The MC: The Mackinac Center Blog

Detroit Public Schools Debt Largely Not Supported By Additional Taxpayer Dollars

The state isn't on the hook for most of what DPS owes

As Michigan legislators discuss a bailout of the Detroit Public Schools, some have argued that this makes obvious fiscal sense for the state since state taxpayers are ultimately responsible for DPS debt. Yet a look at the composition of the district’s debt shows very little taxpayer exposure.

According to the Department of Treasury’s report, the district carries $3.4 billion in debt, most of which contains some state involvement. Yet this involvement rarely comes in the form of a direct obligation to cover the district’s debt.

Consider what is listed as $1.3 billion in DPS’s share of the pension system’s unfunded liabilities. Since the school retirement system is a multiple-employer, cost-sharing plan, these liabilities are the direct responsibility of the other school districts in the state. This means that policymakers could remove this debt obligation from DPS altogether and spread its costs over the rest of the school districts in the state. Indeed, because contribution rates are assessed as a percentage of payroll and because DPS is smaller than it used to be, DPS has already offloaded much of its retirement liabilities onto other districts.

In other words, DPS’s share of the unfunded pension liabilities is not really debt that DPS owes the state; it’s debt that the state owes future pensioners. Bailing out or not bailing out DPS will change none of this. In fact, one thing policymakers might consider is allowing DPS to completely exit the state-run pension system and shed the enormous burden it levies on the district. State policymakers have full control over the pension system and how these payments are made.

The district also secures some of its bonds and notes with revenue from the state. Yet these state contributions do not require that the state make additional payments to bondholders if the district does not make its payments. Instead, it gives bondholders the right to take money directly from the state’s general aid to the district. This would give the district less money to operate, but it would not necessarily require additional state dollars.

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There is one debt that may be the state’s responsibility — the money DPS borrowed through the state’s School Loan Revolving Fund. DPS has borrowed $196 million from the state through this fund, but the district is not likely to pay back the full amount. The state’s School Revolving Loan Fund has debtors of its own and any deficit it holds to those creditors due to DPS nonpayment may be an obligation of the state taxpayer.

If DPS creditors tap state payments to cover what DPS owes them, the district may not have enough money to operate. This is a serious concern, because it will limit the educational opportunities the district can offer current and future students. This may be something that lawmakers want to influence, but this is different from making the case to bailout DPS because the state is ultimately on the hook for the debt anyway.

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What’s Your Bubble? A Think Tank Checks Its Privilege

The ‘bubble score’ of Mackinac Center staff

In his 2012 book, “Coming Apart,” the social scientist Charles Murray discusses an increasing economic and moral divide among Americans.

Decades ago, Murray argues, the typical American was more likely to regularly interact with people from a different social class. People were more likely to marry across classes, attend churches with those of different backgrounds and participate in civic programs together. But today, Americans are increasingly stratified across social classes and distinctly different groupings on issues like religiosity, work ethic, education, family structure and more.

To demonstrate this phenomenon, Murray developed a “bubble quiz,” which is meant to measure how isolated a relatively well-off American is today from his not-so-well-off compatriots. It asks questions about religiosity, family situations, work, housing, entertainment choices and more. The higher the score, the smaller one’s bubble (the less isolated from members of different social classes). Murray says the average bubble score in “elite enclaves” like Manhattan, Silicon Valley, Washington, D.C. and parts of Los Angeles is between 12.5 and 24.5 while the national average is 44.2.

Murray’s main point is that we are increasingly isolated from people outside of our bubble, which makes understanding other mindsets more difficult. To mitigate this limitation, Mackinac Center experts try to practice the presumption of good will. We recognize that we may not be able to completely understand the rationale for someone’s argument on a particular policy issue, so we default to assuming that these arguments are made honestly and in earnest.

But on a personal level, following in the footsteps of our friends at the Texas Public Policy Foundation, we were curious about the size of the bubbles of our staff. So we took the test collectively and averaged a 49, suggesting that the average staffer at the Mackinac Center is less isolated by social class than the average American.

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So what’s your bubble score? Take the quiz here.

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Michigan Needs To Stop Charging Residents To Get Their Property Back

Mackinac Center analyst authors op-ed in Detroit Free Press

An op-ed published in the Detroit Free Press that is co-authored by a Mackinac Center analyst highlights the need for civil asset forfeiture reform in Michigan.

Michigan is one of the few states in the country that not only allows law enforcement to seize property from people who have not been charged with a crime, but requires the owner to pay between $250 and $5,000 to try to get it back. Such is the focus of the op-ed written by Mackinac Center Policy Analyst Jarrett Skorup and Nick Sibilla, a communications associate at the Institute for Justice.

As the authors explain:

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Under Michigan law, if your property is seized and valued less than $50,000, you must post a bond worth 10% of the property’s value to start the process of having it returned to you. But if you fail to post that bond within 20 days of the property being seized, it is automatically forfeited to the state.

House Bill 4629 — which passed a vote in the House and is awaiting hearing in Senate Judiciary Committee — would eliminate the bonding requirement for drug-related forfeiture cases and put an end to charging people who are unsuccessful in retrieving their property. Skorup and Sibilla noted Michigan is taking positive steps to reform its civil asset forfeiture laws on the books, but said more work remains:

Michiganders can still lose their property even if they have never been convicted in criminal court. Meanwhile, state law provides a perverse incentive to seize property and “police for profit.” After a property has been forfeited, police and prosecutors can keep up to 100% of the proceeds. According to a recent report by the Institute for Justice and data from the Michigan State Police, from 2001 to 2014, Michigan agencies collected more than $258 million in forfeiture proceeds under state law.

The bill was introduced by Rep. Peter Lucido, R-Shelby Township, and has been supported by both the Mackinac Center and the ACLU.

Read the full op-ed in the Detroit Free Press

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April 29, 2015 MichiganVotes Weekly Roll Call Report

Crime and Punishment: juveniles, sign breakers, fetus merchants, more

Senate Bill 564, Criminalize selling aborted fetuses or body parts: Passed 26 to 10 in the Senate

To make it a crime to receive a financial benefit or any type of compensation for transferring or selling an embryo, fetus or neonate, including organs, tissues or cells, if this was obtained as the result of an elective abortion.

Who Voted “Yes” and Who Voted “No”


House Bill 4187, Authorize jail for vandalizing road signs, lights, etc.: Passed 36 to 0 in the Senate

To authorize criminal penalties of up to 93 days in jail and a $500 fine for vandalizing or removing a traffic control device, light post, sign, etc. on a road or highway. For a third or subsequent offense the penalty would be one year in prison and a $10,000 fine.

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Who Voted “Yes” and Who Voted “No”


Senate Bill 761, Remove obsolete provisions from state school code: Passed 30 to 6 in the Senate

To repeal an obsolete 1974 law dealing with education for gifted and academically talented students. This one of a number of bills repealing obsolete laws or reporting requirements, most of which passed unanimously. This one was opposed by six Democratic senators.

Who Voted “Yes” and Who Voted “No”


House Bill 5024, Study vehicle driver marijuana intoxication threshold standards: Passed 107 to 1 in the House

To create a new government commission to review and analyze research and state laws relating to THC (marijuana) bodily content levels for purposes of establishing levels that indicate impaired driving, and then make policy recommendations.

Who Voted “Yes” and Who Voted “No”


House Bill 4965, Create juvenile justice family advisory board: Passed 96 to 13 in the House

To create a family advisory board in the Department of Corrections to give advice on ways to support family reunification when a minor is incarcerated for committing a serious crime, and other steps intended to assist re-entry into the community and reduce recidivism.

Who Voted “Yes” and Who Voted “No”


House Bill 4966, Require out-of-cell exercise for young prisoners: Passed 93 to 16 in the House

To require the Department of Corrections to provide “age-appropriate out-of-cell programming and outdoor exercise” at least five days a week for prisoners who are less than 21 years old.

Who Voted “Yes” and Who Voted “No”


House Bill 4962, End "tried as an adult" for some serious juvenile offenses: Passed 90 to 19 in the House

To no longer automatically prosecute and sentence 17 year olds charged with serious crimes as if they were an adult.

Who Voted “Yes” and Who Voted “No”


SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit http://www.MichiganVotes.org.

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How Two Similar School Districts Get Such Different Results

Study suggests funding levels have little impact on student growth

On the surface, DeWitt Public Schools just north of Lansing and Edwardsburg Public Schools on the Indiana border look very similar. They each serve about 3,000 students in predominantly white communities with poverty rates at or below the state average, though DeWitt’s median income level and rate of college-educated residents are noticeably higher.

Each district — DeWitt in Clinton County and Edwardsburg in Cass County — operates one comprehensive high school, one middle school, and three elementary campuses. They each sport Division 3 football teams that were 2015 playoff contenders.

But when it comes to the results their students demonstrate on state tests, the comparison diverges. Edwardsburg students outperformed their DeWitt counterparts on 14 of the 20 M-STEP tests administered last year to students in grades 3 through 11, despite serving more kids with special needs and a Free and Reduced Lunch (FRL) rate that’s nearly twice as high.

The same trend is observed on the Mackinac Center’s Context and Performance Report Cards. As a general rule, students from low-income households score lower on tests than other students, which may skew comparisons between a wealthy district and a less well-off one. To avoid the trap of judging the schools based on the economic status of the students they enroll, as the state’s Top-to-Bottom rankings do, the report cards adjust multiple years of testing data according to the rate of free lunch-eligible students served. A “CAP score” of 100 indicates a school meets expectations based on its student population, with higher scores indicating a school that beats the odds.

A combined look at the 2014 high school report card and the newer elementary and middle school edition reveals that Edwardsburg’s lowest school CAP score (101.81) beat the best showing from any of DeWitt’s schools (99.68). Averaging the school results into a district-level CAP score, Edwardsburg rates more than a full 10 points higher (106.05 vs. 95.50), finishing in the top 10 percent of all Michigan school districts. DeWitt’s combined district CAP score ranks in the bottom 14 percent statewide.

Money doesn’t explain the disparity in performance. Current expenditure data from the U.S. Census Bureau, over the same four-year period as the test results measured in Mackinac’s CAP scores, show the two districts spending nearly the exact same amount per student.

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DeWitt v Edwardsburg

The coming weeks are scheduled to bring the release of Michigan’s taxpayer-funded adequacy study, a $399,000 project almost certain to tell us that the state needs to increase education funding. Official documents for the project indicate the recommendation will be based on the funding levels of “exemplary districts” that exceed proficiency averages on the 2014 Michigan Merit Examination given to 11th-graders statewide.

Both DeWitt and Edwardsburg qualify as “exemplary” under this model, yet both also stand among the state’s lowest-spending districts. Edwardsburg performs significantly better given the odds brought by its student body but continues to spend slightly less: $8,811 per pupil in 2014-15, compared to DeWitt’s $9,136.

This isolated district comparison may raise eyebrows about the adequacy study’s approach. But it’s the new Mackinac Center report, “School Spending and Student Achievement in Michigan: What's the Relationship?”, which clearly undercuts the assumption that more money will improve results statewide.

The report put extensive financial and academic data from more than 4,000 individual public schools through a careful analysis. It included 28 different academic indicators — test scores and graduation rates. Increased spending registered a statistically significant relationship with only one of the 28 indicators. That outlier wasn’t exactly impressive: a 10 percent increase in spending projects to raise the average seventh-grade math score by a mere fraction of a point.

The basis for taxpayers’ skepticism regarding the effectiveness of future funding increases lies deeper than the case of DeWitt and Edwardsburg. A closer look at Michigan’s numbers justifies the need to focus instead on how current dollars are being used.

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Education Spending Not Tied To Success

New study featured in state media

The path to improving student performance isn’t as simple as spending more on education, according to a new study by the Mackinac Center for Public Policy.

The study — authored by Mackinac’s Education Policy Director Ben DeGrow and Edward C. Hoang, a professor of economics at the University of Colorado at Colorado Springs — found no correlation between increased spending and student achievement. These findings suggest that how schools spend money may be more important than how much schools spend.

Among the media outlets throughout the state to cover the report was the Lansing State Journal, which noted that in the 28 areas of achievement examined, a link between spending and performance was found in only one.

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“We’re not saying resources can’t make a difference in some cases,” said Ben DeGrow, the center’s education policy director. “But when you look at the big picture of how our education system is set up, it’s not structured to take those funding increases and turn them into better results for students.”

DeGrow also joined Renk on the Live with Renk Show to explain the importance of the study. The Michigan Legislature has hired a Denver-based firm for $399,000 to determine if the state spends enough on education. That report was due in March, but the deadline has now been extended to May 13 and will almost certainly recommend the state spend more.

“Lawmakers, parents and the Michigan Department of Education owe it to students to examine how education dollars are spent, rather than simply throwing more money to areas that do not directly impact the classroom,” DeGrow said when the study was released.

Read the full Lansing State Journal article here.

Access the study here.

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A Presidential Flip Flop

West Virginia Right-to-Work May Turn on Supreme Court Race

Possible backtracking on worker freedom if union-endorsed candidate elected

A May 10 election in West Virginia could leave the state’s new right-to-work law in peril. On that day, voters will decide whether to re-elect Republican Justice Brent Benjamin to the West Virginia Supreme Court of Appeals, or replace him, possibly with union-supported Darrell McGraw.

McGraw, who is seen as leading the pack of those challenging the 12-term justice, is endorsed almost entirely by unions. If elected, he would be the fourth Democrat on the five-member court.

Flawed Dane County ruling may show the way to killing RTW in West Virginia and nationally

The main concern of those who favor giving workers the freedom to choose whether or not they have to pay a union to keep their job is that with McGraw on the bench, the West Virginia Supreme Court may have the majority it needs to issue a ruling similar to the one recently made by a Wisconsin judge striking down the state’s right-to-work protections.

As I explained in National Review:

Dane County judge William Foust ruled that under the law, “a free-rider problem is born — the ability of nonmembers to refuse to pay for services unions are compelled to provide by law.” He then sided with the three unions in the case, including the Wisconsin State AFL-CIO, that argued that the right-to-work law took their property without just compensation.

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The ruling is incorrect and will almost certainly be overruled.

While Wisconsin’s ruling came from a lower court and will likely be overturned by a higher court, the West Virginia Supreme Court of Appeals would be the final arbiter in a question regarding that state’s new right-to-work law. If that court says it violates federal law, the case could go to the U.S. Supreme Court. If McGraw is elected and assists in overruling worker protections, workers’ only recourse (assuming the case involves a federal issue) is to take the question to the Supreme Court, which has been in limbo since the February death of Justice Antonin Scalia.

The current 4-4 split means the U.S. Supreme Court may fail to uphold nearly seven decades of precedent and kill right-to-work in West Virginia. If there is a tie — as was seen in the most recent union case before the court, Friedrichs v. California Teachers Association — the lower, unfavorable West Virginia ruling would stand. Such a ruling would not set a precedent for future cases or impact other states’ right-to-work protections.

If President Obama’s nominee Merrick Garland is appointed, there may be a 5-4 majority in favor of forced unionism. As the Washington Times recently wrote, “Garland rulings consistently side with labor unions.”

A court with Garland, or an appointee like him, could conceivably strike down right-to-work for the entire country.

Can McGraw Win?

As a former Supreme Court of Appeals justice and former attorney general, McGraw benefits from better name ID than most of the other candidates on the ballot.

Noted West Virginia political commentator Hoppy Kercheval explained:

The former state Supreme Court justice and former attorney general is among five candidates vying for the single seat on the five-member court. McGraw, because of his long political career, likely enjoys the highest name recognition in the field that includes current Justice Brent Benjamin, Wayne King, Beth Walker and Bill Wooten.

Kercheval also notes that, “Additionally, it is a plurality vote, meaning the winner does not have to have a majority, just more votes than anyone else.” Because there are five candidates “theoretically, just over 20 percent of the vote would be enough to win the election. … Voter turnout in West Virginia in the last presidential primary (2012) was only 24 percent, just over 292,000 votes. If turnout for this year’s primary is similar, 60,000 votes could be enough to win.”

Kercheval shows that:

McGraw can get votes. He received 313,830 in the loss to Morrisey (329,854), though that was a two-person race and a general election, which had a much higher overall voter turnout than the primary (670,000 to 292,000).

However, it’s worth noting that Benjamin has already defeated a McGraw once, in the 2004 Supreme Court race when he unseated Darrell’s younger brother, Warren, 382,036 to 334,301. Also, Walker received 329,395 in the 2008 Supreme Court race, coming in third in the race for two seats behind Democrats Menis Ketchum and Margaret Workman.

Will unions have a majority on the West Virginia Court?

According to a 2015 study from West Virginia Citizens Against Lawsuit Abuse, a nonprofit citizen watchdog group that fights lawsuit abuse, two of the justices, Democrat Robin Davis and Democrat Margaret Workman, joined together 68 percent of the time on non-unanimous decisions.

Still, there is hope. Only Davis dissented on a procedural issue during the right-to-work fight that would have killed the chances of the bill. The question was whether the governor had to appoint a Republican or a Democrat to fill a seat vacated by a Republican who had been elected as a Democrat. Workman wrote the majority opinion stating a Republican had to be appointed.

Workman was joined by Democrat Chief Justice Menis Ketchum and Republican Justice Allen Loughry; Benjamin did not participate in the decision due to a conflict of interest.

If McGraw is elected, it would take only one justice siding with a likely Davis vote against right-to-work, to make worker freedom in West Virginia history.

Worse, if Merrick Garland or someone of similar persuasion is appointed to the U.S. Supreme Court, the outlook for right-to-work across the country could be in jeopardy.

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Stopping University Tuition Hikes Would Cost Nearly $3 Billion

Spending at Michigan public colleges is skyrocketing

Costs at Michigan’s state universities have increased substantially over the past 10 years, so much so that returning tuition rates to what they were a decade ago would cost $2.8 billion, according to two analysts at the Mackinac Center for Public Policy.

James Hohman, Mackinac Center assistant director of fiscal policy, and Policy Analyst Jarrett Skorup explain in a recent op-ed in Bridge magazine that rising costs at universities, not a lack of state aid, are the primary drivers of rising costs.

Ten years ago, public universities in Michigan received $1.7 billion in state funds, adjusted for inflation, and average tuition was $6,890. Despite the fact that taxpayers are still spending $1.3 billion a year on universities, the average undergraduate tuition is $11,866, according to Hohman and Skorup.

So what is driving tuition hikes? A likely main factor contributing to this phenomenon is the tendency of students to largely ignore costs when choosing a university. There is no incentive for universities to cut costs as long as students are willing to pay higher tuition – and so far, there has been little slowdown in the number of students wanting to attend college, despite it being more expensive than ever.

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Hohman and Skorup note there is no correlation between the amount of government spending on public universities and how many graduates and degree holders live in a state. Because of this, they argue, Michigan lawmakers should shift the money towards improving infrastructure, reducing debt or cutting taxes.

Read the full op-ed at Bridge.

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April 22, 2016 MichiganVotes Weekly Roll Call Report

School tax hikes, cash-only for rims, bigger fonts on seed warnings

Senate Bill 637, Expand grass seed seller regulations: Passed 37 to 0 in the Senate

To revise details of a law that imposes a testing and labeling mandate on grass seed sellers. The bill would require cool season lawn and turf seed and mixtures to include a "sell by" date, and ban selling them if a state-mandated germination test was more than 15 months earlier. The bill would also require a larger font size be used on a required warning label.

Who Voted “Yes” and Who Voted “No”

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House Bill 5257, Revise liquor marketing regulations: Passed 35 to 1 in the Senate

To revise the very detailed regulations and restrictions on alcohol marketing so as to permit wholesalers and retailers to use social media to promote product tastings and inform consumers of where to find their products.

Who Voted “Yes” and Who Voted “No”


Senate Bill 331, Ban parts shops paying cash for rims and tires: Passed 83 to 24 in the House

To prohibit used auto parts dealers from paying cash to an individual for used tires, wheels and rims. Only payments by traceable checks, electronic transfers, etc. would be allowed. This bill is intended as a theft prevention measure.

Who Voted “Yes” and Who Voted “No”


House Bill 4578, Authorize school recreation property taxes: Passed 108 to 0 in the House

To add school districts to a law that lets several local governments organize a recreational authority with the power to levy up to one-mill of property tax for swimming pools, recreation centers, public auditoriums, public conference centers and parks. The law is silent on whether the recreational facilities could be school facilities if the bill becomes law, but does require them to be open to the public. It also requires voters in each municipality to approve one of these tax levies.

Who Voted “Yes” and Who Voted “No”


SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit http://www.MichiganVotes.org.

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For years my colleagues and I have charted the rise and fall of Michigan’s economic fortunes using a number of different metrics. We did so because we care deeply about the well-being of Michigan citizens — and by extension — the whole Great Lake State.

We have looked at changes in state gross domestic product (the value of all goods and services produced within our borders), per capita personal income and interstate migration and population growth to name just three. We also employ indexes produced by other think tanks and scholars that rely on many more variables. One of those indexes was just updated and released last week. Our state’s rating was middling and could be improved with tax cuts.

The American Legislative Exchange Council produces a report each year called, “Rich States, Poor States: ALEC-Laffer Competitiveness Index.” This index measures 15 policy variables, from top marginal tax rates to public employees per 10,000 citizens and whether a state maintains a right-to-work law. States that appear higher in the rankings tend to do better economically than those who finish in the bottom tier.

The annually updated report uses the data to rank states on their economic outlook. In the 2016 edition, which contains data through 2014, Michigan ranked 22nd, up slightly from 24th. That’s a better but still middling performance. Utah finished first in the index — its outlook is brightest — and New York finished last.

Michigan’s middle-of-the-pack performance is not a big surprise. In the last year or two, there have been no big policy changes in Lansing that would necessitate a big move upward. Also, other indexes and rankings we have tracked have also placed Michigan in the great average of American states. The Tax Foundation of Washington D.C. ranks Michigan’s state and local tax burden 25th among 50 through 2012. Similarly, in the index “Economic Freedom of North America,” Michigan ranks 27th among 50 states through 2013.

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There is much that could be done to raise our ranking in the ALEC index (among others) going forward. A reduction in taxes — or perhaps the outright elimination — of the state’s corporate or personal income tax is just one example.

Great strides have been made in recent years to reform Michigan’s fiscal policy and regulatory landscape, but much more can and should be done.

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