2006-07-07 / Editorial

Consider Michigan's plan for funding Rhode Island education

By Bruce Sundlun

RRecently, there have been major stories in local

newspapers about budget fights in many towns involving rising school expenses and higher property Rtaxes to pay the school expenses.

Some voters don't know their school expenses are paid almost exclusively by their local property taxes. Admittedly, the state recently has contributed some funds toward local education, but the most recent report of the Office of Municipal Affairs shows four towns where school expenses have climbed to more than 80 percent of the budget: Exeter 85.3 percent, Richmond 81 percent, South Kingstown 80.3 percent, and Gloucester 80 percent. Right behind them come seven towns where school expenses amount to more than 70 percent of the budget: Burrillville 78.9 percent, North Kingstown 75.8 percent, Coventry 75 percent, Scituate 71.6, West Warwick 71 percent, Cumberland 71percent, and Portsmouth 70.3 percent. Next comes the biggest group of towns: fourteen with school expenses in the 60th percentile, with Jamestown at 66 percent.

Cities and towns that pay the smallest percentage are Pawtucket 37 percent, New Shoreham 35.6 percent, Newport 35.2 percent, Woonsocket 33.5 percent, and Providence, which pays the smallest percentage for schools, 28.2 percent, because Providence has very large service payrolls for full-time police and fire departments.

The usual way of fighting off increasing school expenses is to close a school or chop curriculum: reduce sports to football and baseball; eliminate art, music, and drama; get the curriculum down to "readin', ritin', and rithmetic." Soon there is a political division between people with kids in school and those without. Most often, the schools and kids lose, because about 75 percent of the people in town do not have children in the schools, against only 25 percent who do.

Michigan is the only state I know that has created and implemented a plan that sharply reduced property taxes and shifted most of the expense of primary and secondary education to the state budget. Republican Governor John Engler, faced with the customary conflict between climbing school expenses and resistance to higher property taxes, combined with U. S. Senator Debbie A. Stabenow, a Democrat legislative leader, to have the state take over the financing of school expenses and banning the use of property taxes. But how does the state pay for schools? The governor gave the people a choice in a referendum: increase the state income tax by 1.4 percent, or the sales tax by 2.2 percent. In 1993, the voters adopted Governor Engler's plan by 69 to 31 percent, and chose to increase the sales tax. Called Proposal A, the plan has been a success.

Michigan property is now classified as homestead or non-homestead. Homestead property is a resident's home and not subject to property tax. Non-homestead property is business, rental, and vacation property, and is taxed.

From 1994 to 2003 property taxes were reduced by $63 billion, while state taxes increased by $46 billion, for a net decline of $17 billion over 10 years! Michigan's tax burden dropped from 14th in the country to 20th. Homestead property taxes dropped 43.3 percent.

Rhode Island, by contrast, is fifth in state and local property taxes in the country. In fiscal 1999, Rhode Island state aid contributed only 25.5 percent of local revenues, and was 43rd in America. The national average is 31.1 percent.

The Rhode Island General Assembly has tried to decrease reliance on the property tax, especially the phase out of the motor-vehicle excise tax. But there are still two factors explaining why Rhode Island is high on property taxes and lower on other taxes: 1) the state does not tax services in its sales tax; 2) the state's many exemptions narrow the sales-tax base.

Twenty of 45 states with sales taxes include taxing services. Not Rhode Island. Cleaning services are taxed in 21 states, repair services in 21, transportation services in 12, and personal services in five.

Rhode Island exempts grocery food from sales tax, as well as non-prescription drugs, and clothing. Fine. But there are about 155 other items not taxed in Rhode Island, but taxed in other states.

In Rhode Island, when the irresistible force, school expenses, hits the immovable object, property tax, the voters may want to consider Michigan's Proposal A. It seems to work.

The writer is a Jamestown resident and is a former governor of Rhode Island.

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