REGIONAL ENHANCEMENT MILLAGE

ALLOWED FOR CHARTER SCHOOLS,

CYBER SCHOOLS, & ISDs

Senate Bill 574 proposed committee substitute (H-1)

Sponsor:  Sen. David Hildenbrand

House Committee:  Education Reform

Senate Committee:  Education

Complete to 10-25-17

SUMMARY:

Senate Bill 574 would amend the Revised School Code to provide that public school academies (PSAs, or charter schools) and intermediate school districts (ISDS) themselves, for certain pupils, would be eligible to receive a portion of funds obtained through a regional enhancement property tax levied by an ISD, for a regional enhancement millage approved after the bill is effective.

Regional enhancement millages are intended to supplement the operations of school districts within an ISD.  If approved by voters, a regional enhancement property tax is collected within the ISD and distributed to constituent districts within the ISD, a term which currently applies only to “traditional” public school districts. 

The bill would add a provision that, for purposes of Section 705 of the Code, which governs regional enhancement property taxes, a charter school would be considered a single constituent district of an ISD if it meets both of the following criteria:

·         The charter school operates at least one site located in that ISD.

·         The charter school counts in membership students enrolled at the site or sites located in that ISD on the state membership count day.

The bill would also specify the following criteria, under which a cyber school (a type of charter school operating under Part 6E of the Code) would be considered a single constituent district of an ISD for purposes of Section 705:

·         The administrative office of that cyber school is located within the ISD.

·         At least 80% of the students enrolled in the cyber school reside within the ISD.

·         The cyber school counts in membership students enrolled in the cyber school on the state membership count day. 

For the purposes of Section 705, an ISD would also be considered to be a single constituent district of the ISD for regional enhancement property taxes initially authorized and levied or renewed after the bill would take effect, as long as it enrolls pupils that are counted in membership of the ISD and not in the membership of another ISD, district, or charter school. (This is intended to account for students attending special education center programs within the ISD).

The bill would provide that a non-cyber charter school receiving revenue from a regional enhancement property tax under this section must use that money only for expenditures that directly benefit a site operated by the charter school that is located in the ISD in which the tax was approved. 

Generally, the bill would not be retroactive, meaning it would not apply to existing regional enhancement property taxes.  However, it would make exceptions for the communities of Muskegon Heights and Highland Park.  In those communities, the original school districts exist to pay off debt, with the education of students and school buildings managed by a K-12 charter system.  However, the charter schools share in the regional enhancement property taxes levied and collected by the respective ISDs in which they reside—Muskegon for Muskegon Heights and Wayne for Highland Park–through an agreement allowed under Section 705.  Once the existing regional enhancement property taxes for those two ISDs expire, the charter schools operating in Muskegon Heights and Highland Park would not be able to receive revenue under a renewal unless they meet the proposed requirements for a charter-school-as-constituent-district, described above.

The bill would take effect 90 days after enactment.

MCL 380.705

BACKGROUND:

Process for approving and disbursing a regional enhancement property tax

The Code currently provides that an ISD may place the question of levying a regional enhancement property tax on the ballot for a regular school election, state primary, or general election.  The tax may not exceed three mills and may not exceed a term of 20 years. If approved by a majority of voters in the ISD, the tax will be approved. 

Then, not later than ten days after the ISD receives the revenue, the ISD must calculate and pay each of its constituent districts a portion based on the district’s membership. 

Kent ISD

According to the bill sponsor, in May of 2017, a regional enhancement millage of 0.9 mills was placed before and approved by voters in Kent ISD.  The millage will raise almost $20 million a year for ten years. However, the 14,000 students attending PSAs in that district do not benefit from the collection of the millage, as it is directed to the students of “traditional” public schools within the ISD. The bill sponsor went on to say that there are six regional enhancement millages across the state in six different ISDs; over 73,000 PSA students residing within the boundaries of those ISDs do not benefit from those millages.

FISCAL IMPACT:

The bill would have no fiscal impact on the state but would have an indeterminate impact on the future distribution of newly authorized ISD enhancement millage revenue.

The bill would not affect regional enhancement property tax millages that have already been approved by voters, but would affect future millages.  Including additional pupils who are enrolled in PSAs or counted in membership in an ISD would decrease the per pupil revenue received by each entity, all other things being equal.  However, the extent of the decrease would vary by ISD depending on the proportion of their overall pupil population that attends PSAs and whether an ISD operates center programs.  Additionally, the impact would vary depending on changing pupil populations and taxable values and whether any of the ISDs with existing enhancement millages increased their millage proposals in response to the bill’s changes.  The table below summarizes the six currently approved enhancement millages, including when each expires and their current per pupil revenue distribution.

Currently Authorized ISD Regional Enhancement Millages

Intermediate District

New/

Renewal

Number  of Mills

Initial     Tax Year

Final

Tax Year

    FY 2017

Total Revenue

FY 2017

Per Pupil Revenue

Kalamazoo

Renewal

1.5000

2017

2019

$10,901,264

$323

Kent*

New

0.9000

2017

2026

$19,270,690

$211

Midland

Renewal

1.5000

2014

2018

$4,867,313

$423

Monroe

Renewal

0.9866

2017

2021

$5,394,761

$274

Muskegon

New

1.0000

2014

2023

$4,156,739

$162

Wayne

New

2.0000

2016

2021

$77,820,119

$375

*Kent ISD’s millage revenue will begin for FY 2018, but for comparison purposes is estimated based      FY 2017 taxable value and pupil information.

                                                                                        Legislative Analyst:   Jenny McInerney

                                                                                               Fiscal Analysts:   Bethany Wicksall

                                                                                                                           Samuel Christensen

This analysis was prepared by nonpartisan House Fiscal Agency staff for use by House members in their deliberations, and does not constitute an official statement of legislative intent.