Engler's New Finance Plan in Michigan Would Shift Burden of Retirement Costs

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Taking a new tack toward resolving Michigan's long-running dispute over school-finance equity, Gov. John M. Engler has announced a plan to help close the gap between rich and poor districts by making better-off systems bear more of the burden of school-employee retirement costs.

Mr. Engler's plan, unveiled this month, calls for a shifting of $400 million currently distributed to all school districts to help cover their Social Security payments for employees.

The Social Security allocations would be consolidated into the state's main school-aid fund, which is distributed to schools according to need. Poorer districts thus would get more money, while wealthier districts stand to lose up to $160 million.

In the next year, the Governor would do the same with $400 million paid by the state into a pension fund for school employees, thereby redistributing another $160 million or so from wealthier to poorer districts.

Backers of the plan estimate that it would give poorer districts about $200 more per student.

"The current system is not fair to the taxpayers--and even more importantly, it's just not fair to the kids," Mr. Engler said this month in a budget address that included the proposals to shift state education funds.

"Our children," Mr. Engler said, "deserve an even break-- equal opportunity to be their best. This plan moves Michigan closer to that goal."

In an apparent gesture of goodwill to the wealthier districts that stand to lose under his plan, Mr. Engler said he would cap the amount of state aid any district could lose under his plan at 5 percent.

The Governor also announced that he would work to repeal a controversial law approved by the legislature last year that forces some districts to share part of the growth of their tax base. (See Education Week, Sept. 25, 1991.)

In addition, Mr. Engler promised to end current state policies that, he said, result in up to $40 million in state funds being withheld from wealthier districts each year.

'Bold Step Toward Equity

Several legislators last week praised Mr. Engler for venturing into school finance, a stormy issue that over the years has caused swells of controversy in the Great Lakes State.

"It's a bold step toward getting equity,'' said Senator Dan L. DeGrow, who helped fashion the Governor's plan.

Even supporters of the measure predicted, however, that the plan may be sunk in the legislature by opposition from wealthier districts and other education lobbies that want no district to lose funds.

Tom Mateer, executive director of the Michigan Out-of-Formula District Association, an organization of 129 school districts that contain too much local property wealth to qualify for state aid, last week criticized the proposal as likely to force many districts to raise taxes or cut educational programs.

"We look at the Governor's proposal as being another tax shift. It is shifting added taxes to a third of the districts in the state," Mr. Mateer said.

Justin P. King, executive director of the Michigan Association of School Boards, said his organization supports school-finance reform, but not if it results in wealthier districts losing money.

"Our position is that no district should be forced to cut programs as a result of changes in finance," Mr. King said.

Mr. King predicted that the Governor's proposal would pit wealthy and poor districts against each other. And, he said, it would complicate collective-bargaining agreements and negotiations between teachers' unions and school districts that end up with reduced or capped budgets under the plan.

Vol. 11, Issue 22, Page 23

Published in Print: February 19, 1992, as Engler's New Finance Plan in Michigan Would Shift Burden of Retirement Costs
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