Sinking Property Values Cost Schools Up To $150 Million

School officials this year will likely wake up to the reality Michigan homeowners are facing: declining property values mean the loss of real money — value upon sale for homeowners and tax dollars for school districts.

News is percolating through the capital that sinking property and home values around the state could force state lawmakers to readjust the state school aid budget, because the dollars they thought would be available may not materialize. That could hurt efforts to create smaller high schools and pump more state support into early childhood education.

House Fiscal Agency Chief Mitch BEAN confirmed to MIRS that the decline in property values — while taken into consideration during the January Consensus Revenue Estimating Conference — have been deeper than first projected.

"Property values have been declining, as everybody is aware of," Bean said. "I think we may have to reduce our estimate of the amount of money that is going to come in on the State Education Tax (SET)."

Adding to the issue is a lawsuit that was settled in Midland over the value of some personal property. The state had set aside some money to cover that issue, but apparently, not enough.

Bean stressed that the SAF revenue news isn't a panic issue — it's roughly going to be $100 to $150 million (based on early preliminary numbers) to the state's coffers this year for both the falling property values and the law suit settlement.

For the state, the issue of SET revenues is compounded by the fact that local school districts are collecting less on the property tax as well due to declining values. The state has to make up whatever the districts lose in order to keep districts at the base per pupil funding level.

Oakland County ISD lobbyist Brian WHISTON reports in his county alone over the next three years, his schools could lose $75 million. "This is not a blip on the screen. It is a major problem."

The problem is home values are declining, and in some cases would mean fewer dollars for local schools that depend on the state equalized values (SEV) of those homes.

Whitson and Tom WHITE from the group Michigan School Business Officers hope that the increases in the K-12 foundation grant can be salvaged but other programs may be left on the table.

"This is a nervous period for schools," White explains. "What are they actually going to have? They start with one budget based on one number and end with another. I'm urging my members to be very cautious about this."

Even before the loss of revenue issue surfaced, Whitson and Oakland County schools were complaining that they were being treated unfairly on the governor's original foundation grant recommendation. Under her recommendation, the lower funded schools would receive a higher per pupil foundation grant. Better-funded schools, like Oakland, would net a lower increase. The goal of the proposal is to further "close the gap" between districts.

Whitson has offered an alternative that would guarantee the $216 per pupil the governor embraced, but add $15 million to increase aid from $108 to $145 per pupil so that those well-funded districts "could get closer to the rate of inflation," he said.

(MIRSNews: Senior Capitol Correspondent Tim SKUBICK contributed to this story).