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Ballot Proposal Analysis: Prop. 2006-05: Educational Funding Guarantee Law

Recommendation: Proposal Would Reduce Legislative Oversight - Vote "No"

October 1, 2006       Leave a Comment
By: Dave Rogers

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The Citizens Research Council has released its analysis of Proposal 2006-05, the Educational Funding Guarantee Law, a statutory initiative that Michigan voters will be presented with at the November 7, 2006, general election.

The proposal would amend the State School Aid Act to guarantee a minimum amount of state funding for K-12 schools, community colleges, and universities in Fiscal Year 2007 (FY07). For all years after fiscal year 2007, the proposal would guarantee funding increases equal to the annual change in inflation.

In addition to the state funding guarantees, Proposal 2006-05 would cap the amount of retirement contributions to the Michigan Public School Employees Retirement System (MPSERS) made by K-12 schools, community colleges, and universities, and require the State of Michigan to make up the difference between the capped employer's contribution and the actual retirement contribution required by the system.


The proposal also contains a declining enrollment provision for K-12 school districts that are experiencing falling student membership. The provision allows the use of a three-year average to determine current-year membership.

Finally, the proposed law would require the gap between the basic per pupil foundation allowance and the maximum state-guaranteed per pupil foundation allowance to be reduced from $1,300 to $1,000 by fiscal year 2012.

The Citizens Research Council estimates that the additional costs of the proposed law to the enacted FY07 state budget will be between $565 million and $707 million.

Recommendation: Vote "No" on Proposal 2006:05.

Under the proposal, these costs will have to be financed by the State's General Fund. At the minimum level, Proposal 2006-05 would increase the amount of the General Fund budget currently dedicated to education spending from 21 percent to 27 percent.

After FY07, assuming moderate state revenue growth, the Research Council estimates that the proposal's required inflationary increases in education funding (excluding retirement costs) can be financed by existing resources without having to reduce the amount of money allocated to other state programs.

Over two-thirds of the initial additional costs to the State from Proposal 2006-05 arise from the provision to cap employer retirement contributions. This cost component represents a new financial obligation to the state budget and will steadily increase each fiscal year. The State's projected annual costs associated with the required retirement contributions will rise faster than inflation, thereby requiring policymakers to reconfigure state finances to meet the education funding guarantees within existing resources or to raise general revenues.

The proposal provides guaranteed funding for various levels of education regardless of the State's fiscal condition. The annual inflationary increases may require reductions to other programs financed by the General Fund, such as health care, corrections, assistance to the poor, especially if state revenues fail to grow with inflation. Further "crowding out" of these other areas of the state budget will result from the proposal's retirement provisions, unless state revenues are raised to finance these new costs.

The state budget process is the arena in which policymakers determine public priorities by allocating finite financial resources among competing claims. During this process, lawmakers are able to review and evaluate programs and adjust annual spending plans accordingly.

Proposal 2006-05 would reduce the effect of legislative oversight by removing a significant portion of the state budget from the annual appropriations process. Lawmakers will lose the ability to make certain resource allocation decisions in response to their oversight findings, as the funding guarantees included in the proposal effectively make these decisions for them. ###

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Dave Rogers

Dave Rogers is a former editorial writer for the Bay City Times and a widely read,
respected journalist/writer in and around Bay City.
(Contact Dave Via Email at carraroe@aol.com)

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