Year of publication
Journal of Policy Analysis and Management
School finance reform in Michigan involved centralization (at the state level) of spending decisions about schools, a large tax shift (mostly from property to sales), and a small tax cut. The changes came about after two decades of failed attempts to reduce property taxes in the state, and were the immediate result of an unlikely piece of legislation that abolished all funding for public schools. Unlike most centralized systems, foundation grants in Michigan differ by district. Distributionally, the reforms favor residents of small, rural districts (whose spending was increased sharply). Residents of poorer urban areas, including Detroit, lost net income as a result of the reforms, as did residents of some of the richest suburbs in the state. Michigan permits a number of districts to supplement their foundation grants by limited amounts, a strategy that we argue may be a promising way of combining the efficiency benefit of local control with the equity benefit of foundation grant systems.