Michigan Bill to Redistribute Schools' Wealth On Governor's Desk; Poor Districts Want More

CHICAGO - The Michigan Senate yesterday approved and sent to Gov. John Engler a bill that would force the state's wealthiest school districts to share a portion of their property tax collections with poorer districts.

The House approved the bill last week. Rochelle Black, a spokeswoman for Gov. Engler, said the governor favors the idea of having school districts share their tax bases, but wants time to study the measure.

Public finance officials in the state said the plan would not affect school district bonds.

Under the bill, the state's wealthiest 170 school districts would share up to half of their annual growth in property tax collections from commercial and industrial properties with the remaining 390 school districts in the state.

The exact percentage of property tax collection growth that the wealthiest districts would have to give up would be determined by a formula measuring the average income levels within those districts against the state average, according to Sen. Dan DeGrow, R-Port Huron, a sponsor of the plan.

A coalition of poorer school districts said they still plan to pursue a lawsuit against the state, charging that the school-funding formula is unconstitutional because of disparities between rich and poor districts.

Richard Wilson, executive director of the Informula School Caucus, said his group supports the tax-base sharing plan, but maintained it does not go far enough.

"It doesn't change our belief that the system is fundamentally flawed and inequitable," Mr. Wilson said.

He added that oral arguments are scheduled this fall in the Michigan Court of Appeals on a motion by the caucus to overturn a previous ruling that barred school districts from using public funds to sue the state. If that ruling is overturned, he said, the group will file a lawsuit against the state challenging the school-funding formula.

If signed by the governor, the tax base-sharing plan also could be challenged in court. William Bedell, superintendent of Romulus Community Schools in suburban Detroit, said he has asked the district's attorneys to explore the possibility of a lawsuit against the state. He estimated his district could eventually lose up to $700,000 a year under the plan.

"It just seems to me that there should be a way to stop someone from taking away part of your tax base," he said.

Sen. DeGrow explained the motivation behind the legislation was to narrow the per-pupil funding differences among Michigan school districts. According to a Senate Fiscal Agency analysis, the plan would raise $27.2 million in fiscal 1992, which begins Oct. 1, for redistribution to the 390 less-wealthy school districts in the state - amounting to an average per-pupil increase of $23.20. In 10 years, the agency forecasted that the plan would raise $340 million for redistribution, totaling an increase of $290 per pupil.

Annual per pupil expenditures by Michigan school districts range from $2,500 to $7,500, according to the state's Department of Education.

The new law will not have any effect on outstanding school district bonds or future bond issuance, said Richard Allen, senior vice president at Kemper Securities Group Inc. in Lansing, Mich., because the legislation specifically exempts property tax levies dedicated to debt service.

William Roche, senior vice president and manager of the public finance department at First of Michigan Corp. in Detroit, said that "the great majority" of Michigan school bond issues are required to be approved by voters and carry an unlimited taxing ability for debt service.

He added that the only bonds school districts are allowed to issue without voter approval are those to upgrade school heating systems. He said the alternate source revenue bonds carry a general obligation pledge, but are paid with savings achieved from increased energy efficiency.

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