Saturday, May 22, 2010

This is good news?

The Michigan Senate and House Fiscal Agencies revised revenue estimates this past week, as they do several times each fiscal year. The state’s general fund revenue projections are down another one-quarter to one-half million dollars since the January 2010 estimates.

The “good news,” we are told, is that higher-than-expected sales tax receipts feeding into the state school aid fund mean that K–12 schools will not have their funding cut again this year.

Uh ... the schools let out for the year in 2–3 weeks. How could they possibly cut their budgets in any meaningful way this late in the year? School districts are required by law to adopt budgets for the coming school year by July 1. The fact that, 10-1/2 months later, they still don’t know how much revenue they have to work with, illustrates just how impossible it is for them to be responsible stewards of public funds.

This was one of the unexpected side effects of 1994’s Proposal A, which tried to bring greater equity to K–12 funding by funneling much of the revenue through the state. I don’t think anyone (except the most cynical among us, perhaps) expected the state to begin receiving statewide school property taxes in August but then not relay all of them to local districts until the following August—long after the school year has ended. One consequence of this is that more districts every year must borrow in the spring to meet cash flow needs (that is, to pay their employees) until they receive these held-back funds. The local districts pay interest on these “tax anticipation notes,” further cutting into funds available for use in classrooms.

This is no way to run a railroad—or a school system. Changing the state’s fiscal year to a July-to-June model (as was suggested both in Senate Bill 1281 and as part of a constitutional revision), could alleviate the problems caused by the mismatch in fiscal years.

1 comment :

  1. Californians who are due state tax refunds are getting IOUs. Fortunately (!) we owed state tax and thus aren't left holding official paper that the bank won't take as a valid deposit. And yet. Our primary election is June 8 and everybody paying for attack ads is saying they won't raise taxes, just let small business go about their business of creating more jobs. When we have elected officials who have the guts of an old violin bow, it's no wonder these things happen.