Written by: Rachel White
Primary Source: Green & Write
The message sent by 1.7 million voters that entered ballot boxes across the state last week was loud and clear: voters rejected Proposal 1 by a 4-to-1 margin. The Proposal did not garner a majority of the votes in a single county in the state.
While the central component of Proposal 1 was road funding, Michigan’s public schools also had a stake in the game. As was discussed in a previous Green & Write blog, a portion of the money generated from the sales tax increase at issue in Proposal 1 would have generated around $300 million for the School Aid Fund (SAF). Moreover, Proposal 1 would have prohibited four-year colleges and universities from accessing money from the SAF.
Now that Proposal 1 has failed, the Michigan legislature is back to the drawing board and must figure out a way to address the states crumbling road and bridge problem. Governor Snyder has said that at least $1.2 billion a year is needed to maintain Michigan roads. Where will this money come from? In the short term, legislators will likely go back and make changes to their originally proposed 2015-16 budgets to free up some funds for the roads this next year. Whether and which areas of the SAF will be affected remains to be seen; however, what is clear from Proposal 1 is that four-year college and universities will be able to continue accessing money appropriated to the SAF.
What the School Aid Fund Funds
Currently, Article 9, Section 11 of the Michigan Constitution requires SAFs to “be used exclusively for aid to school districts, higher education, and school employees’ retirement system.” Proposal 1 would have eliminated the term “higher education” in this section of the Constitution and replaced it with “public community colleges, public career and technical education programs, scholarships for students attending either public community colleges or public career and technical education programs.” However, given Proposal 1’s failure, this change will not be made.
If this is how things have always been, why does it matter that four-year colleges and universities will continue to have access to the SAF?
While the majority of state payments to four-year colleges and universities come from the state’s general fund, a small portion – about 14 percent – comes from the SAF. For example, in 2014, higher education received approximately $2 million from the SAF and $1.2 billion from state general fund/general purpose money.
If Proposal 1 had passed, four-year colleges and universities would have had to compete with all other areas general government for all of their state appropriations. However, given that Proposal 1 failed, it is likely that four-year colleges and universities will continue to receive the approximately $2 million from the SAF that they have received for the past four years. The will have to compete with general government functions for the remainder of their funding, as they have in the past; however, this competition will likely be much more fierce given that the state is going to need to cut in other areas to pay for the crumbling roads and bridges. With fewer options for other state funding to support higher education, will SAFs that would have typically gone to K-12 be transferred to provide more support for higher education if general funds are not available due to an increased appropriation to pay for Michigan’s roads and bridges?
To see whether K-12 SAFs do indeed get redirected to pay for higher education, stay tuned to the Michigan legislature this week. The May consensus revenue estimating conference is taking place this Friday, which will give House and Senate members a more accurate idea of how much revenue they have to work with in light of the failure of Proposal 1.
Contact Rachel White – email@example.com