Tax Revolt Meets School Equity

April 17, 1994|By CHARLES C. EUCHNER

Demetrio Rodriguez, meet Howard Jarvis.

The late Howard Jarvis was the force behind the property-tax revolt that resulted in the passage of California's Proposition 13 referendum. That initiative led to other states' efforts to cut taxes and, eventually, to Ronald Reagan's assault on the federal tax system.

Demetrio Rodriguez was the lead plaintiff in a Texas case that challenged his state's system of unequal school funding. The U.S. Supreme Court in 1973 rejected Mr. Rodriguez's claim that some kind of equity in school funding was a constitutional right. But the case, Rodriguez vs. San Antonio Independent School District, spurred activists around the country to challenge the school inequity caused by different levels of property wealth.

Now these two movements have converged in Michigan, where last month voters overwhelmingly approved a wholesale change public school funding. Under the plan, dubbed Proposal A, about 90 percent of school costs will be paid by the state #F government -- virtually ending the traditional local reliance on property taxes.

The Michigan referendum, quite simply, could cause the greatest upheaval in U.S. public schooling since desegregation. After a referendum last summer to eliminate property taxes as the main source of school funding -- an action that one expert likened to a plunge into a pool without water -- Michigan voters endorsed a state takeover of funding.

The principle behind Michigan's revolution is that people throughout the state have a common interest in teaching the next generation. A corollary is that who pays and who runs the schools can be separate questions.

Under the plan approved by 70 percent of voters, the state will give each district a minimum of $4,200 per pupil. Wealthier districts will be limited in how much they may supplement that base, but high-spending districts will be given several years to adjust. To cover property tax losses, starting May 1 the state sales tax will increase from 4 percent to 6 percent and the cigarette tax will increase from 25 cents to 75 cents a pack.

Under the old system, on average Michigan schools get about 62 percent of their funds from property taxes, 32 percent from state programs and 6 percent from the federal government. Per-pupil spending in the state's system ranges from about $3,200 to $10,000.

Nationwide, state and local authorities split most of the costs of schools, with states paying an average of 46.9 percent, localities paying 46.2 percent and the federal government picking up the rest. New Mexico has the most centralized funding system, with 76.1 percent provided by the state and 11.2 percent by local sources. The most local system is New Hampshire's, with 8.2 percent in state funding and 89 percent in local funding.

In the past decade, the states' share of the total school spending nationwide increased by about 10 percent. But glaring inequities remain. Average per-pupil spending this school year ranges from a low of $3,173 in Utah to a high of $10,561 in New Jersey. The range within states can be greater.

Challenges to school finance systems have clogged federal and state courts in recent years. Districts with high property values can tax themselves lightly and get enough money to hire the best teachers and set up the best facilities. Districts with low property values tax themselves to death but get little money for schools.

The finance systems of schools in 13 states have been found unconstitutional by the states' highest courts, according to the Education Commission of the States. Those states include California, Texas, New Jersey, Massachusetts and Washington. Remedies for these systems have come slowly because affluent districts resist losing their advantages. Overall, 28 states are now in court over the way they finance education.

Like all reforms, Proposal A has flaws. Sales taxes are regressive. They also depend on the Michigan economy's boom-bust cycle,though data show a steady increase in the state's sales tax revenues over the past two decades. Higher cigarette taxes present risks, too: A reduction in smoking or an increase in the supply of bootleg butts might cause revenues to decline. A 1 percent or 2 percent increase in income tax rates would be a better financing scheme. But politics involves compromise, and Michigan has shown politics can work.

Already, people in affluent and poor districts have complained that the proposal does too much and not enough. Officials from wealthy districts have expressed concern that they might have to cut back programs to stay within the limits of the complicated funding formulas. Those from poor districts say the new base, while an improvement, might not be enough.

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