A frequent claim among taxpayers in the Grosse Pointe Public School System is that we are a “donor district” in relation to K-12 funding, implying that we send more in taxes to Lansing than we get back from them. With mandated school choice potentially looming and the recent residency debates, tax fairness is central to many related arguments.
Can we truly claim to be a donor district?
An understanding how Michigan funds public schools is a prerequisite to even engaging in this dialog. If you need a refresher, here’s a handy one from the non-partisan Michigan Senate Fiscal Agency.
Of all the conventional thinking, the biggest misconception is that property taxes are the largest source of school funding. In the first year after the passage of the state’s current school funding law, Proposal A, the state levied property tax accounted for just 9.5% of K-12 tax revenues. The largest source was sales tax at 57%.
This distribution of income sources has fluctuated over time. The non-negotiable 6 mills the state levies on all homestead properties generated a high water mark of 18% of all K-12 revenues in 2006-7, but has dropped in concert with the reduction of property values. In 2010-11 state levied property taxes accounted for 13.4% of K-12 tax revenues.
So in Grosse Pointe’s case, we are subject to that same 6 mills that gets sent to Lansing. This is all discrete from our locally levied Hold Harmless millage. But since that millage never flows through Lansing, we can’t really account for that in the “donor district” question. Our community is one of just 23 out of 550 school districts in the state to levy this kind of millage.
Nevertheless we receive a substantial amount of money from Lansing. In 2011-12, GPPSS received $64.4 million from the state portion of the Foundation Allowance, the per pupil funding amount set by the state, and other categorical funds (e.g. retirement offset and “Best Practices” funding).
So what do we send to Lansing in Property Taxes to receive that $64.4 million?
To calculate we need to know the Taxable Value of the Homestead Properties in the GPPSS and then apply the 6 mill rate against it. In 2011, the Taxable Value of all the Homestead Properties in the GPPSS was about $2.2 billion. Divide this by $1,000 to get the base of the 6 mill tax levy set by the state and we see that GPPSS homestead property owners sent $13.2 million to Lansing.
This then means that roughly 80% of the school aid funding the GPPSS receives from the state is not derived from our own property taxes. To know if we were truly a “donor district” we’d have to calculate income tax, sales tax, and a variety of other smaller taxes to determine if we send an additional $50 million in taxes to Lansing that are not property tax based.
According to the U.S. Census Bureau, the Grosse Pointes and Harper Woods has about 28,000 in the labor force. If each of those 28,000 generated more than $1,800 in school based taxes, we would indeed be a donor district. The forensics to prove this get pretty toughfrom here.
If GPPSS is typical, then half of the non-property tax based revenue would come from sales tax (at a 2% rate). That would require those same 28,000 to average about $45,000 sales tax eligible in spending annually. That seems unlikely, but I have no way to prove that. We could indeed over-index on income tax, as we’d be expected to have a higher than average income, but I simply don’t have the data to make the assertion that it would kick us into “donor district” territory.
We’ve gotten deep in the weeds here, but one point is certain. Property taxes alone do not put us in “donor district” status – in fact, not even close. The Hold Harmless millage is clearly a local phenomenon. 25% of our total general education revenues are derived from locally levied property taxes (both homestead and non-homestead).
What’s most relevant given the political climate is that tax structure does not remotely bolster the case for 96% of the local districts as it relates to local governance.
And it’s clear the majority of the representatives in Lansing know this full well.
3 responses to “Is Grosse Pointe really a donor district?”
Thanks for your clear-eyed look.
In its voting to NOT support the November proposal for the county education millage, the GP Board has attempted to ensure that the district will not be a “donor” district in the future. If the voters in GP turn down the millage, but the rest of the county votes it in, GP residents will donate more in educational millage through property taxes than the GP district will receive back in in revenue dollars from the county, but not by much.
The advantage to the district in that proposal passing, though, is that there WILL be some discretionary funds returned to the district, which will NOT be ear-marked for any particular purpose. The funds could be used to improve technology, yes, but could also be used to decrease class sizes in the elementary buildings, or increase course offerings in the high schools. The amount that the district would receive back would even be enough to re-instate the seven period day at the middle school, if that’s what the community decides is needed.
Perhaps the Board is afraid that if the county millage passes, and the residents are dis-satisfied with “donating” a tawdry amount to other county districts, then the Board won’t have the community support it needs to pass a badly needed technology millage. That is a sad story for the students in today’s classrooms. Our district is at least five years behind in technology needs. While we have wonderful Smart Boards in every classroom, our computers are so old, they crash when we attempt to use them during instruction. When compared to other like districts, our technology labs are slow and out-dated. All of the buildings need upgraded technology.
Voters need to know that a technology millage can only be used to improve technology. It can’t be used to hire more teachers or bring back the seven period day; only technology can be purchased. While we need technology, and teachers need the training that the technology millage can provide, we also need the ability to use some discretionary funds that passing the county millage would provide.
It would be nice if the GP voters recognized that to be competitive in a buyers’ market and in a global economy, we need to continue to invest in public schools in order to bring residents to our community. To continue to be the best district in the state, we must continue to invest in our students, by whatever means the state allows. That means that voters should vote both to approve the county millage in November and a technology millage when the GP Board decides to propose one. It would also behoove us to have a district-wide wifi available to all residents; that would indicate to potential residents, that we truly plan to participate in the 21st century educational environment by providing all residents the opportunity to do so.
The county millage was an undeniable loser for the district taxpayers. While I can’t recall the exact numbers, GPPSS taxpayers would have paid in twice the amount that we would have received back.
Brendan