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Michigan House Kills Blanchard's Tax- and Finance-Reform Proposal

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Gov. James J. Blanchard of Michigan suffered a stunning defeat last week, as partisan infighting weakened and then killed his controversial plan to revise the state's tax and school-finance systems.

Capping a month of intense politicking, the Democratic-controlled House voted 51 to 46 to approve the measure--with two-thirds needed for passage and a majority of those voting in favor Republicans--shortly before adjourning for the year at 4 P.M. last Thursday.

The House session's end was marked with a flurry of accusations and recriminations.

Key Democrats said they voted against the plan because it was opposed by the politically influential state chamber of commerce. The Governor, who is a Democrat, and the business group denied the charge. Officials of the chamber accused the Democrats of trying to make it a scapegoat.

Republicans and education lobbyists claimed that House Democrats were caught in a bind because they felt the final version of Mr. Blanchard's plan was too favorable to business, did too little to reduce spending disparities among rich and poor districts, and failed to raise new revenues for school reform. At the same time, they said, the Democrats did not want to embarrass their Governor by rejecting his proposal.

Senate Approval

The Republican-dominated Senate, meanwhile, had passed the bill on a 28-to-7 vote at 4:30 A.M. the same day, after having rejected it twice before during a 21-hour session, and once earlier on Dec. 6.

Senator Dan Degrow, the chairman of the K-12 appropriations committee and a key figure in negotiations over the plan, said he and fellow Republicans knew they were voting for "a bad bill." But, he added, they had "made a political decision that we couldn't afford to let it die in the Senate," which would have allowed the Governor to blame the gop for its demise.

Aides to key House members from both parties said the chamber's leaders would be willing to try to forge another agreement on the tax and school-aid systems when lawmakers return to Lansing for their 1989 session next month.

Petition Drive

But Senators Degrow and Norman Shinkle, chairman of the finance committee, both said they have given up all hope of passing such legislation. They will now turn their attention, they said, to starting a petition drive aimed at placing a constitutional amendment on the 1990 general-election ballot that would guarantee that the state school-aid fund receives at least 12 percent of all general-fund revenues.

The school fund now receives about 8 percent of such revenues, down from just under 30 percent in fiscal year 1970-71.

"If we couldn't pass legislation after two years of debate, I just don't see how it can be done," Mr. Degrow said. "We Republicans control the Senate and we were willing to put the Governor's plan before the voters, and even his own party members aren't willing to do that for him."

"I think we're out of the legislative process and into the petition route," agreed Allan Short, director of government affairs for the Michigan Education Association.

"We're very disappointed because schools need help immediately and this sets us back at least one or two years," he added. "For a full year we spent hours and hours trying to reach a compromise. We left no stone unturned."

Controversial Amendments

Democratic and Republican lawmakers alike said Mr. Blanchard nearly scuttled the bill earlier in the week by first expressing strong support for a version passed by the House on Dec. 1 and then backing away from it a few days later.

That version, which was opposed by Senate Republican leaders, would have provided less tax relief for businesses than the final version.

In addition, it contained two potentially explosive proposed constitutional amendments, later stripped from the final version, that would have forced the state to provide a system of "free and equal" public schools that "achieve an equal excellent result."

The state attorney general and others predicted that passage of the amendments and their subsequent endorsement by voters would have guaranteed the filing of a school-finance lawsuit against the state.

Bill's Provisions

The measure rejected by the House would have raised the sales tax from 4 cents to 5 cents and reduced property taxes for homeowners by 25 percent and for businesses by 10 percent.

After the tax cut took effect, a district's remaining tax rate would have become its "foundation," meaning that the rate would not have to be renewed every few years by voters.

Districts' rates for homeowners would have been capped at 28 mills through 1991. In that year, the bill would have allowed districts to ask voters to increase the rate for home4owners to a maximum of 30 mills, and for businesses to a maximum of 1 mill above their rate set after the tax cut.

In addition, the bill would have "dedicated" all state-lottery revenues and varying percentages of sales and other tax receipts to ensure that state school aid would rise from its current level of $503 million to at least $613 million in fiscal 1989-90, $699 million in fiscal 1990-91, and $790 million in fiscal 1991-92.

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