Association for Public Policy Analysis & Management

The adoption of the 2009 Michigan Promise Zone Act allows up to ten cities, counties, or school districts to “capture” half of the growth in a state-levied property tax, to support the provision of place-based college scholarships. The funding mechanism, known as tax increment financing (TIF), has drawn concern from school district trustees who suspect the strategy diverts money from K-12 budgets. However, there is no empirical analysis that examines this supposition. This study is animated by the following question: Did the adoption of the Promise Zone Act impact the revenue and per-pupil spending of public school districts?

The primary sources of data supporting this study include: 1) The State of Michigan Educational Entity Master database, administered by Michigan’s Center for Educational Performance and Information; 2) Michigan Department of Treasury, Division of Real Estate Services (Promise Zone Reimbursement Report); 3) CoreLogic (Housing appraisals and tax assessments by Census Tract); and 4) U.S. Census Bureau, a) Longitudinal Tract Data Base; and, b) American Community Survey.

Our desire to understand the impact of TIF on the funding of coterminous public school districts orients our analytical approach toward a difference-in-differences estimation framework. This strategy permits the analysis of TIF on school district revenue and per-pupil spending over academic years 2007 to 2013. The introduction of TIF is a good example of an experiment in public policy, which occurs when an exogenous event, such as the adoption of a program or law, occurs to affect some groups but not others (Murnan & Willett, 2011). The adoption of the Promise Zone Act provides a unique opportunity to investigate the causal effect of the funding strategy, as seven of the active 18 programs are using proceeds from the State Education Tax to support the provision of scholarships, while the remaining eleven are privately funded (Wilbur, 2016).

This study will be used to evaluate the impacts of a policy. A current school board trustee and Promise Zone Authority member await anticipated findings in order to consider whether their Zone would be well-served by a modification in the funding structure. Preliminary results suggest Promise program reimbursements negatively influence revenue growth trajectories in school districts where proceeds from property tax assessments remain relatively flat. Data analysis will conclude by July 2017, at which point a more robust set of results will be interpreted.

This study contributes to the emerging body of literature on place-based College Promise programs by examining outcomes for K12 schools and school districts. Moreover, the study contributes to the substantial body of literature concerning the impacts of TIF (as an economic development strategy) on school district finance. Finally, given political debates and scholarly inquiry regarding the effect of changes in per-pupil spending on K-12 performance metrics such as student achievement, teacher and staff hiring, staff professional development, and spending predictability, the results of this study bear influence on districts’ efforts to promote college preparation; an ancillary, yet important outcome College Promise programs attempt to positively influence.