BY LAURA BOHANNON
Capital News Service
LANSING– Proposals in the House and the Senate to eliminate the state income tax could devastate Michigan’s public universities, already coping for years with dramatic drops in state support, a higher-education consortium says.
“You would see continued increases in tuition,” said Daniel Hurley, chief executive officer of the Michigan Association of State Universities (MASU). “The sky would fall.”
Funding for public colleges and universities in Michigan has declined for decades, and the institutions have raised tuition to maintain high-quality programs.
The state income tax represents 67 percent of the state’s general fund and 22 percent of public school aid fund, Hurley said. Phasing out the tax with no plan to replace the revenue could force universities to scale back on enrollment and new initiatives.
“Often when you have a discussion about higher ed, it’s about affordability,” Hurley said. “Quality is so important.”
The House plan would immediately decrease the income tax from its current rate of 4.25 percent to 3.9 percent, then continue to decrease by .1 percent each year until it’s eliminated.
The Senate bill would eliminate the tax faster, from 4.25 percent to 4 percent in 2018, then each following year it would decrease by no more than 1 percentage point.
Sen. Tonya Schuitmaker, R-Lawton and a co-sponsor of the Senate bill, said she signed on to reduce taxes.
“Nobody’s saying where the replacement money is going to come from,” Schuitmaker said. “I’m firmly committed that it not come from higher ed funding. I think it’s important to ensure we have a thoughtful discussion as to how to pay for it.”
Rep. Winnie Brinks, D-Grand Rapids, said there are too many questions surrounding the House bill for her to take a stance on it yet.
“We can have a discussion about income tax and it cannot happen in a vacuum, so we need to make sure we’re taking a holistic look at our tax structure if we‘re going to eliminate one form of tax entirely,” Brinks said.
According to research by MASU, funding for higher education has declined by 19.5 percent from 2001-02 to 2016-17, while funding for state corrections programs has risen by 20.1 percent.
“What does that say about a state’s policy priorities?” Hurley asked.
Hurley said he doesn’t think policymakers “get any joy” from cutting higher education funding, but because universities can rely on tuition increases as alternative revenue, it’s easier to target them for cuts.
Hurley said that in 1979, the state covered 70 percent of university funds, and in 2015 the state covered 23 percent.
Michigan is “also unfortunately an above-average state in terms of the trend in disinvestment,” Hurley said.
Schuitmaker agreed that the state’s role in supporting public universities has diminished.
“It’s been kind of an inverse of how it used to be 25 years ago,” she said. “The paradigm has flipped, and that’s without any changes to the income tax.”
Schuitmaker and Brinks both said they have children in college and agree it’s important to put more pressure on the universities to ensure that tuition costs are reasonable, especially for working families.
“They have a duty to ensure they’re using their university money appropriately,” Schuitmaker said.
Hurley said, “There is certainly a perception that university spending is out of control, and that is not the case.”
According to MASU research and House Fiscal Agency data, spending per student has risen by 2.3 percent over 12 years.
MASU research shows that university financial aid has increased by more than $700 million since 2002 to ensure that college remains affordable, while the state contributes more than $100 million in financial aid.
Brinks said she believes the Legislature also needs to be held accountable for a continued decrease in funding for public universities.
“What we’ve done is shift the cost of higher education from the public sphere…to being a burden on individual student families,” Brinks said. “As the cost of higher education continues to rise, it is outpacing people’s’ ability to pay without having a huge amount of debt. So there are a lot of questions we need to answer about that, and part of that equation is how much the state puts in to support public universities.”