CHICAGO -- Michigan's new school funding system will be put to the test today as more than 200 school districts seek voter approval of tax property millages needed to maintain per-pupil spending levels.

Allen Short, director of governmental affairs for the Michigan Education Association, said that 226 school districts will be holding millage elections to pass the 18 mills tax on business property needed for participation in the state's foundation grant program.

The program guarantees school districts a maximum annual funding level of $6,500 per pupil that includes what the districts would raise from 18 mills of property taxes on nonresidential property. If voters in a school district fail to pass the 18 mills of property taxes, the district's grant would be cut proportionately.

Today's elections mark the first big wave of school millage requests since voters statewide approved shifting most of the burden for funding primary and secondary education to the state from local property taxes. In March, Michigan residents approved an increase in the state sales and other taxes to raise $6.8 billion for education in the wake of the elimination of school operating property taxes by the state legislature last summer.

However, under the state's new funding program, districts are required to levy six mills of property taxes and seek voter approval for 18 mills of business property tax. Some districts may also seek voter approval for more mills to increase their per-pupil spending over the state grant.

Tom White, director of government relations for the Michigan School Boards Association, said people are still confused about millage votes because they think schools are "out of the millage business." White said the confusion could lead to some millage defeats.

"These are the first guys coming out of the boats onto the beach," he said. "And they could be mowed down."

White said the impact of a millage defeat would vary amongh the districts, adding that they still will have time to go back to voters later this year with another attempt.

Short agreed that there could be "trouble in spots" across the state because of the confusion. He said he has "no idea" how successful the districts will be in passing their millage requests since the districts have had "no experience in this area."

One district that has already tasted defeat at the hands of voters will be back today. The Southfield Public School system in suburban Detroit will be asking voters for 231.884 mills, after voters rejected 23.884 mills in April. The rejection resulted in Moody's Investors Service downgrading the school system's rating to A from Aa. Standard & Poor's Corp. placed the system's AA rating on CreditWatch with negative implications.

Much of the school debt in Michigan is qualified under the state's School Bond Loand Fund, which carries the state's ratings of A1 by Moody's and AA by Standard & Poor's. However, districts with debt rated above that level or with unqualified debt under the program are being watched closely by rating agency officials.

Michael Forrester, a director at Standard & Poor's, said the rating agency will be reviewing the impact on districts that spend more than the $6,500 per pupil state grant. The agency carries ratings on eight of those districts that have issued debt not qualified for the state loan program.

Charles Kishpaugh, an assistant vice president at Moody's, said the rating agency will be checkingn with school districts this week to learn the outcome of the millage election and ascertain the impact on a district if the millage is defeated.

"We've already heard from some districts that if [the millage] is defeated they will go back in August," Kishpaugh said.

Meanwhile, the Michigan legislature si trying to classify what will happen to districts that do not garner voter approval of the 18 mills. Under a measure pending in the legislature, a school district would not receive the state foundation grant if the 18 mills are not passed, Short said.

"It makes sure there is incentive to pass the 18 mills," Short said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.