Michigan Economic Outlook and Implications for Home Rule Governments

1. Dr. Eric Scorsone Senior Economist Senate Fiscal Agency Michigan Economic Outlook and Implications for Home Rule Governments

2. Background Economic and Fiscal Conditions

3. Is There A New Normal? • Slower economic growth (2% vs. 3%), higher unemployment • Consumers repaying debt and holding down purchases • Global realignment (China and India emerging) • Migration of wealth and people to developing countries • US more export driven • Lower Investment returns (4-5% vs. 8-10%) • Focus on Government Deficit Reduction • Higher taxes, fewer services Forecasts are almost always wrong, but there is some element of truth

4. Employment Challenges

11. Good News • Michigan is coming out of decade long recession • Job growth occuring in manufacturing and health care • Detroit Three are in very good shape • Market share stabilized • Profitable, breakeven is 10 million vehicles • Still have strong educated engineering and precision manufacturing workforce • Michigan stands to benefit from increasing export drive of U.S.

14. Home Rule and State Affairs

16. 2000-2010 YR State Appropriations

17. Types of Local Government Michigan Has 8 GENERAL PURPOSE SPECIAL PURPOSE

18. Local GovernmentsOverlapping Boundaries * Boundaries may cross city, township and village lines ** Boundaries are within the township *** Boundaries may include more than one county City County School Dist.* Township** Intermediate School Dist.***

19. Michigan ranks 13th

20. Public Education • Is a function of the state….. • That can be delegated to local units of government (school districts and boards) • Local school board is manifestation of local home rule of schools • Local control of schools emerged under • Massachusetts Act of 1789 and 1801

21. Dillon's Rule Cooley Doctrine Two Sides of the Argument

22. Home Rule Concept • Most forcefully argued by Thomas Cooley (MI Supreme Court) in late 1800’s • Grants discretionary authority to local governments over “local affairs” • Local government is a matter of absolute right to citizens, cannot be taken away by state

23. Creatures of the State (No Home Rule) • Dillion’s Rule (Iowa Supreme Court) • Local governments possess no inherent sovereignty unless expressly implied by state law • Local governments owe their very existence to the state

24. Trenton v. New Jersey 1923 (Supreme Court) • In the absence of state constitutional provisions safeguarding it to them, municipalities have no inherent right of self-government which is beyond the legislative control of the state. 1 A municipality is merely a department of the state, and the state may withhold, grant or withdraw powers and privileges as it sees fit. However great or small its sphere of action, it remains the creature of the state exercising and holding powers and privileges subject to the sovereign will.

25. Different Views of Home Rule • Traditional View • Administrative View • Public or Social View • Political Economy View

26. Traditional View • Wanted protection from legislative interference but also limited local powers • local government should only be a “night watchmen” and little else • Specific provisions • No special legislation • Very hard to change local charter, limited taxing power

27. “Special” State Legislation • In the 19th century, legislators saw cities and local govt. as their tools for power in many cases • 1908 Michigan Constitution prohibited special legislation unless special conditions exist

28. Administrative View • Expertise and efficiency should shape local government to address urban challenges • Does allow for exercise of new “police powers” • However, these powers are exercised by administrative professionals • City managers, principals, superintendents • Professional development and training

29. Public or Social View • Build critical social relations or social capital in order to address tough new urban “ills” • Specific Aspects: • Public ownership of utilities, civic engagement, full taxing power • Streetcars, swimming pools, golf courses

30. Political Economy Argument for Home Rule • Economic Efficiency • Multiple centers of decision making are not duplicative but competitive and efficient • Centralized administration and coordination will be more costly than expected • Democratic Accountability • Vote with your feet • Aristotle observed “what is common to the greatest number has the least care bestowed upon it” • Governments can cooperate or consolidate on a voluntary basis

31. Today’s Local govt’s are hybrids of these Views • Traditional view: business improvement districts, taxes subject to voter approval • Administrative View: City Manager or Principal, Public Authorities • Public View: public housing, recreation center • Political Economy: Voluntary cooperation among governments

32. Home Rule for Michigan Schools

33. MI’s Pierce Plan of Education • Primary schools and township school inspectors • Moderator, Director, Assessor—School Board • Each school district (township based) could tax its residents • Rev. Pierce was concerned about lack of county and state oversight (very decentralized system)

34. Post Civil War Reforms (1866-1881) • 1866 County superintendent position was created (elected) • Improve schools • Inspect teachers • Children attendance improvement • After nine years, county system dismantled and township governed system re-created • Township superintendent created (915 of them) • No qualifications, not full time • Visit schools, license teachers, curriculum

35. Continuing Reforms (1881-to WW II) • 1881 reforms • Shared governance between county and townships • County Board of School examiners • Elected by township boards • Held teacher examinations, could suspend teachers • 1887 and 1891 reforms • County supervision of rural schools handed to County Board of School Examiners • Two elected members from townships plus probate judge----these three elected a Secretary • State oversight of teacher credentials

36. 20th Century Reforms • Elected representatives for a County Board of Education was established and County Superintendent • Maintain libraries, consolidate rural districts, audits, special education, professional development • 1962 Intermediate School District created • Separate funding from county government, 1971 mandate for special education, vocational education

37. Michigan Home Rule & Constitution • In general, Michigan home rule is not as strong as it would first appear • Constitutional provisions for home rule do not identify school districts • Statues must be passed to implement constitutional provisions • Legislature shall pass no special or local in any case where a general act can be made applicable • State is prohibited from requiring any new or expanded activities by local governments without full state financing

38. Assessing the Degree of Home Rule • Degree of Discretionary Authority • Immunity from state mandates/legislation • Court interpretation of “local government authority” also called “liberal construction”

39. Degree of Discretionary Authority over: • Structure and organization; How will you operate? • Function: What will you do? • Fiscal: How will you raise spend and borrow money • Personnel: Number, type and condition of employees

40. Local Control of Schools • Been significantly eroded by: • Compulsory attendance (most of the 20th century; all states) • Every state has teacher certification requirements • State approved curriculum and minimum standards • Teacher tenure statutes and negotiation statutes

41. Local Control and Financing • Serrano v. Priest (CA, 1971)—since that time school financing has dramatically changed • Most states have significantly increased their control and share of financing of schools

42. Reform and Consolidation: A Macro View

43. TABLE 2: Enrollment Size in Michigan Educational Units

45. KEY FINDINGS: SCHOOL REORGANIZATION • Cost savings • Moving from less than 500 students to 2,000 to 4,000 students shows cost savings • Student Achievement • Achievement falters with elementary schools over 300 to 500 students and high schools over 1,000 students • Transportation cost is an issue; urban schools have not been widely studied

46. History of Reform • Administrative Progressives • Early 20th century • Believed that science could improve education • Reforms • Business efficiency in government • Small elite school board (no wards) • Superintendent/Principals as professional experts • “Taking the school, out of politics” • “Bigger schools were better”

47. Consider Some Statistics…. • 130,000 school districts in 1931 to 16,000 in 1987 • Progressive era reformers achieved their goal of fewer, larger districts • Many fewer school trustees • One room schools • 150,000 in 1930’s to under 1,000 in 1990 • Principals • 25% of schools in 1946 and an average of one per school in 1990

48. Thank You! Questions and Discussion.