Expanded School Sinking Fund Taxes : Infrastructure Investment, or Backtracking on Proposal A? / Patrick L. Anderson, Scott D. Watkins and Ilhan K. Geckil.

In 1994, Michigan voters approved Proposal A, which reduced school property taxes, increased the sales tax, and established a per-pupil funding guarantee for public schools. This report describes the effects of Proposal A and challenges to it. Since Proposal A was implemented, funding for schools has grown substantially while property taxes have fallen, as promised. However, school districts have levied additional taxes, resulting in a millage-rate growth of over 60 percent in 6 years. Michigan legislators continue to explore ways to increase the taxing powers of local school districts beyond those allowed by Proposal A. One proposal would allow districts to use "sinking-fund" taxes to pay costs that go beyond their intended use. To better understand the impact of such legislation on taxpayers, this report simulated the effects of increased school sinking-fund taxes over a 10-year period and found a substantial tax increase. As a result, the report presents the following options for Michigan policymakers: (1) retain Proposal A; (2) consider regional taxes; (3) prohibit "double dipping"; (4) tighten allowable purposes for debt millage; (5) expand charter schools; and (6) insist on better management. (Contains nine charts and graphs, and photocopies of state documents itemizing Proposal A.) (WFA)

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