to 6.9%. In early 1993, the BLT plan was introduced with an impressive bipartisan roll of nearly 40 House co-sponsors quite evenly divided along partisan lines.
As a result of the 1992 election, the 1993-94 partisan make-up of Michigan government was: Republican Gov. Engler; Republican majority control of the state Senate (20 GOP members to 18 Democratic members); and an evenly split number of 55 Democrats and 55 Republicans in the state House – where a “Shared Power” structure was adopted. The Democratic Speaker was Rep. Curtis Hertel and the Republican Speaker was Paul Hillegonds. They alternated each month as the “presiding speaker.” The House committee chairs alternated each month representing the party of the presiding speaker of the month.
The evening of July 20, 1993, the Michigan Senate unexpectedly voted 29 YES and 5 Democrats NO to eliminate the property tax for funding of public-school operations. The following day the Michigan House of Representatives hurriedly voted 69 YES to 34 Democrats and 1 Republican (Rep. Bill Bryant) NO to concur. Engler signed the bill into law as Public Act 145 of 1993. As a result, 65% of all funds for locals schools (roughly $6.5 billion) were eliminated with no replacement plan for consideration.
Immediately, co-speakers Hertel and Hillegonds tasked the bipartisan group of 12 state representatives, who had been meeting in Rep. Munsell’s office, with developing a new system of funding Michigan’s public schools. The bipartisan group increased to 14 Representatives—seven Democrats and seven Republicans. We were: Jim Agee (D-Muskegon); Bob Brackenridge (R-St. Joseph); Bill Bryant (R-Grosse Pointe); Maxine Berman (D-West Bloomfield); Bill Bullard, Jr. (R-Milford); Barbara Dobb (R-Walled Lake); Bob Emerson (D-Flint); Don Gilmer (R-Augusta); Lynn Jondahl (D-Okemos); Bill Keith (D-Garden City); Susan Grimes Munsell (R-Howell); Jim O’Neill (D-Saginaw); Glenn Oxender (R-Sturgis); and Ted Wallace (D-Detroit).
In 1993, these 14 lawmakers had a combined length of House service in excess of 150 years, dealing with education policy, education finance, taxation, and education politics. We represented a true cross-section of school districts from among the smallest communities to the largest, rural, suburban and urban. We brought diverse professional backgrounds to the table as teachers and school administrators, farmers, business operators, a union laborer and organizer, lawyers, a banker, a clergyman, CPAs, and financial advisors. Some were married, some single. Some had children, others had none. Six of us (not me, obviously) have died since our efforts together in 1994.
Our challenge was to develop Proposal A for the state Legislature to place before voters on the March 1994 statewide ballot. In later months and years, I found it notable in watching video interviews with them and printed obituaries at their times of death, that each of them described their experience as part of this team as a key experience of her/his life or was remembered by others for the contribution made to the Proposal A resolution of the school finance dilemma.
Generally, the negotiators met for two or three months in the afternoon after session or in the evenings into the night on a daily basis whenever the legislature was in session. Meetings were held in the Capitol office of Rep. Gilmer. It was a low-cost operation. The menu was pretty consistent – basic food groups of pretzels, twister candy, coffee and soft drinks – provided pot luck by the participants. The schedule and calendar were driven by the awareness that the manner in which schools would be funded and by what sources they would be funded beginning in fall 1994 would depend on decisions made by the end of December, 1993 and early 1994. The 14 legislators knew each other in advance and got to know each other much better as we regularly confronted questions requiring decisions. The elements of those decisions were influenced by the diverse personalities, ideas, ideologies, experiences, observations, and political philosophies brought to the table. And always folks worked in the context of partisan and personal political agendas. There were no models or prescriptions to simply affirm or deny.
The disagreements and, consequently, the debates were intense. There was no gavel in the room. No one was in charge. Rules of debate were kind of established and kind of honored in search of the necessary goal of consensus. Vocal volume often determined control. On at least one occasion a bipartisan search and recover party of two set off to retrieve a very unhappy negotiator who stormed out of the Capitol discussions onto the streets of Lansing. More commonly, however, negotiators communicated by rolling their eyes and finishing each other’s oft-repeated sentences and arguments. Equally common, oft-repeated sentences and arguments were met with appropriate laughter, yawns or profanities.
The deliberations were marvelously and creatively staffed by Hank Prince from the House Fiscal Agency, Mary Kay Shields, Scott Schrager and Bob Swanson from the House staff – all on a regular basis – and other staff input as needed from varied areas of knowledge and skills from throughout state departments and agencies. It was remarkable to follow the development of what was to become the language of legislation and constitutional amendments. For example, legislators would reach conceptual agreement on a matter and Scott, Bob, Mary Kay, and other staff conscripts would evaluate how that could be implemented – what legislation would be required and whether/how that idea could be made compatible with existing law, court rulings, and the Michigan Constitution. Frequently, Hank would then take those proposals to the Fiscal Agency and return the next evening with a print-out of what the impact of the concept or proposal would be on each of the 558 school districts in the state.
Our bipartisan team’s goal was three-fold:
- Find an acceptable replacement for the property tax to fund school operations,
- Create a funding system to reduce the gap between low- and high-per pupil spending districts, and
- Create a revenue formula to assure adequate and stable funding for school operating costs immediately and long-term.
We intentionally limited our focus on school operating funding. We chose not to address school capital funding needs, partially because of the complexity of our task and also assuming that the property tax, millage-based system of funding building costs would be enhanced by the property tax relief resulting from shifting school operating costs to a tax alternative.
We assumed that equal dollars do not necessarily result in equal education. However, grossly unequal per-capita spending almost surely results in unequal educational opportunity.
Early in negotiations it was evident some among us wanted only a statutory proposal, one that could be enacted by the Michigan Legislature without a vote of the people. This was prompted by several concerns. One was the history of Michigan voters defeating a dozen school finance reform proposals on past statewide ballots. Most often, the alternative proposed was an increase in the state sales tax, which requires voter approval of an amendment to Michigan’s Constitution. Passing a statewide ballot question is significantly harder, and more expensive, than passing a bill in the legislature.
In addition, a statutory plan would be more flexible – changed and fine-tuned more easily. This would respond to the public demand that the legislature created the problem and the legislature ought to fix it.
Opponents of a statutory option argued from several perspectives. They did not want flexibility. Voters, they argued, would not trust the “solution” if it were not written into the Constitution and a constitutional amendment requires a vote of the people to enact or change. Some prefer the use of a sales tax alternative and, in Michigan, the sales tax rate was capped at 4% in the Constitution. Permitting or requiring a vote of the people provides some political buffer between legislators and voters. An increase in the income tax voted by the legislature and signed by the governor is more politically threatening than a vote of the legislature putting a constitutional amendment to increase the sales tax on the ballot to be decided by a vote of the people.
The major compromise/agreement was to offer voters a choice between two options – a constitutional proposal that provides for a shift from property taxes primarily to the sales tax to pay for schools, and a statutory proposal that provides for a shift from property tax primarily to the income tax. The agreement was based on the judgment that something must pass. We could not afford to have a ballot proposal alone that, if it failed, would then have us back where we started–with no source of funds for Michigan’s public schools only months before school was to open in fall 1994. We enacted bills to implement either proposal with provisions in them differing based on which proposal passed. For example, if the ballot proposal passed, the income tax would be reduced. If it failed, the income tax would increase. Voters were not given the option of nothing being done – a return to the status quo of no funding sources for school operations.
After months of negotiations, the House passed the compromise proposal. The Senate rejected it and passed a several hundred-million- dollar tax cut without an education-funding component. The bipartisan House leadership, the Senate Republican majority, and the governor sat down to negotiate the two-option proposal along the lines developed by the House bipartisan committee of 14. On Christmas Eve 1993, the House and Senate ended a 26-hour marathon session with the adoption of the two-proposal option that sent Proposal A to Michigan voters in March 1994. The package included 20 bills that spelled out the legislative design for distributing education funding. If the ballot proposal was adopted, the funding proposal would be paid for primarily from an increase in the sales tax. If it were not adopted essentially the same funding proposal would be pad for primarily from an increase in the state sales tax.
The bipartisan team of 14 members managed the legislation on the House floor – operating by consensus agreement. Scores of amendments were proposed, debated and voted on during the all-night session. Only one amendment was adopted on which the team of 14 were not in consensus agreement. It provided that property assessments could not annually exceed the lesser of 5% or inflation. In On March 15, 1994, Michigan voters passed Proposal A—the sales tax option over the income tax option—by a landslide vote of 69.17% to 30.83%.
Many years have passed since the passage of Proposal A. You might find it worth your time to see and hear the 14 “BLT” legislators reflect back on their work. Hank Prince of the House Fiscal Agency staff produced a remarkable video report on this extraordinary bipartisan legislative accomplishment that includes interviews with the 14 legislators who worked together for months to assure that Michigan public schools would open in 1994 and thereafter. You can check it out at the following House Fiscal Agency Archives at:
https://www.house.mi.gov/hfa/PDF/SchoolAid/DVD/Breaking_the%20_Logjam.mp4
Just over 10 years later, I was executive director of the Michigan Prospect, a non-profit public policy institute that focused on state issues. Our organization decided to evaluate the results of Proposal A. We were frustrated that it is more difficult to get policy accountability and oversight in the new era when constitutional term limits require that legislators be inexperienced. We invited the 14 former House members who crafted Proposal A to revisit the goals of the amendment and compare them to what it had actually achieved a decade later. All agreed and began meeting. Unfortunately, Jimmy O’Neill had died, and Bob Brackenridge moved out of state and was unable to participate. Six Democrats and six Republicans of the original bipartisan group of 14 proceeded.
The Michigan Prospect hired two research authors to work with the group: Mike Addonizio and Doug Drake. Mike was professor of educational leadership and policy studies in the College of Education at Wayne State University. Formerly he was assistant state schools superintendent for research and policy in the Michigan Department of Education and education policy director for Gov. Engler. Doug was senior policy consultant and group manager at Public Policy Associates in Lansing. He was the former director of the Office of Education and Infrastructure in the Michigan Department of Management and Budget and the Office of Revenue and Tax Analysis. Before that he was director of the House Democratic Research Staff. These two respected analysts and policy wonks worked with the former legislators to create a 140-page report on the impact of Proposal A. The process was unique and satisfying.
The bipartisan group of former state lawmakers met with Mike and Doug and developed 33 questions we wanted to answer. The answers, we reasoned, would help determine how well or poorly Michigan was moving to achieve five key goals of Proposal A:
- Reduce and limit property taxes for school operations.
- Reduce the local share of funding for school operations and increase the state share.
- Increase state taxes to finance that greater state share with primary reliance on a sales tax increase.
- Reduce, but not eliminate, the per-pupil funding disparities across local school districts.
- Provide more overall stability in funding.
The process began with Mike and Doug reviewing our 33 questions, conducting research to seek answers, and then writing out their findings to present and discuss with us. They would write. We would meet and tell them we thought some of their stuff was okay, but what we really wanted to know is . . . And they would talk with us and take notes and write some more and continue this process. I’m sure they would testify that this is not the way they usually do their writing—and for good reason.
The end product was theirs and reflects findings that respond to our questions and ongoing discussions. Their summary conclusion (supported by many charts, graphs and analyses) reads: “The evidence presented here reveals success on the first four goals, and mixed results on the last.”
As the 12 of us reflected on Mike and Doug’s work, we again arrived at a consensus on two conclusions: A modest conclusion and an audacious conclusion.
MODEST CONCLUSION: “Any school funding reform we could achieve would be part of an ongoing dynamic of reform – not a once-and-for-all-time panacea. What we accomplished in 1992-1994 were appropriate responses to the educational, taxation and political concerns of the moment. These concerns should and certainly do change and need continuing review and analysis.”
AUDACIOUS CONCLUSION: In September 2005 we published eight pages of recommended policy changes to the Michigan school finance system and structure. To date I believe none of these have ever been implemented.
