In a nutshell:
- Michigan families with school-age children have access to many public schooling options, including charter schools and inter-district school choice; however, a 50-year-old constitutional prohibition on public support of private schools has made private school choice unavailable.
- The proposed citizen-initiated law, Let MI Kids Learn, would provide access to tax-credit education savings accounts to help families finance the cost of various educational services, including private school tuition.
- The proposal currently awaits review by the Board of State Canvassers to determine petition signature sufficiency before being sent to the legislature for consideration. But, even if approved by the current Republican-controlled House and Senate, the proposed law would have to withstand constitutional scrutiny.
Michigan has been at the vanguard for providing families with school-age children with public schooling options. Over the past three decades, state policymakers have opened up several options to allow families to choose an alternative public school to the one assigned to them based on their residence. This menu of options is highlighted by laws authorizing public charter schools and allowing students to attend schools in nearby districts. While many public schooling alternatives are available, Michigan families have been frozen out of state-subsidized private school options due to the strictest-in-the-nation constitutional ban on providing public aid to private K-12 schools. Despite the current prohibition, two proposed citizen-initiated laws currently awaiting state review seek to provide Michigan families with access to new educational savings accounts to support greater educational choice.
The Let MI Kids Learn proposal would establish a new state law and amend another one to provide individuals and businesses with dollar-for-dollar tax credits against their state tax liability for donations made to scholarship-granting nonprofit organizations. The scholarships would fund student-specific educational savings accounts that could be used by families of K-12 students enrolled in both public and private schools to cover a host of educational expenses. The proposed initiated state laws are nearly identical to bills passed on a party-line vote by both chambers of the Republican-controlled legislature in late 2021, but subsequently vetoed by Democrat Governor Whitmer.
Petitions circulated to initiate the two proposed laws are before the Board of State Canvassers to determine whether they have the requisite number of signatures. The state constitution requires a citizen-initiated law to obtain 340,000 valid signatures (equal to eight percent of the votes cast for governor at the last election) to be certified by the board. Because the proposal involves two separate laws (and two petitions), both petitions must meet the signature threshold. While the Board of State Canvassers has not signaled exactly when it will make its final determination, many observers believe that will occur after the November general election, either in late 2022 or early 2023.
If the board determines that the petitions have met the signature threshold, they will then go to the Michigan legislature for consideration. The constitution provides the legislature with a 40-day window to enact a citizen-proposed law, as presented, or to recommend an alternative. If approved, the proposal becomes law without the need for the governor’s support as the governor is unable to veto initiated laws enacted by the legislature. If the legislature does not enact the proposed laws or propose an alternative, they would then appear on the November 2024 general election ballot for a statewide vote. To be clear, the proponents’ main stated objective is to have both laws approved by the current Republican-controlled legislature, rather than send it to a statewide vote in 2024.
If approved, the Let MI Kids Learn proposal would represent a totally new era of school choice in Michigan.
Michigan Public School Choice Options
As is the case in other states, Michigan charter schools (formally called public school academies (PSAs) under state law) are public schools funded by state tax dollars that operate independently from traditional public school districts. They are governed by appointed boards and authorized to operate under a separate “charter” issued by their authorizing bodies. In Michigan, this can be a public university, community college, or school district. Authorizers are responsible for ensuring schools comply with their charters as well as all applicable laws.
Soon after Minnesota authorized the first-in-the nation public charter school law in 1991, the Great Lakes State enacted its own law. In the fall of 1994, nine charter schools opened their doors to provide K-12 education. Since then, the number of charter schools, as well as the number of Michigan children enrolled in them, has grown substantially. For the 2021-22 school year, 293 PSAs in virtually every corner of the state enrolled almost 150,000 K-12 students (about 11 percent of all public school students). Charter schools, like traditional public schools, cannot discriminate when enrolling students; if family interest in a charter school exceeds the number of open desks available, available spots are filled by a lottery. In addition to typical brick-and-mortar schools, state law also allows the establishment of cyber charters that provide full-time student instruction via online learning.
Michigan added another public school choice option in 1996 when it adopted a statewide policy allowing for inter-district choice. The Schools of Choice program allows students to attend a traditional public school outside of their district of residence, but only if the receiving district accepts students. While state policy and regulations govern the operation of this program, district participation is voluntary. Like the rules governing charter schools, if a traditional public school district has more applicants than available desks, it must hold a lottery to fill those spaces. Today, over 200,000 students participate in the Schools of Choice program and nearly 80 percent of the state’s 530 traditional public school districts enroll at least one student from outside their geographic boundaries. In addition to the state’s inter-district choice program, districts across the state provide parents with intra-district educational options that allow students to choose a school within the district other than the one they are assigned to based on their geographic residence.
Both major public school options available today, charter schools and inter-district choice, were made possible by 1994’s Proposal A school finance reforms. Specifically, Proposal A created the per-pupil foundation allowance as the primary funding mechanism for public schools. With the adoption of the portable foundation allowance mechanism, each student’s funding “follows” them to the district in which they enroll, whether it is their district of residence, another traditional public school district, or a charter school. The total amount of foundation allowance funding a school receives each year is a function of the per-pupil foundation allowance and the number of students it enrolls, as determined by two student count days.
Statewide, approximately one quarter (350,000 students) of Michigan’s 1.4 million public K-12 students attend either public charter schools or exercise inter-district choice. While this uptake rate is impressive and has earned the state a high national ranking for access to public school choice options, proponents of private school choice programs contend that many parents of school-age children still don’t have access to an educational alternative that best fits their child’s needs. Parental calls for more public-subsidized schooling alternatives have been accentuated by the disruptions, including school closures and mask mandates, caused by the COVID-19 pandemic. For these parents, the Let MI Kids Learn proposal would fill that void.
Tax-Credit Scholarships – What are They and How do They Work?
The Let MI Kids Learn proposal is a mashup of two popular school choice mechanisms that have been adopted across the United States in recent years – tax credits and education savings accounts (ESAs).
ESAs can be thought of as flexible spending accounts that families can draw upon to fund eligible educational services. They are similar to health reimbursement accounts where an employer funds an account, allowing employees to draw funds to pay for a variety of eligible health-related expenses. Unlike school voucher programs popular in other states that are limited to private schooling options and, sometimes, specific students (e.g., low income), ESAs provide greater flexibility. This is the case with the Let MI Kids Learn proposal as students attending both public and private schools could access ESAs and the funds could be used for a myriad of educational services, including tuition and tutoring, summer and after-school programs, mental health services, student transportation, AP and dual-enrollment classes, and technology devices.
According to EdChoice, a school choice advocacy organization, eight states directly fund these accounts with public dollars in order to allow families access to alternative educational opportunities. However, Michigan’s constitutional prohibition on direct financial support for nonpublic schools requires an alternative ESA funding mechanism. Therefore, the Let MI Kids Learn proposal would fund these accounts (called Student Opportunity Scholarships) through charitable donations made to state-approved scholarship-granting organizations (SGO). By doing so, the scholarship funds never directly touch State of Michigan accounts. Under the proposal, SGOs must be nonprofit organizations established exclusively to administer ESAs, provide oversight, and comply with state-reporting requirements.
Eligible families of children enrolled in both public and private schools could apply for an ESA. Scholarship amounts would be capped based on the type of school a student attends and whether the student has a disability. Further, there is a household income limit for students enrolled in private schools or being homeschooled.
For eligible students attending public school (both traditional and charter), the maximum scholarship amount would be $500 per year or $1,100 per year for a child with a disability. For students enrolled in private school or engaged in at-home learning, the maximum scholarship is capped at 90 percent of the per-pupil foundation allowance (this equates to $7,830 in the 2022-23 school year). Students who have a disability and students from households with income below the income eligibility criteria for the federal free lunch program (roughly $51,000 for a family of four) would receive the maximum. This amount is reduced for students from higher-income households based on a sliding scale. Under this phase down, the smallest ESA amount would be $4,894 for students from households with income at 200 percent of the income threshold for the federal free lunch program (roughly $102,000 for a family of four).
In exchange for making a donation to a nonprofit SGO, donors, which could include either individuals filing an Individual Income Tax return or businesses filing a Corporate Income Tax return, would be eligible for a new state income tax credit. The non-refundable credit would be available on a dollar-for-dollar basis. While non-refundable, an approved credit could be carried forward to offset any tax liability in subsequent tax years until used up. For instance, a donor that contributes $100,000 to an SGO and has an annual state income tax liability of $20,000 (after all other exemptions and credits) would be able to apply the $100,000 credit to eliminate all of his or her state tax liability for five tax years.
The aggregate of all credits claimed in any tax year would be limited to $500 million, equal to approximately 1.6 percent of the state’s $31.2 billion discretionary revenues annually. This amount of foregone income tax revenue revenue, however, would be netted against any reduction in state payments made to public schools associated with public school students that receive ESAs and switch to private schools. The Mackinac Center for Public Policy’s fiscal analysis of the proposal found that the net impact to the state treasury would range from a cost of $109 million to a benefit of $381 million, based on participation rates, scholarship amounts, and other factors.
The tax credit limit can grow if the total amount of tax credits approved for the previous year was at least 90 percent of the $500 million. In this case, the total amount of annual state tax credits available would have to increase by 20 percent. If the 90 percent threshold is met each year, the statutory cap would rise to over $1 billion in foregone state revenue by the fifth year in operation.
According to EdChoice, the state legislatures of two states (Kentucky and Missouri) have enacted similar tax-credit ESAs to provide expanded educational choice. The Kentucky program, the first of its kind in the nation, was ruled unconstitutional in 2021 and has been enjoined by a state court from taking effect. The Missouri tax-credit ESA program took effect in 2021 and allows students from low-income households and those with special needs to access scholarship dollars.
Procedurally, the immediate next step in bringing the Let MI Kids Learn proposal to life is a determination of petition signature sufficiency by the Board of State Canvassers. As noted earlier, this is likely to come following the November general election in either late 2022 or early 2023. Next, per the state constitution, it must be approved by each chamber of the Michigan legislature, by simple majority vote, within a 40-day window following approval by the Board of State Canvassers. Again, the proponents have always considered this the primary route to adoption based on the proposal’s previous approval by the Republican-controlled legislature.
Beyond these procedural hurdles, there remains a question of the proposal’s constitutionality under Michigan’s prohibition against public aid to private schools. While two recent U.S. Supreme Court decisions overturning similar restrictions in other states provide some hope to proponents that the 50-year-old Michigan prohibition might be found unconstitutional under the federal constitution; those cases don’t provide any direct relief for Michigan families looking to access greater school choice through private schooling. As such, there remains unresolved legal questions surrounding the Let MI Kids Learn proposal that will have to be answered in addition to the procedural steps. In this light, the next wave of school choice will first hit state, and possibly federal, courts before it washes over Michigan’s K-12 education landscape.