Proposal A was a 1994 ballot measure that amended the Constitution of Michigan to restructure school funding and revise the property tax base. Approved by voters on March 15, 1994, the measure replaced certain local school property taxes with an added state sales tax and established a funding formula for distributing state school funding. Separately, it set a ceiling on individual property tax assessments.
The reform converted Michigan's school finance system from one of the country's most locally-controlled to one of the most state-controlled. Before Proposal A, approximately two-thirds of school revenues came from local property taxes, producing wide disparities in per-student spending across districts. A new formula reduced funding disparities by guaranteeing a minimum funding level, a "foundation allowance." Centralization also removed local school districts' option to raise operating revenue from homeowners' property and established and new rate limits on taxing other property. Studies show that the higher foundation increased test scores in underperforming districts in the five years following reform. Over longer periods, the reform reduced Michigan's educational spending relative to nearby states, with studies finding a net reduction in school performance.
Unrelated to school funding changes, Proposal A created strict controls on property assessments, shifting burdens within local jurisdictions. A new assessment limit capped annual assessment increases to the inflation rate until sale. The rule provided long-term owners of property to accumulate tax relief; owners of slower-appreciating properties and new buyers paid correspondingly more. By 2024, new property owners' burdens were 29 percent higher than the average burden.
Text Proposal A amended Article IX, Section 3 and other sections of the Constitution of Michigan. The amendment increased state sales and use taxes while dedicating the proceeds to school aid, established differential property tax treatment for homestead and nonhomestead property, capped annual increases in taxable value, and authorized a new statewide education tax. The amendment also reduced the state income tax rate from 4.6 percent to 4.4 percent.
Background Michigan property tax burden Before Proposal A, Michigan relied more heavily on local property taxes than most other states. In 1993, the ratio of property taxes to state personal income ranked seventh highest in the nation. Relative to the average U.S. property taxpayer, Michigan property owners paid nearly one-third more in property taxes. For the 1992–93 school year, approximately 61.4 percent of total local school revenues originated from local and intermediate sources, primarily property taxes. Only three states—New Hampshire, Illinois, and Vermont—relied more heavily on local property taxes to fund K–12 schools. Nationally, the figure was 44.7 percent.
This heavy school reliance on property taxes created political dissatisfaction. School operating levies had grown at a rate outpacing both inflation and personal income: between 1980 and 1993, total school operating levies increased 135.5 percent while Michigan nominal personal income grew 112.4 percent and the Detroit CPI rose only 63.7 percent. Following a statewide freeze on property tax assessments in 1992, many residents faced double-digit increases in their assessments the following year, intensifying public receptiveness to reform.
School funding disparities Michigan's reliance on local property taxes produced wide and growing inequities among school districts. Districts with substantial property wealth could provide generous support for schools while maintaining low tax rates, whereas property-poor districts taxed themselves at higher rates yet raised less revenue. By 1991–92, per-pupil spending ranged from $3,291 to $10,765 across districts. In fiscal year 1993–94, per-pupil state and local revenues varied from $3,398 to $10,294.
These disparities contributed to political pressure for reform. In March 1993, the small, rural Kalkaska school district closed early after voters rejected an operating millage, an incident that received national attention and reinforced perceptions that Michigan's school finance system required fundamental change.
The Headlee Amendment (1978) The Headlee Amendment, adopted by Michigan voters in 1978, represented the state's first major property tax limitation. It restricts local government property tax revenue growth to the rate of inflation by requiring automatic reductions ("rollbacks") in millage rates when a jurisdiction's tax base grows faster than inflation, excluding new construction. The amendment also prohibits local governments from increasing millage rates above what was authorized in 1978 without voter approval and limits state-imposed mandates on local governments.
While the Headlee Amendment limited the taxes local governments could collect, it did not control increases in individual property owners' tax bills. When assessments on some properties rose faster than others, individual tax bills could increase even as the overall millage rate was rolled back.
Failed reform attempts (1972–1993)
Property tax reform emerged as a major political issue in Michigan during the 1970s. The Milliken and Blanchard administrations developed a series of ballot initiatives aimed at reducing property taxes and changing the school finance system, but voters rejected all of them. Between 1972 and 1993, Michigan voters defeated twelve ballot proposals that would have reduced property taxes as a source of school finance, including two in November 1972, two in November 1989, and one in 1992.
When John Engler ran for governor in 1990, he pledged to reduce property taxes by 20 percent. Several proposals to voters failed, including those with features similar to what would later be adopted. In November 1992, voters rejected two competing property tax proposals on the same ballot: a legislature-initiated "Proposal A," which would have capped assessment growth on homestead property at the lesser of 5 percent or inflation, and a voter-initiated Proposal C ("Cut and Cap"), which proposed a 3 percent cap on all property along with a 30 percent exemption from school operating taxes. Both were defeated, with Proposal A receiving 37.5 percent support and Proposal C receiving 40 percent support.
Engler put forward a more comprehensive school finance proposal in June 1993 that would have increased the sales tax, cut property taxes, capped assessments, and established a $4,800 per-pupil funding guarantee. Voters rejected it with 46 percent support.
+ Property tax reform ballot proposals in Michigan, 1992–1994 Proposal Date Initiator Key provisions Assessment cap Yes votes No votes Result Proposal A (HJR H) Nov. 1992 Legislature Separate millage rollback calculations for residential/agricultural vs. other property; no direct tax cut 5% or inflation on homestead only 1,433,354 2,384,777 Defeated (38%) Proposal C("Cut and Cap") Nov. 1992 Citizen 30% exemption from school operating taxes (phased in); state reimbursement to schools 3% or inflation on all property 1,552,119 2,276,360 Defeated (41%) Proposal A (HJR G) June 1993 Legislature Sales tax increase (4% to 6%); property tax cuts; $4,800 per-pupil foundation guarantee 5% or inflation on all property 1,008,425 1,164,468 Defeated (46%) Proposal A (SJR S) Mar. 1994 Legislature Sales tax increase (4% to 6%); 6-mill state education tax; income tax cut (4.6% to 4.4%); foundation allowance system; no status quo option 5% or inflation on all property 1,684,541 750,952 Adopted (69%)
Legislative history Public Act 145 of 1993
On July 20, 1993, during a state senate debate on its recently failed property tax reduction proposal, state Senator Debbie Stabenow proposed an amendment to eliminate the property tax entirely as a source of local school finance. The move was widely interpreted as an attempt to demonstrate the impracticality of cutting taxes without specifying replacement revenues. Unexpectedly, the senate passed the amended bill the same day, the house followed a day later, and Engler immediately announced he would sign it.
Governor Engler signed Senate Bill 1 into law as Public Act 145 on August 19, 1993, at a media event at Greenfield Village in Dearborn. The act eliminated approximately $6.5 to $7 billion in property taxes for school operating expenses, effective December 31, 1993, without providing any replacement funding source. The legislation also ended the ability for local governments to "roll up" previously reduced millage rates under the Headlee Amendment.
The Engler proposal In October 1993, Governor Engler presented his school finance reform plan in a document titled "Our Kids Deserve Better: New Schools for a New Century." The plan stated four goals: reducing property taxes, improving funding equity through a new foundation grant system, implementing educational reforms including school choice, and redefining state–local government relations.
The governor's revenue proposal included a new state property tax, an increase in the sales tax rate from 4 to 6 percent, redirection of approximately $400 million in state funds to K–12 education, a substantial increase in the cigarette tax, and several other revenue measures.
Ballot proposal vs. statutory plan In December 1993, the legislature approved two competing replacement revenue plans. The first, known as the "Ballot Plan" or Proposal A, required voter approval to amend the constitution. The second, the "Statutory Plan," would take effect automatically if Proposal A failed.
+ Comparison of March 1994 reform plans Feature Proposal A (Ballot Plan) Statutory Plan Sales tax From 4% to 6% No change (4%) Income tax From 4.6% to 4.4% Increase from 4.6% to 6.0% Cigarette tax From 25¢ to 75¢ per pack Increase from 25¢ to 40¢ per pack State Education Tax 6 mills on all property 12 mills on nonhomestead property only Local school operating millage (homestead) Eliminated 12 mills Local school operating millage (nonhomestead) Up to 18 mills 12 mills Assessment cap 5% or inflation (constitutional) None Real estate transfer tax 0.75% 0.75%
March 1994 election Proposal A passed with 69 percent of the vote (1,684,541 for, 750,952 against), carrying all 83 counties in the state. Contemporary analysts identified four factors contributing to the margin of victory. First, Michigan voters expressed a clear preference for the sales tax over the income tax as the primary revenue source. Second, Proposal A reduced homestead property tax rates more than the statutory alternative. Third, Proposal A's higher cigarette tax increase appealed to anti-tobacco sentiment. Fourth, Proposal A included the constitutional cap on assessment increases, while the statutory plan did not.
The assessment cap had been rejected as part of broader reform packages multiple times between 1992 and 1993, but in March 1994 it became a distinguishing feature between the two alternatives rather than a feature voters could simply reject outright.
Provisions Tax changes Sales and use tax: Proposal A increased Michigan's sales and use taxes from 4 percent to 6 percent, effective May 1, 1994. All proceeds from the additional 2 percent are constitutionally dedicated to the State School Aid Fund. Prior to reform, 60 percent of the 4 percent sales tax went to school aid; afterward, 60 percent of the original rate plus 100 percent of the increase went to the fund. The additional 2 percent rate does not apply to residential use of electricity, natural gas, or home heating fuels.