Engler Seeks Shakeup of Michigan Education, Taxes

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After only two months in office, Gov. John Engler of Michigan is already making clear his intention to seek a major shakeup of education programs in his state.

As he continues to release his plans for doing so, though, Mr. Engler faces a political climate befitting March in the Midwest--uncertain, with winds from all directions, storms likely, and many people afraid of getting left out in the cold.

In the budget he released this month, the new Republican Governor outlined his plans to reduce property taxes by 20 percent across the board over three years, enact a number of education-reform proposals, and confront the powerful Michigan Education Association, while sparing education some of the deep spending cuts hitting other state programs.

Mr. Engler also has indicated that he will push an interdistrict school-choice plan, to be announced next month, and another attempt to resolve the state's long-running debate over school-finance equity.

But dark clouds appear to be gathering on the horizon, threatening Mr. Engler's proposals.

Speaker of the House Lewis N. Dodak, a Democrat, declared the Governor's budget "dead on arrival in the House," largely because of its proposed cuts in other social spending.

Moreover, Mr. Engler's efforts to tackle the politically explosive property-tax issue are in danger of being pre-empted by alternative proposals.

One, a tax-cutting initiative developed by a grass-roots activist, Richard H. Headlee, was seen by many political analysts as winning easy adoption if it comes up in the legislature. Election officials, however, last week were disputing whether petitions for the plan had enough legitimate signatures to effectively force the legislature to consider it.

"The Governor's budget message, at least at first glance, was encouraging to education groups. He said education was going to be his number-one priority, and that is exactly what he has done in his budget," said Gary J. Jackson, superintendent of the Huron School District in New Boston and president of a lobby group for low-wealth districts that get extra state aid.

But, Mr. Jackson added, alternatives to Mr. Engler's tax plan "are coming out of the woodwork" as the consensus grows that "there has to be tax relief in this state."

"Everybody knows there is a problem," Mr. Jackson said. "Everybody wants to be the hero now."

Mr. Engler proclaimed his $8-billion fiscal plan "a taxpayers' budget," with provisions to halt the growth of a state government that, he said, had increased in size by two-thirds since 1982.

Although the amount appropriated for 1992 reflected a 3.7 percent increase over appropriations at the beginning of last year, it was well below the $8.9-billion figure to which state spending had swelled by last fall, as tough economic times strained social services.

Currently, the Governor and legislature are struggling to pare 1991 spending by $1.1 billion to fulfill the constitutional requirement for a balanced budget. Mr. Engler's proposed 1992 budget assumes some cuts already proposed for 1991.

Although his 1992 state budget is austere, Mr. Engler pledged to make education his top priority, boosting precollegiate and higher-education spending by 4 percent.

Education is one of few areas spared substantial cuts, and its share of the proposed state budget would rise to 52 percent, up from 48 percent this year.

The department of social services, by contrast, would see a 13.8 percent cut in its general-fund budget, while funding for the department of public health would decrease 9.6 percent.

The Governor said his property-tax-reduction plan was designed to stimulate new business in the Great Lakes State, which continues to suffer from its reliance on a sluggish auto industry.

The plan, which also calls for caps on property-tax assessments, would immediately go into effect for all senior citizens and would be phased in over three years for the rest of property owners. The property-tax cut would be 5 percent the first year, 10 percent the second, and 5 percent the third.

The proposal also calls for increasing the maximum size of the homestead property-tax exemption deductible from state income taxes from $1,200 to $2,500.

During the first year of the plan alone, the state would provide $525 million to reimburse schools for the loss of property-tax revenues, thus increasing the state share of total education spending from 44 percent to 47 percent.

State spending for reimbursements would increase to $1.5 billion after three years.

Mr. Engler pledged in his budget address to release a plan this spring "that addresses the disparity in funding per pupil between districts."

On the same day that Mr. Engler proposed his budget, the Senate and House each overwhelmingly approved separate property-tax-reduction plans.

Nick H. Smith, chairman of the Finance Committee in the Republican-controlled Senate, described his chamber's plan as "very similar" to the Governor's. The differences, he explained, were that the Senate tax cut would amount to 24 percent, only low-income senior citizens would be allowed to shortcut the phase-in process, and the size of the property-tax credit deductible from state income taxes would be $900 higher than in the Governor's proposal.

House Democratic leaders described their plan as more likely to benefit middle-income households. It essentially would exempt the first $30,000 of a home's, but not a business's, value from all local school operating taxes; limit assessment increases to the rate of inflation; increase homestead tax credits for renters, low-income seniors, and the disabled; and reduce taxes for small businesses.

Revenue to offset the House tax cuts would come from eliminating industrial abatements for school taxes and repealing an existing tax deduction given corporations for acquired capital and investments.

The consensus among many legislators and observers of Michigan politics last week, though, was that both chambers would be likely to approve Mr. Headlee's tax-cut initiative if it were brought before them. Mr. Engler also has said he would endorse the proposal as "the will of thousands of Michigan taxpayers."

Mr. Headlee predicted that Democratic lawmakers would rather see his plan passed than risk letting the Governor get credit for tax reform.

But the fate of the Headlee initiative, which calls for assessments to be cut by 20 percent, seemed uncertain last week, after an investigation conducted by the m.e.a. invalidated several petition signatures and left the initiative just short of the 191,726 signatures required.

Mr. Headlee's organization, Taxpayers United, was trying to reverse the state Board of Canvassers' decision, while both Taxpayers United and the m.e.a. threatened suits that could tie the initiative up in court.

The Governor also included in his budget a proposal to cut state aid to districts that do not use competitive bidding when buying health insurance for employees.

The proposal was seen as a blow to the m.e.a., which has a subsidiary that insures about 80 percent of school-district employees, often after they demand the policy in contract negotiations.

John Truscott, a spokesman for Mr. Engler, confirmed that the Governor plans to tackle a number of other education-labor issues on which he is likely to meet resistance from teachers' unions.

The state has had more than 650 strikes by public-school employees in the past two decades, noted Thomas E. White, director of government relations for the Michigan Association of School Boards.

Mr. White added that Mr. Engler's leadership "provides us an opportunity that we have not had before" to address teacher tenure, collective bargaining, health insurance, and other issues where his association often has been at odds with the m.e.a.

Both the Governor and the mea appear to be readying themselves for a confrontation. Larry W. Chunovich, president of the union, said last week that Mr. Engler has declined to meet with him, while the teachers' organization already has mobilized against some of Mr. Engler's proposals.

"We have already had legislators calling us to say 'Back off a little bit, our phone is ringing off the hook,"' Mr. Chunovich claimed.

Mr. Engler's budget also calls for a "learnfare" program similar to one that first gained national recognition in neighboring Wisconsin, but with a twist aimed at ensuring that sanctions for extensive school absences not fall solely on poor families.

Mr. Engler proposed seeking a waiver from the federal government to implement a program that would reduce Aid to Families with Dependent Children payments to families whose teenage children failed to meet basic school-attendance requirements. Savings to the state for the program would be about $1 million in 1992, although the budget package said the purpose of the program would be to boost attendance, not cut spending.

For middle- and upper-income families, Mr. Engler plans to push for amendments to the state tax code that would allow a parent to claim a personal exemption for a teenage child only if that child met school-attendance requirements.

Although Mr. Engler is not expected to release his school-choice proposal until next month, the Governor's budget includes a total of $1 million for pilot planning grants, to be given to selected intermediate school districts to begin developing open-enrollment programs.

Mr. Engler has suggested that his choice plan will be based on intermediate districts, which generally are defined by county borders and encompass several smaller school districts. (See Education Week, Feb. 13, 1991.)

Also proposed in the budget are programs to allow high-school students to enroll in public postsecondary institutions for some classes.

Other education initiatives proposed for funding include:

Foreign-language-instruction incentive grants for elementary and middle schools totaling almost $13 million.

Math and Science Center grants totaling $2.37 million to be given to districts, intermediate districts, and museums to develop outreach programs.

University-school planning grants totaling $750,000 for public universities to develop alternative elementary- and secondary-education programs.

Grants totaling $150,000 to be given to six school districts to restructure the school year or extend it to 200 days.

A proposal to increase by 6 percent the number of at-risk preschool children served by early-childhood programs.

Vol. 10, Issue 26

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