Explaining ‘Headlee,’ Proposal ‘A’ to the Voters
By Pete Everson,SuperintendentSt. Ignace Area Schools
The “Headlee Amendment” was approved by Michigan voters in November 1978 and added sections 25 through 33 to Article IX of the State constitution. The provisions of the amendment affect local units of government in several ways, some of which are still significant today.
The main effect that the Headlee Amendment has on schools is the limitation on the amount of local taxes that can be collected. Headlee requires that the amount of a particular tax is limited to the consumers’ price index (CPI) rate applied to the aggregate of the property values in any particular local unit of government, or 5 percent, whichever is less. If the taxable value of a local unit of property, like the City of St. Ignace, for example, increases by more than the CPI, then the amount of millage that is assessed for operations would need to be reduced to keep the total tax dollars collected to the same rate as that year’s CPI.
This provision of the Headlee Amendment works very well at containing the increase in the rate of property taxes and, in my opinion, serves the public the way it was intended. However, Proposal A, the current program that provides for public educational funding in the State of Michigan, doesn’t account for the local effects of the Headlee Amendment.
Under Proposal A, local school districts are required to assess operational millage on non-homestead properties in their district. The State of Michigan assumes that each school district assesses and collects 18 mills of taxes on all non-homestead properties (with the exception of a few districts where this tax is limited to less than 18 mills). Once the 18 mills are assumed to be collected, then the State of Michigan provides additional school aid up to the Foundation Allowance per pupil for the district. In the case of St. Ignace Area Schools, the local non-homestead property tax provides approximately one-third of our operational costs and the balance is provided by State School Aid.
Each year, local units of government are required to use the information provided by the County Equalization Department to consider whether or not the taxable value of local property has increased above the CPI. If it does, then the Headlee Amendment would take effect and require that the local tax rate be reduced so that the total amount of tax dollars collected, in this case on non-homestead properties, not exceed the CPI.
This has a negative effect on local school districts operational budgets in that the State of Michigan assumes that the full 18 mills are collected on all non-homestead properties. When non-homestead tax rates are reduced by the effect of the Headlee Amendment, State Aid to schools continues to assume that the full 18 mills are collected. At St. Ignace Area Schools, the Headlee Amendment has reduced our non-homestead tax collection by $55,000 for the current year and will likely increase this amount in the coming year. The State School Aid program ignores this factor when providing for our per-pupil funding.
For any school district that receives State Aid, the Headlee Amendment is a factor. A “Headlee Override” vote of the local registered voters is the only way to compensate for the reductions due to this provision. With a “yes” vote on election day, voters can assure that their local schools will be able to collect their full per-pupil funding.
It would be important to note that the Headlee Amendment does not alter the taxes paid to retire debt or other special millages. In the case of paying for a new building, the amount of millage is set by the payment that is due to retire the debt. For schools, Headlee only applies to school operational millages.