Engler's angle: how tax relief became school reform in Michigan - Michigan Gov. John Engler

Reason, August-Sept, 1994 by Derek Green

On March 15 this year, Michigan voters went to the polls to decide on Proposal A, which was essentially the Engler plan. It passed by a margin of nearly three to one. The new law raises the sales tax by 2 percentage points, increases the per-pack tax on cigarettes from 25 cents to 75 cents, and hikes the tax on international and interstate phone calls to 6 percent. It also implements a 0.75 percent tax on all real-estate transfers. While stopping short of actually abolishing property taxes, the plan reduces them by between 70 percent and 80 percent, enacts a property-tax assessment cap of 5 percent or inflation (whichever is less), and allows local communities to use a percentage of property-tax money for new school construction and building maintenance.

Just as important to the plan's authors, a number of school-quality reform measures also passed, including the legislation allowing charter schools, additional money for at-risk students, and an increase in the minimum number of school hours required of pupils from 900 hours a year to 1,080 hours. State Treasurer Doug Roberts says the reforms accomplish Engler's goal of setting a new course for education in Michigan because they give parents more options than the old system. "With something like charter schools," he says, "parents will have a choice."

Whether the reforms work out in the long run, the plan is a complete break with tradition in Michigan. Engler and many others believe that such a drastic change was the only way to effect change at all. The governor feels the schools had become too rigid and inflexible, too controlled by unions and the tyranny of the status quo, to cope with the educational needs of students and the instructional interests of parents. "The problem with education [reform]," says Engler, "has been that when you try to approach it piecemeal, to bring about incremental change, the inertia of the status quo is just so difficult to overcome that it really does wear you down."

But while Republicans and a number of Democrats are basking in their success, plenty of difficulties loom on the horizon. Chief among these is the problem of revenue shortfalls in the years to come. Opponents of the reform plan charge that the plan is seriously underfunded and that within the next few years legislators will have to slash school funding, raid the general fund to keep schools open, and enact huge tax increases to make up lost revenue. The MEA claims that when the legislators approved the plan, they knew it was underfunded by $500 million dollars--a figure boosted to $1 billion because of concessions to various interest groups. Other detractors worry that relying on sales taxes, which drop significantly during economic downturns, fails to ensure a steady, predictable source of revenue.

Deputy Treasurer Khouri, whose newest job is to start implementing the plan he helped author, disputes the doomsday claims but admits that the new plan doesn't mean that schools will have ever-growing budgets. "Will there be tough decisions to make when we set spending levels in the future?" he says. "Will spending have to be brought in line with economic realities? Of course." Khouri believes that there will be steady revenue increases in years to come--though not on track with the booming increases of the 1980s.