A new report from Demos, a left-leaning think tank, blames Detroit's bankruptcy on Wall Street and calls for a state bailout. Its diagnosis is wrong and its prescription has already been tried.

Demos believes that the city's problems can be mostly linked to a loss of population and tax revenue and the state's "slashed" revenue-sharing, rather than costs for the city's pension and retiree health care benefits. It wants more money from the state and the ability for the city to raise more revenue.

But the state of Michigan has been bailing out Detroit for years and it's only delayed the problems. In fact, Detroit gets favors from the state of Michigan that no other city receives, and the state has made these rules to try to get the city more revenue to deal with its problems.

Detroit is the only city in Michigan that can assess a utility tax. It is added on top of monthly bills charged to residents and businesses. The tax expired in 1988 but was resurrected in 1990.

Detroit is the only city that assesses a wagering tax. The state rewrote its gambling laws in 1996 to allow for Detroit casinos and allowed the city to tax them directly. No other city has state-authorized casinos.

The Demos report is critical about the fact that Michigan's statutory revenue sharing has declined. Yet, Detroit still gets the majority of these contributions — 58 percent of the total, while Detroit's share of the population is less than 10 percent. And this proportion is up from 42 percent in fiscal year 2002. While municipal leaders have long bemoaned reductions in state revenue sharing, only Detroit is in bankruptcy.

A report from the Citizens Research Council shows that Detroit gets more total revenue than every other city in Michigan. Yes, this has declined over the years. But compared to the rest of the state's cities that provide largely the same services to its residents, the decline means that Detroit's gone from unheard-of levels of funding to extremely-high levels of funding.

One of the Demos recommendations is that the state help Detroit borrow $196 million. Except this already happened. Michigan rewrote its fiscal stabilization bonds for Detroit in 2010 and the city borrowed $250 million, secured by state revenue sharing. Indeed, in the five years before Detroit's consent agreement, the state helped the city borrow $610 million.

The most significant thing the report ignores is at the very heart of Detroit's problems: incentives.

The Demos solution is for the state to pump more money into the city and for Detroit to raise more revenue. But the city already has by far the highest tax-burden in Michigan and residents do not receive quality services in return. The report's solution doubles down on the problems that cause more people to leave resulting in less employment and revenue.

Detroit has suffered decades of bad policy coupled with mismanagement. Bankruptcy and emergency management may be the only things that can fix these problems. If state bail-outs were the answer, Detroit would have been thriving long ago.

This fall, Michigan received disappointing, but expected news: The Center for Education Reform gave the state a score of '0' for its school choice policies.

Though charter public schools provide choice to approximately 10 percent of Michigan public school students, our state is the only one in the nation to hold the distinction of constitutionally prohibiting any form of private school choice, including tax credits. 

In this regard, Michigan lags far behind Indiana, Ohio and Wisconsin. All three of those states have recently expanded their private school choice programs. Michigan's neighbor to the south, Ohio, now allows students attending failing schools to make a better choice — low-income Ohio students and those with special needs can attend schools that their parents believe will provide them with the best education.

While Michigan students attending poor-performing schools have to "wait it out" if there is no available public alternative, Ohio provides students with immediate access to an alternative.

Wide-ranging choice programs like Ohio's are promising because they empower parents. With the expansion of choice, schools become more accountable to the people they serve. If students leave, schools will lose money. By expanding private school choice, Ohio is incorporating choice-based accountability and placing more power in the hands of parents.

In comparison, some of Michigan's recent reform efforts fall flat, in part due to the fact that the state is handicapped by its prohibition against private school choice. State officials enforce accountability instead with unilateral state action and bureaucracy. There is no better illustration of this than the Michigan's "Top-to-Bottom" school ranking. The list purports to measure the quality of all schools with a single, though complex, methodology.

This list is used to force schools to fire principals, trigger school reorganization, and could even force the closure of a school. Indeed, legislators have considered using the TTB list to identify schools for state takeover. Never mind the fact that some of the lowest-ranked schools on the TTB list have been recognized for their success by independent, third-party organizations. 

One stark example illustrates the risks associated with a centralized accountability system. Thirkell Elementary, a Detroit elementary school featured in the last edition of IMPACT for scoring at the top of the Mackinac Center for Public Policy's Context and Performance report card, is ranked poorly by the state. It is troubling that Thirkell, which the U.S. Secretary of Education honored this year and which Excellent Schools Detroit identified as a top-rated school, is considered a failure by the Michigan Department of Education.

Choice-based accountability has the potential to transform education for the better. Since parents see schools firsthand, they are able to discern whether a school is meeting their child's needs. The decentralized knowledge that parents gain through experience is what economist Friedrich Hayek described as the "particular circumstances of time and place." There is no mechanism that will ever be able to make use of all of this richly detailed information, other than enabling individuals the freedom to make decisions to best serve their needs.

In other words, no equation developed by state officials will ever be able to take into account what parents know from experience and word-of-mouth about the quality, safety, organization and effectiveness of each Michigan school. A centralized system of judging school quality will always overlook key and individual aspects of certain schools, or penalize schools for serving disadvantaged children. 

A better model is in Ohio, where students in schools that receive low grades on the state's report card for two years become eligible for up to $5,000 to attend another school. Instead of unilaterally closing the school or requiring certain actions, Ohio empowers students and parents to leave if they want. If the state misidentifies a school as failing when it really is serving students well in the eyes of their parents, then students will continue to enroll. 

Michigan has tried many different state-imposed accountability reforms recently, including "best practices incentives" to encourage districts to adhere to better financial and educational practices. These require districts to evaluate teachers based on performance, and also require that performance be a significant factor in teacher compensation.

Unfortunately, certain schools have repeatedly demonstrated how to abuse or avoid these state reforms. The Birmingham school district gamed the state's best practices incentive to get hundreds of thousands of dollars for taking in just six additional students. Lansing rated every one of its 887 teachers effective, rendering the evaluation requirement meaningless. Davison Community Schools made headlines when the district provided $1 as a bonus to teachers who were rated highly effective. 

Such abuses are an expected risk in a top-down accountability system. There is little recourse under this system, and taxpayers are left to foot the bill for clever work-arounds.

In comparison, a choice-based accountability system would force districts to focus on providing an education that meets students' needs. Districts would not be able to easily game such a system. If schools do not meet the needs of students, parents could simply take them to another school. Under a system of comprehensive school choice, the state could ease up on top-down reforms and instead trust parents to remove their children from failing schools.

Michigan has tried virtually every other education reform measure in the book. But the state has not enabled wide-sweeping educational choice. Perhaps it's time to consider it.