Property Tax & School Funding Reform: The Michigan Experience and Principles for Pennsylvania

Executive Summary

After decades of relative inaction, Pennsylvania policymakers may finally tackle the issue of property-tax and school-funding reform. While states such as Michigan have already substantively addressed the problem of ever-increasing property taxes, the General Assembly of the Commonwealth of Pennsylvania is being forced to deal with the issue in a Special Session of the legislature in 2002.

This policy brief draws on the experience of Michigan’s property-tax and schoolfunding reform of 1994, and outlines principles for Pennsylvania policymakers to follow in order to enact comprehensive and permanent legislative improvements. Michigan’s success in providing net tax relief to its citizens is attributable to two key reform provisions: 1) Michigan citizens constitutionally eliminated the power of school boards to increase property taxes for operating revenues; and 2) Michigan citizens placed public education funding under the state’s constitutional limits on the amount of personal income that the state can take from taxpayers. Without these provisions, reform would have failed to provide net tax relief to citizens, and local school boards would have raised property taxes once again.

The Michigan model is incomplete, however. Although the changes adequately dealt with the revenue side of the property-tax and school-funding equation, they did very little to address the equally, if not more, important expenditure side. Therefore, in order for comprehensive reform to occur in Pennsylvania, policymakers must embrace three key principles: 1) Taxpayer Protection through Tax Limitation; 2) Resource Management through the Competitive Delivery of Education; and 3) Continuous Quality Improvement through Accountability to Parents.

The Pennsylvania General Assembly must not simply shift revenue sources without making significant changes in how education is delivered and how the effectiveness of that delivery is evaluated. Policymakers must use this opportunity to permanently relieve Pennsylvanians of onerous taxes and, at the same time, dramatically improve the quality of education for all children.

# # #

Matthew J. Brouillette is president of the Commonwealth Foundation, a non-partisan, non-profit public policy research and educational institute based in Harrisburg, Pa.