ALLOW ADDITIONAL PROMISE ZONES

Senate Bill 98 (proposed substitute H-1)

Sponsor:  Sen. Jim Ananich

House Committee:  Education Reform

Senate Committee:  Government Operations

Complete to 10-4-17

SUMMARY:

Senate Bill 98 would amend the Michigan Promise Zone Authority Act (MCL 390.1664) to allow for the creation of five additional promise zones, in addition to the existing ten. 

Beginning in 2008, the Promise Zone Act allowed communities to establish economic development "promise zones," and accompanying "promise zone development plans" to ensure financial assistance for postsecondary education to high school graduates who both live and go to school within the zone's boundaries. 

In order to be eligible to apply to the Michigan Department of Treasury for certification as a promise zone, communities had to have a percentage of children under age 18 living at or below the federal poverty level greater than or equal to the state average.  The maximum number of promise zones in the state was capped at ten.  Currently, the ten spots allowed for promise zones are filled by the following communities:

Baldwin Community Schools                         Lansing School District

Battle Creek Public Schools                           Muskegon Area ISD

Benton Harbor            Area Schools                          Newaygo ISD

City of Detroit                                                            School District of the City of Pontiac

School District of the City of Hazel Park       Saginaw School District

The bill proposes to allow fifteen promise zones instead of ten. 

BACKGROUND INFORMATION:

A promise zone development plan submitted by a community must include all of the following:

·         A complete description of the proposed promise of financial assistance (which, at a minimum, would have to provide sufficient funding to cover tuition necessary to obtain an associate's degree at a community college, and at most, sufficient funding to obtain a bachelor's degree or its equivalent at a public or private state institution—capped at the cost in a public institution—and could also be used for education improvement activities designed to increase college readiness).

·         A complete description of any limitation on the promise of financial assistance (including whether the assistance would be prorated based on residency length; would require public or non-public high school attendance in the zone; would be predicated on a minimum college grade point average and class load; or would be restricted to attendance at one or more institutions of post-secondary education).

·         Whether graduates of a public or non-public high school would be required to exhaust all other available publicly funded scholarship before receiving finance assistance.

·         How funds necessary to accomplish the promise of financial assistance would be raised, and actuarial model of how much the proposed plan was estimated to cost (based on actuarial formulas developed by the Department of Treasury).

Under the act, a portion of the annual growth in the State Education Tax within the zone may be captured, to augment the work of promise zone authorities which successfully raise the revenue necessary to fund a locally designed college promise for their students.

FISCAL IMPACT:

Senate Bill 98 would create an indeterminate cost increase for the state and would have an indeterminate fiscal impact for a local community that establishes a promise zone. 

If a new promise zone authority successfully makes tuition assistance payments in accordance with its promise of financial assistance, the state would have to pay to the authority one-half of the increase in revenue, if any, from the collection of the State Education Tax (SET)—which would otherwise be deposited into the School Aid Fund— due to growth in the local property tax values compared to a base year. 

Currently under the act, the base year is the amount of SET revenue collected in the promise zone in the year immediately preceding the year in which an authority makes its initial tuition payments or the amount of SET revenue collected in the promise zone in any one of the five immediately succeeding years, whichever is less. 

Payments are currently made to promise zone authorities as part of the annual School Aid budget in Section 26c of the State School Aid Act.  The cost of a new promise zone would depend on local property values and the base year.  The cost would increase each year as property values continue to increase compared to the base year.

                                                                                        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.