Engler's Parting Shot Proposal A – Chicanery for Michigan Property Owners

Pressure is already mounting regarding the financing of public education. Each week brings more tales of woe from administrative representatives, and the situation is probably the same in every state of the union. The economy is in decline while the costs of public education never shrink without being forced to do so. All states will be scrambling for any remaining, albeit shrinking, funding sources.

As governors begin to panic, especially those in states like California which are tethered to rigid educational demands without the school finance structures necessary to support them, these politicians will begin the search for alternate methods of finance. The solutions of choice will certainly be those that shift the burden of public education further onto the backs of property owners. Officials may look longingly at the finance reform passed in Michigan, so it would be well for property owners to educate themselves regarding the actual outcome of that Michigan reform, and prepare to defeat similar suggestions in their states.

Michigan property owners actually became victims, rather than beneficiaries, of Governor John Engler’s infamous “Proposal A” – the plan which was supposed to a.) assure all Michigan children equitable educational funding while b.) lifting the education portions of property tax burdens from homeowners. Schools were to be financed from the state coffers, and from increased sales tax rates.

A document from the Michigan government site reminds us that, “After 12 failed ballot proposals and many efforts to improve equity through various appropriations measures, the Michigan Legislature made national headlines in July 1993 when it eliminated local property taxes as a revenue source for school operations.”

That, however, is not what Proposal A ended up doing for us. When our new tax bills arrived, we saw that we were still expected to support education with property taxes: we were still stuck with the Intermediate School District operating expenses, and we were billed for something called the “State Education Tax.” Of course we had expected that ‘school operations’ meant all expenses to operate the schools, but it appeared that we had either misunderstood, or had been misled.

Our property taxes were lowered that first year, but that action only served to prolong the moment when we would realize that the reduction did not make up for the increased sales tax rate. Proposal A increased the rate from 4% to 6%, and we found that the higher rate was especially punishing when we made major purchases. The new rate noticeably raised the cost of automobiles, and our family joined others in buying used, rather than new cars; in keeping cars longer; in buying used parts and doing our own repairs. These personally sensible, financially conservative, decisions gave Michigan’s economy NO financial boost and certainly did nothing to balloon the fund from which the new schooling finance costs would be drawn.

Taxpayers next learned that Proposal A would not provide equity in educational support for all children. Districts were reimbursed based on the per-pupil allotment they had been receiving under the old system, with a ceiling to limit the amount of new gain. Restricted gains meant small increases for small districts, while larger districts still had their greater per-pupil, pre-Proposal A financing.

Proposal A did allow us to vote additional tax monies back onto our property bills if we wanted better schools – but that would negate the need for Proposal A, as well as for the 6% sales tax. The bitter irony of it became clear – low taxes meant few additional dollars for local schools; poor school districts were still poor; rich school districts were still rich. We had relinquished local control in order to gamble on small, undependable, state handouts for operating budgets, and we still had to pay educational expenses.

Property owners soon noticed the next ‘benefit’ from Proposal A: the state ordered the townships to reassess homes and properties, and of course they raised the values. Soon our property taxes began to climb – first to the levels where they had been prior to Proposal A, and now moving to even higher with each yearly bill.

For 14 years we have owned the same 28′ x 32′ 130-year-old simple, aluminum-sided, farm cottage with a partial, unfloored cellar. However, the state now considers it a very fine property, taxes it accordingly, and we have completely lost any benefit we ever gained from Proposal A.

We learned to not make improvements to our property, and the state coffers again lost money as we refrained from buying paint and lumber. When we tore down an unsightly wall and replaced it with a simple railing, the township raised our property appraisal before we could even paint the one-inch spindles! When we replaced an aging garage with a rough pole building – steel walls and roof, no electricity, no floor, no insulation, three tiny windows and handmade doors made of crossed 2×4’s covered with leftover pieces of steel siding, the township assessed the building at $12,000, and raised our taxes accordingly.

At the Board of Review we explained that we had only put $4,300 into the structure. The board agreed that we had the right to appeal – but verbally warned us that if we asked for reassessment of the pole building, our entire property would be rated higher, and our tax bill would go up even further. We left in disgust, blackmailed into dropping our appeal. We also dropped all plans to enlarge the house, so Michigan lost the sales taxes we would have paid on products to add two rooms and a second bathroom.

This year I noted, directly on our tax bill, that we were paying under protest because the ever-increasing appraisals have undone the promises of Proposal A, but we are still stuck with a higher sales tax rate. The receipt came back with a small typed note:

“Dear Taxpayer, For your information – in case you didn’t catch the newspaper articles or see on TV – Gov. Engler mandated, beginning in 2003, all townships will collect the State Education Tax (ST ED) portion of your taxes in the summer. You will receive a statement for that amount in late June. The taxes are due July 1, and delinquent September 15. For 2003 only the millage will be dropped to 5 mills. In 2004, it will go back to 6 mills. The November tax statement you receive will be minus that portion. If you have any questions, please feel free to call me at…Treasurer”

I phoned to ask why we would be paying both Summer and Winter taxes, and why we are paying ANY “State Education Tax” when Proposal A was to remove educational costs from property taxes. The official said that she had never thought about that and honestly could not answer the question. I asked when Governor Engler had “mandated” this new summer school-property tax, and I was told that he had signed it during in the last session before he left office. I was not surprised at the timing; a final burden for property owners who had been promised so much under the dishonest and unreliable Proposal A.

Do not be fooled into supporting a ‘Proposal A’ in your state: We now pay a 2% higher sales tax rate. State assessors have inflated the values of our properties so our property taxes are higher than before the ‘tax relief.’ We still pay state education taxes. We still pay Intermediate School District costs. We still pay the debts accrued by the local school districts. We pay four (4) different county taxes, and a township tax. We no longer improve our properties because of the punishing township officials with their lightning-fast appraisal rate hikes; and now, for the first time ever, we will have a summer State Education Tax bill. We expect that once we become used to paying property taxes in the summer, the state will increase our winter taxes to ever-higher levels, and we will be forever stuck with double tax bills which actually do, despite the promises of Proposal A, support educational expenses from the property tax base.

We hope that your governor does not decide to ‘gift’ you with such ideas for reducing the burden of taxes for homeowners; for finding alternate ways to finance schools. We cannot afford another round of Engler’s type of conservatism and tax cuts, and we doubt that you can, either. We will never recover from the damage caused by Proposal A, and we dread the long-range outcome of Engler’s parting shot – mandated summer tax bills for "State Education Taxes.”

February 11, 2003