State Vs. Local Taxes for Education

When Proposal A went into affect in 1994 it was to provide financial equity to all Michigan schools districts. Integrated into Proposal A is a distribution formula that reduces the disparity in operating expenditures across high- and low-spending school districts, in part, by constraining the allocation of operating funds for high-spending districts. With this shift in funding came responsibility from the state level rather than the local level. The centralized funding has been successful in creating a level playing field for financial equity, but there are also studies that have shown unforeseen costs to more affluent school districts. 

The article “Unintended consequence of centralized public school funding in Michigan education” by Ron Zimmer and John T. Jones from the Southern Economic Journal recently study the particular case of centralized funding for Michigan public schools. They provided valuable information on the school systems economics and also further information on Proposal A. The statistics found in the study are intriguing and raise some very interesting points on which to discuss school finance.
The best argument the authors make is that the more affluent schools have taken a spending decrease. This is an obvious hit to their wallet, however, that was the point of Proposal A – everyone gets the same amount regardless of taxes collected. Since these schools are use to a higher budget, and expenditures, they are still trying to maintain that high standard of spending, hence causing the schools to circumvent the policy by increasing the use of capital markets and debt financing. The schools that are being constrained below their determined levels of operating expenditures are looking close by to generate more funds. These high-spending districts experienced a 47% increase in the probability that a bond will pass in a local referendum after Proposal A was enacted. This statistic shows that less money is coming from the state to uphold their expenditures, so more money is coming from the districts citizens, with interest percentages.