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Michigan Policy Helped Poor Districts Academically, Not Rich Ones, Study Says

In the mid-1990s, Michigan lawmakers and voters approved a dramatic overhaul of their school finance system, which increased the flow of money to poor districts and transferred authority over many education funding decisions from local school systems to the state.

Now, a newly published study has found that Michigan's funding system significantly increased the academic performance of students in impoverished districts on a number of measures, but may have had a negative impact on their peers in wealthier school systems.

In addition, the sweeping policy, which reduced districts' reliance on local property taxes, was successful in reducing inequalities between rich and poor districts in Michigan, the study concludes.

Published in the spring issue of the journal Education Finance and Policy, the study has potentially important implications for school policy, writes author Joydeep Roy. It shows that state policymakers, if they so choose, are capable of creating school-finance systems that redistribute state money and create a fairer balance between wealthier and poorer districts.

But the study also suggests that similar funding schemes have the potential to bring unintended academic consequences, the author says—as demonstrated by the apparent, negative impact on students in wealthier districts.

A number of school-finance experts have said that states that are overly reliant on funding education through property taxes create inequitable systems, because impoverished, tax-poor districts struggle to raise revenue, while affluent districts have an easier go of it.

Michigan's school-funding program, crafted by state lawmakers and approved by voters in 1994, took a very different approach. The policy, known as Proposal A, reduced Michigan districts' reliance on property taxes and replaced that money with increases in state sales taxes—a step that boosted the state's share of K-12 spending. The measure had the effect of greatly reducing school districts' authority over school spending, and giving it to the state, explains Roy, a senior economist at the Independent Budget Office of New York City, and an adjunct assistant professor of public policy at New York University.

In her study, Roy examines the Michigan policy's impact on school spending in wealthy and poor districts, and looks at data from state tests and students' participation and performance on the ACT, a college admissions test.

Her study finds that students in the lowest-spending districts she examined improved significantly on state tests—though they not make any significant gains in either ACT scores or participation. Meanwhile, there is "suggestive evidence" that the constraints created by Proposal A had a negative impact on students in the highest-spending districts.

Proposal A is still the law of the land in Michigan today. Martin Ackley, a spokesman for the Michigan Department of Education, said the policy essentially "took much of the burden off local districts from having to go to their local voters to raise revenues for schools."

Ackley said Michigan students have made overall progress on state tests, though not to the extent state officials have hoped. Overall progress on the ACT has been encouraging, he said.

In responding to the study, Ackley said in an e-mail that the state's goal is to close the gaps between students of various academic-performance and income levels by having all of those groups improve—not for any one group to make progress, while another stagnates.

"We strive for every student in every district achieving at high levels to be career- and college-ready," he said.

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