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Blanchard Unexpectedly Reshuffles School-Finance Deck

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Gov. James J. Blanchard of Michigan has unveiled a controversial plan to revamp the state's school-finance system, a wholly unexpected move that enraged education groups and key figures in the House and Senate.

Mr. Blanchard's Nov. 16 proposal ended his year-long silence on the topic and came just days before members of a House-Senate conference committee planned to send a compromise finance-reform bill back to their chambers for final approval.

The heads of the committee said the Governor's surprise announcement effectively killed their plan--which would have raised the sales tax from 4 cents to 6 cents, cut property taxes by $1.2 billion, and generated about $500 million in new revenues annually to equalize spending among districts and fund programs included in a companion school-reform measure.

Key education groups--including the politically potent Michigan Education Association--were among that plan's chief backers. Spokesmen for the organizations harshly criticized Mr. Blanchard's proposal last week, saying it failed to guarantee funding for reforms and equalization.

The Governor attempted to mollify his critics at a Nov. 22 press conference, saying his plan would include a provision that would "recapture" a portion of locally collected school revenues in rich districts for redistribution to poorer ones.

Mr. Blanchard also said that although he supported reform efforts, they should not be "held hostage" to the debate over reducing property taxes. He suggested that plans to improve school quality and equalize school spending ought to be dealt with in separate legislation.

The Governor requested that lawmakers pass his proposal before they adjourn early next month so that his proposed tax changes can be placed on the ballot next summer for voters' approval.

Some legislators and lobbyists, however, questioned whether enough time remained to forge a new consensus and take a final vote. They raised the possibility that the school-finance debate would have to begin anew in the 1989 session.

The Democratic-controlled House and Republican-dominated Senate had been at loggerheads over the finance-reform issue for most of the their current session, which began in February. Both chambers passed several bills, but most of them died.

The measures fell victim to partisan infighting and pressure from the education lobby, which wanted more revenue for schools, and the business lobby, which wanted more tax relief.

Represenative Lynn Jondahl and Senator Dan DeGrow, who headed their chambers' delegations to the conference committee, both said last week that the panel had reached a compromise by September, but agreed to delay action until late this month or early December to prevent the plan from being scuttled by election-year politics.

Both lawmakers also said the Governor had assured them that their pact had his blessing. Therefore, they said, they were stunned when Mr. Blanchard announced in a series of press conferences held across the state that he was offering his own proposal in the hope that it would end "more than eight months of negotiations in Lansing."

Lawmakers, lobbyists, and other observers, however, said they did not believe the Governor's stated motive, given the fact that an agreement had already been forged. Most speculated that Mr. Blanchard was attempting to improving his standing among voters prior to his expected bid for re-election in 1990 by backing a lower tax hike than that endorsed by the committee.

Under the Governor's plan, the sales tax would rise only to 5 cents, 1 cent less than in the conference panel's proposal. Mr. Blanchard estimated that the increase would generate about $800 million in new revenues.

That tax hike, Mr. Blanchard added, would be offset "dollar for dollar" by a 25 percent property-tax cut for homeowners and a 10 percent reduction for businesses. Districts' property-tax rates would not be allowed to exceed 28 mills, and homeowners would be guaranteed that that the tax on their residence would never exceed 1.4 percent of its value.

The Governor acknowledged that his plan would not raise additional revenues for schools in its first year.

But, he predicted, growth in sales-tax revenues, higher property assessments in low-tax districts, and state savings by paying out less in property-tax deductions on state income taxes would generate a total of $1.2 billion over five years. Those funds, he said, would be used to help equalize spending among districts and to finance school-improvement efforts.

The Democratic Governor's proposal was greeted with mixed--and politically atypical--reactions.

The mea and the state school boards' association--traditionallyel10lamong the Governor's staunchest supporters--were some of its harshest critics.

Meanwhile, the plan was embraced by the Michigan Chamber of Commerce, the state manufacturers' association, and several key Republican senators--all of whom can be usually counted among his opponents.

Barbara Roberts Mason, chairman of the state board of education, and Donald L. Bemis, the new school chief, issued a joint statement commending the Governor for offering a plan that "has the potential for improving some measures of quality in our schools and providing greater equity for students."

But Philip E. Runkel, the former state chief and co-chairman of a task force created by the board to study the finance issue, characterized it as "a simple tax shift" that could ensure "decades and decades of greater mediocrity" in the education system.

Last week, Senator Norman Shinkle, the Republican chairman of the finance committee, introduced Mr.4Blanchard's bill in the Senate. But he added an amendment, vigorously opposed by the Governor, that would earmark 12 percent of the general-fund budget for public schools.

According to lawmakers, Senator Shinkle said the provision was needed to win the support of educators and to return the proportion to its historical level. It dropped to 8 percent during the recession of the late 1970's and early 1980's and has remained there ever since.

At his press conference last week, Mr. Blanchard criticized the earmarking plan, saying that it could force budget cuts for other essential services during hard financial times.

Earlier that day, Senator DeGrow--who said he had been "betrayed" by the Governor--argued that a compromise could be forged if it included Mr. Shinkle's proposal.

"If we're going to do what we have to do for the schools, we'll have to earmark" a portion of the budget, Mr. DeGrow said. "I think I can get my caucus to back that, but some Democrats might have a problem if they think they'll be embarrassing their governor. It's going to take their support. Whether we'll get it, I don't know."

Representative Jondahl, meanwhile, said he was meeting with the Governor and his staff "to find out how we might put Humpty Dumpty back together again."

"We're trying to find out how much flexibility there is" on the earmarking plan, he said.

"Obviously, if your goals are educational equity and improvement of educational quality, you'll make lesser strides with the Governor's proposal than you would have with ours," Mr. Jondahl added.

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