Prior to 1994, Michigan’s school funding was primarily reliant on local property taxes, which led to significant disparities in resources between communities, as districts with higher property values could generate more revenue than districts with lower property values. Consequently, students in wealthier areas often had access to better facilities, resources, and educational opportunities than those in less affluent districts.
In 1994 Michigan implemented Proposal A, which shifted school funding from primarily property taxes to primarily sales, use, cigarette, and real estate transfer taxes. This established a funding system where districts receive a minimum amount of funding per student ($9608 for 2023-24) regardless of local property values, significantly decreasing, though not eliminating, the funding discrepancy.
Currently, schools collect local taxes, and then the state provides the additional funds to reach the minimum, with the exception of Charter schools, which are fully state funded. In addition, the Hold Harmless, or 20j, districts are allowed to levy an additional local tax because when Proposal A was implemented they were spending more than the base funding.
Local taxes are now capped at 18 mils ($18 per $1,000 of non-homestead property, all but primary homes) property value for operations, with additional property taxes allowed for capital and sinking funds. In addition, there is another 6 mil state education tax levied on all properties. Additional state taxes are used as funding for at-risk, low income, and non-English speaking students as well as geographically isolated districts and teacher pensions. About 10% of funding comes from the federal government, primarily providing for schools serving low-income students, the National School Lunch Program, and supplementing services for special needs students.
Schools can use up to 20% of their state provided funds on capital projects, but rarely do so, because that money is necessary for operations. This leaves bonds and sinking funds as the options for funding projects related to safety, facilities, transportation and technology maintenance and improvement. Bonds are similar to a mortgage; a loan is taken out for a lump sum which is generally used quickly, with taxpayers paying on principle and interest for 20 to 30 years. Sinking funds are like savings accounts, where taxpayers fund projects prior to completion for a maximum of 10 years and 3 mils. Sinking funds are utilized by close to half of the districts in the state.
While Michigan’s current funding system guarantees a base level of funding for each student, it hasn’t entirely eliminated disparities. Some of the most common issues cited are that the formula still doesn’t adequately address the needs of economically disadvantaged districts, special education is inadequately funded, and budget fluctuations can make planning difficult.
The evolution from heavy reliance on local property taxes to a more diversified approach provided a significant shift towards equity and consistency. By establishing a minimum funding per student regardless of local property values, Proposal A has helped mitigate disparities in resources between communities. Moving forward, addressing continuing funding disparities will require attention from policymakers, educators, and citizens to ensure equitable access to quality education for all students across Michigan. By addressing these challenges, Michigan can work toward an even more inclusive and quality education system for future generations.
