CENTRALIZATION OF SCHOOL-FINANCE IN MICHIGAN

School finance reform in Michigan involved centralization (at the stat e level) of spending decisions about schools, a large fax shift (mostl y from property to sales), and a small tax cut. The changes came about after two decades of failed attempts to reduce property taxes in the state, and were the immediate result of an unlikely piece of legislati on that abolished all funding for public schools. Unlike most centrali zed systems, foundation grants in Michigan differ by district. Distrib utionally, the reforms favor residents of small rural districts (whose spending was increased sharply). Residents of poorer urban areas, inc luding Detroit, lost net income as a result of the reforms, as did res idents of some of the richest suburbs in the state. Michigan permits a number of districts to supplement their foundation grants by limited amounts, a strategy that we argue may be a promising way of combining the efficiency benefits of local control with the equity benefits of f oundation grant systems.