AAPS would receive a higher rate of return from the proposed countywide millage than from an increase of two mills in the statewide property tax for education, as explained in detail below.

Michigan tax law treats homestead and qualified agricultural or forestry property, henceforth “homestead property,” differently from all other property. The “all other” category is primarily business and industrial property. While the distinction is not always important, this analysis recognizes the distinction so it is available when it is relevant.

First, consider the capacity to generate revenue with an increase of two mills in the property tax. With respect to the state the Administration, House and Senate estimates of the revenue in FY 2010 from the 6 mills state education property tax prepared for the May 2009 consensus revenue forecast encompass the narrow range of $1.849 billion (Administration) to $1.871 billion (House). This analysis uses the mid-point, $1.86 billion (Senate). An addition of two mills to the state tax would increase total revenue by 1/3, which would be $620 million. Homestead property accounts for 58.8 percent of total valuation and thus for $365 million of total revenue. Business and industrial property accounts for 41.2 percent, which would be $255 million.

With respect to WISD, the value of taxable property in the WISD in calendar year (CY) 2009 is $15.158 billion. The proposed levy of two mills would generate revenue of $30.3 million to the ten local districts within WISD. Homestead property accounts for 58.9 percent of total valuation and thus $17.9 million of revenue. Business and industrial property accounts for 41.1 percent, which would be $12.4 million of revenue.

Turning to AAPS, the value of taxable property in the AAPS in calendar year (CY) 2009 is $7.945 billion. The proposed countywide levy of two mills would generate revenue of $15.9 million from the taxable property within AAPS. Homestead property accounts for 53.1 percent of total valuation and thus $8.4 million of revenue. Business and industrial property accounts for 46.9 percent, which would be $7.5 million.

Thus, using a two mills tax on property as a tax option, AAPS would produce 2.6 percent of the revenues from a statewide tax and 52 percent of the revenues from a WISD tax. The tax base of AAPS is more heavily business and industrial than the tax bases of the state and WISD.

Second, consider enrollment, which is the primary factor used by the state in distributing K-12 funding and the sole factor to be used in the countywide millage. Enrollment in FY 2009 in the state was 1,619,744; in the ten local districts in the WISD was 43,929; and in the AAPS was 16,439. Thus, AAPS enrollment equaled 1.0 percent of state enrollment and 37 percent of enrollment in the ten local districts within WISD as of FY 2009.

In conclusion, AAPS has 2.6 percent of the state’s tax base but only 1.0 percent of the state’s students. The result is that for every dollar we send to Lansing, we get back only 38 cents (1.0 divided by 2.6). With respect to WISD, AAPS has slightly more than half of the tax base and 37 percent of enrollment, which means we receive 71 cents for every dollar of tax (37 divided by 52). These estimates are calculated from gross taxes rather than net taxes. While this is satisfactory for comparing returns from state and WISD actions, the use of net taxes is important when computing absolute returns to citizens in the AAPS – as shown in “Sources of Revenue and Destinations of School Funds,” a companion piece in this Data Bank series. If our only choices are a state or countywide fiscal action, which is the case for generating operating funds, local action is more cost-effective.