News Story

School Earmark Proposal: California Here We Come?

Democrats in the Michigan Legislature have introduced a state constitutional amendment to prohibit using tax revenues earmarked to the state “School Aid Fund” for any education spending other than K-12 schools. In other words, this money could not be used to fund state universities, as the just-signed 2012 budget does, or community colleges, as is done in the new budget and the last one signed by former Gov. Jennifer Granholm.

Sen. Gretchen Whitmer, D-Lansing, is the primary sponsor of the proposal. In late March, she told MIRS News that four legislative Republicans speaking to an audience dominated by members of the Michigan Education Association school employees union “said they would support this.” They were Sens. Rick Jones, R-Grand Ledge and Judy Emmons, R-Sheridan, and Reps. Kevin Cotter, R-Mt. Pleasant and Deb Shaughnessy, R-Charlotte. None of these Republicans co-sponsored the proposed amendment (it is not known whether they ever had an opportunity to), and only one — Rick Jones — voted against the 2012 education budget that actually did what the proposed amendment would prohibit.

It’s hard to make a case that current money in the School Aid Fund can’t be used to pay for colleges and universities. As Michael Van Beek, director of education policy at the Mackinac Center, explained in a recent article, the fund was codified in the Constitution of 1963, which states, “There shall be established a state school aid fund which shall be used exclusively for aid to school districts, higher education, and school employees’ retirement systems, as provided by law” (Article IX, Section 11).

Van Beek explained that opposing arguments rely on a particular interpretation of what voters intended in the 1994 “Proposal A” amendment, which among other things earmarked revenue from a state sales tax increase into the fund. It’s likely that most voters primarily intended the most widely advertised purpose of the amendment, which was to cut and cap property taxes.

More important than these particular arguments are the risks inherent in locking up such a large proportion of state tax revenue for a single purpose; and no state illustrates this better than California. Under the complex terms of a ballot initiative adopted there in 1988, Proposition 98, at least 40 percent of state revenue is earmarked to K-14 education (that includes community colleges but not universities), and if overall revenue goes down in any given year, the school money has to be “made up” by allocating even larger amounts in subsequent years — the current “deficit” is reportedly $10 billion. As quoted on, The New York Times wrote in March 2010, these complicated provisions "earmark so many state tax dollars for education that it is now extremely difficult to balance the state budget.”

Fortunately, Michigan still retains SAF flexibility. The budget that Gov. Rick Snyder recommended in February relied on this, and the one he just signed allocates $195 million from the SAF to community colleges and $200 million to universities. This freed up general fund revenue for other state purposes, and also will also help force school districts to start trimming the $2.45 billion in employee fringe benefits they provide that are above-and-beyond private-sector averages. 

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.