After New Programs Pass, Mich. Panel Weighs Taxes

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The Michigan Senate late last week was weighing a tax plan that would replace all of the school funds lawmakers cut when they abolished local property taxes last summer.

The debate over a plan followed a flurry of activity in which a special Senate school-reform committee passed a host of new programs that would significantly change the state's education system.

In many areas, the Republican-controlled Senate strayed from the proposals of Gov. John Engler, who proposed a comprehensive school-reform package last month. (See Education Week, Oct. 20, 1993.)

Lawmakers last week were considering an alternative finance plan introduced by Sen. Debbie Stabenow, a Democrat who wants to challenge the Republican incumbent in the 1994 gubernatorial election. Ms. Stabenow set the stage for the current drama in July by advocating the repeal of $6.3 billion in school property taxes--an idea that was quickly seized by legislators and the Governor.

Under Senator Stabenow's proposal, which analysts said would make up all of the lost property-tax funds, the state sales tax would rise from 4 cents to 5 cents. In addition, there would be a 1 percentage point increase in the state income tax, a slight rise in the single business tax, a 21 mill property tax on businesses and second homes, and an increase in the cigarette tax of 50 cents per pack.

Several Republicans expressed initial interest in her plan, which officials said may be more palatable to the public than the 2 cent sales-tax increase suggested by Mr. Engler.

Community-College Guarantee

While action was slowed on the politically sensitive issue of raising new revenues, the special Senate committee moved quickly on a package of programmatic initiatives that included creation of a new state trust fund to guarantee every student two years of community-college tuition.

The new program would set aside $200 in state revenues annually for each Michigan schoolchild, which could be applied toward a four-year college or cashed in for full tuition at a community college.

The panel did not, however, approve Governor Engler's proposal for a new system of Student Education Bank Accounts, under which students could use a portion of their state education aid for summer school, tutoring, or college.

But the committee did back modified versions of Mr. Engler's proposals for public school choice and publicly funded charter schools.

The Senate charter-school proposal would bar religious institutions from the program and would require that charter applications be approved by local school boards or a state panel.

Under other changes approved by the committee, students by 1996 would receive an extra hour of instruction each day, going from five instructional hours to six. Also, the legislation would authorize funding for an additional 20 days of school for 300,000 low-income children.

Spending Reduction Opposed

The panel's school-finance recommendations quickly dashed any savings recommended by the Governor, whose plan called for a $300 million net savings to Michigan taxpayers after the property-tax shift.

Sen. Dan DeGrow, the chairman of the Senate Select Committee on School Reform, said it was "not realistic'' to try to make such sweeping changes while still spending less.

The Senate panel's plan would provide for a basic $4,500 per-student state grant, as proposed by Mr. Engler. But it tinkers with the details by allowing a 10 percent increase per year for districts now spending less than $4,500.

Districts spending between $4,500 and $6,500 per student would be allowed a 3 percent increase each year, while districts spending more than $6,500 could ask local voters to approve a 1 percent increase each year paid for with local property taxes.

The local levies for high-spending districts would be the only local property taxes allowed to flow to schools.

Democratic lawmakers, who say that limitation is unfair, have proposed allowing all districts to levy an extra 3 mills with voter approval.

Other provisions approved by the Senate panel would require binding arbitration in labor disputes and competitive bidding on school districts' health-insurance coverage.

Vol. 13, Issue 10

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