The most obvious way public school defunding happens is inadequate funding of the per pupil allowance districts receive from the state each year. This is critical because, as a result of Proposal A, while schools can raise money locally for technology and infrastructure, they can only pay operating expenses with the per pupil allowance from the state. What is "Proposal A," and how does it effect my school?, Okemos Parents for Schools, June 10 2013. The per pupil allowance comes out of the state's School Aid Fund (SAF). But the SAF is threatened on the front end when revenue going into it is taken away.
You might recall that this summer Governor Snyder floated a plan to change our state's gas tax from a sales tax to a wholesale tax. Because a piece of funds collected from sales taxes go into the SAF fund, but wholesale taxes do not, this would have been a massive hit to public school funding. Changing the Gas Tax Will Cost K-12 $500 Per Pupil, Okemos Parents for Schools, May 3, 2013. What's going on now is similar. But, instead of one big tax change, many, many tax changes are having the same effect.
Lately our Legislature has been exempting certain groups and individuals from paying certain taxes:
“Many bills have been enacted that exempt various individuals, groups and businesses from paying certain taxes. Each one cuts funding for the School Aid Fund (SAF) — a little here and a little there. Our schools and children deserve adequate funding which can only be accomplished if the SAF receives the necessary revenue.
Many of these tax exemptions may on the surface appear to serve a good purpose. Taken as a whole, however, we are slowly but surely cutting significant amounts of much-needed revenue from our kids’ schools.”
To follow up on that memo, the organizations have turned in testimony on bills that negatively affect the SAF and urged opposition to the bill unless an amendment to hold the SAF harmless was adopted. MASB also has testified in Senate and House committees to this issue. At one hearing, it was noted that the bills would only affect 1/10th of 1% of the SAF. Which has been our point, this is only 1/10th, but so is the next bill and the next one after that.
The most recent bill considered by the House Tax Policy Committee was House Bill 4831, which would exempt over-the-counter medications that are prescribed by a doctor from the sales tax. Included with our testimony was a list of all of the bills that had passed House committees since January that affected the SAF. In total, the bills considered in the House would cut a minimum of $238 million annually while only increasing revenues by a minimum of $55 million. This list caught the eye of some of the committee members, but when Rep. Jon Switalski (D-Warren) offered the amendment to hold the SAF harmless it was defeated along party lines. [Tax Policy and Its Effect on the School Aid Fund, Michigan Association of Schools Boards, October 1, 2013.]A table below lists the bills which have been introduced to date which would impact
the SAF. This is a troubling new trend which is worth following.
|Bill Number||Issue||Effect on SAF|
|SB89-90, HB4234||Eliminate the sales and use taxes of the difference between the value of a trade-in and a new vehicle||$152 million loss|
|SB142-143||Eliminate sales and use taxes on prewritten software||$7-11 million loss|
|HB4121||Allow a five-year tax abatement on the sale of school property||Loss undetermined|
|HB4135||Eliminate the requirement to pay school operating mills on foreclosed properties||$38-42 million loss|
|HB4202-4203||Create sales and use taxes on sales over the Internet||Increase undetermined|
|HB4540 (Public Act 85 of 2013)||Clarify taxation of certain industrial facilities exemption certificates||Loss undetermined|
|HB4541 (Public Act 115 of 2013)||Allow an application approval for the previous tax year under the obsolete property and rehabilitation law||Loss undetermined|
|HB4831||Exempt over-the-counter prescription medications from the sales tax||$6 million loss|
|HB4572||Eliminate sales tax on aviation fuel||$35-41 million loss|
|HB4677||Earmark a portion of state tax revenue to transportation fund||Includes a $55 million earmark increase to SAF|
|SB51, 54, 55 & HB4244 (Public Acts 43-44, & 50 of 2013)||Changes in the taxes on forestry industry and property||Loss undetermined|