Deep State Tax Cut Threatens to Bankrupt Michigan's Schools

MICHIGAN is abuzz with the largest tax cut in state history - an average drop of 60 percent to 65 percent in property taxes statewide, adding up to $5.6 billion - and the question of how to make up the difference to keep its schools running.

Passed July 21 with one quick day of debate after years of deadlock, the new state bill means that Michigan, perennially among the nation's top five states in average property tax paid, will give a break to recession-ravaged businesses and homeowners, while shaking the state's education establishment.

"Michigan's overburdened taxpayers will get substantial property-tax relief, job providers will gain a competitive edge, and the people of our state will have an unprecedented opportunity to reform our schools," said Republican Gov. John Engler, who is expected to benefit politically by the measure. State Sen. Debbie Stabenow, the highest-profile Democratic opponent of Mr. Engler in 1994, is expected to be hurt.

Shock waves are running through the state's education community because the tax cut will be accomplished by eliminating the operating taxes of local and intermediate school districts. The state legislature provided no means of replacing the revenue to schools, a situation that, if left unresolved, would bankrupt nearly every district in Michigan.

Democrats said they would push for full reimbursement of the lost revenue through such proposals as increases in the state's 4 percent sales tax, extension of the sales tax to services such as dry cleaning and auto repairs, or shifting money from other state services.

Republicans see an opportunity to initiate changes that might include a voucher system. Under this plan, parents would receive a state grant for education to spend wherever they wish.

Several critics said the legislature acted rashly and irresponsibly.

They "destroyed our system of funding, with no answer of how we're going to reshape and reformulate it," said state Rep. Lynn Jondahl (D).

"This is leading right to the dissolution of public education... . They're playing Russian roulette with our children," said Trini Johanessen, vice president of the 123,000-member Michigan Education Association. But the measure seems an irreversible fait accompli.

Newspapers here are already full of accounts of special-interest groups lining up in legislative lobbies: taxpayer organizations making the case for net tax cuts, business groups trying to ward off increases elsewhere, and human-services advocates trying to protect welfare and mental-health programs from those looking to make up education cuts at their expense.