The Craig Fahle Show

Public Schools Treasurer Back to School 2013 Editorial: The Most Important Issue

As students head back to school, WDET asked some of Michigan's most influential experts and policy makers to answer the question: What is the most critical issue facing education in Michigan and how can it be solved? Here is an editorial from Treasurer of Ann Arbor Public School Board and retired economics and public finance consultant, Glenn Nelson:

Michigan’s laws and regulations governing K-12 school finance are a drag on our future. Reforms in two areas would brighten the prospects of our children and encourage economic growth.

First, policymakers in state government have been lowering the priority of K-12 education for over a decade.

Expenditures from state sources as a percent of state personal income declined from an average of 3.67 percent in 2002 and 2003 to a projected average of 2.92 percent in 2014 and 2015. The decline of this measure cannot be explained by the recession and the slow recovery. If state lawmakers had given stable priority to K-12 education, the percentage of our state’s resources devoted to it would have remained constant.

If current lawmakers would give the same priority to education as did those of 12 years ago, our public schools would have an additional $2.76 billion. This would equate to an additional $1,800 per student in traditional districts and charter schools.

Our children – and all who care about them – are suffering the consequences, as shown in the chart. In 2003 our fourth graders performed better than those in 24 and 23 other states in math and reading, respectively. By 2011 our fourth graders outperformed those in only 9 and 15 other states in math and reading, respectively.

Until we reform school finance, our children will be at a competitive disadvantage relative to those in other states and nations. Their future depends, in important part, on funding K-12 education more adequately at the state level. If this requires more taxes rather than a reallocation of current revenues, the taxes should be borne disproportionately by those with the highest incomes and greatest wealth. State officials could a) extend the sales tax to services used disproportionately by high income households, b) reinstate a state tax on large estates, and c) initiate the adoption of a progressive income tax.

Second, state policymakers have constrained constructive action at the district level. Districts cannot ask their citizens to approve an increase in the property tax to fund the operational costs of education (as opposed to costs for buildings and equipment) at a level beyond that dictated by the state. The rationale flows from the desire of many policymakers to prevent any increase in taxes and also from many policymakers’ wish to prevent the wide differentials in district-level spending that were pervasive in the 1980s and early 1990s. State officials have reduced the differentials since the early 1990s by providing smaller increases, or larger decreases, to districts with higher funding per student.

These constraints are restraining educational spending to a greater degree in districts whose residents desire greater depth and breadth in their schools. Because spending on education has a high rate of return to individuals and society, the foregone spending lowers the future well-being of the individuals, the community, and the state. In addition, these constraints are gradually eliminating the option of finding a community in Michigan with excellent public schools by national and international standards. Mobile professionals seeking and demanding such places to live will increasingly choose communities outside of Michigan if we do not reform our policies.

The path to reform lies in an adjustment of the current enhancement millage. Current law states an Intermediate School District (ISD) can pass an enhancement millage. The resulting revenues are shared among the constituent districts in proportion to their fraction of total enrollment.

The solution is to move to equal opportunity for districts within an ISD rather than equal results. We should allow each local district to decide whether to adopt an enhancement millage with the following provision. Districts that raise more funds per student with an enhancement millage than they would under the current ISD enhancement millage would have their state aid decreased by the differential. Districts that raise fewer funds per student than they would under the current ISD enhancement millage would have their state aid increased by the differential. Every district within an ISD would have an equal opportunity to raise the same revenue per student with the same tax effort even though their tax bases differ. Differences in local funding would reflect differences in citizen desires rather than differences in tax bases.

* The views expressed here are Glenn Nelson's, and may or may not reflect those of his colleagues. Please contact him directly at with comments or requests for detailed information.

Click here for additional editorials on this topic