TMCG filed suit against the State of Michigan on Wednesday, Sept. 7, 2016 at the Court of Appeals in Detroit. Copies of our complaint and brief are located on the Print Information page.
Taxpayers for Michigan Constitutional Government (TMCG) is suing the State of Michigan for violating the Michigan Constitution by purposefully and continually miscalculating the minimum mandatory payment to local governments, as required by the Headlee Amendment, which has resulted in a shortfall of payments to local governments that is well in excess of $1 Billion. The Headlee Amendment, passed by Michigan voters in 1978 and interpreted by case law in 1989, requires that the State of Michigan pay a minimum of 48.97 percent of monies raised through State taxes to local governments. It further stipulates what funding can and cannot be included in the calculation of the minimum percentage payment (MPP). The Headlee Amendment states that monies raised through tax shifts that place a tax burden on local governments; monies paid to local governments to perform obligations imposed by the State; and monies paid to agencies that are not political subdivisions of the State, cannot be included in the calculation of the MPP.
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I. Proposal A
The Headlee Amendment prohibits payments of monies to local governments raised through a tax shift that imposes a burden on local governments from being included in the calculation of MPP.
Argument: Proposal A adopted in 1994 constitutes a tax shift of a tax burden to local governments. The Headlee Amendment of 1978 was not altered or abrogated by Proposal A. Therefore, funding raised by Proposal A and paid to school districts may not be included in the calculation of the MPP. To include Proposal A funding in calculating the MPP would mean that local taxpayers would have their increased sales tax used to reduce state revenue sharing payments to their local governments, placing a burden on their governments to raise local taxes or cut local services.
Precedent: Richard Headlee at the time the measure was placed on the ballot characterized Proposal A as a tax shift that would violate the Headlee Amendment, if revenue derived from it were included in calculating the MPP.
II. Charter Schools
The Headlee Amendment requires that the State include only payments to political subdivisions of the State in the calculation of the MPP. The State has wrongfully included payments made to charter schools in the calculation of the MPP.
Argument: Charter schools are non-profit corporation and are not political subdivisions of the State as the term was understood in 1978 when the Headlee Amendment was adopted. Interpretation of the Constitution is governed by the common understanding of the people who adopted the Headlee Amendment in 1978. Moreover, charter schools do not provide services in a geographically limited area of the State and do not have the power to act primarily on behalf of the area, as the Headlee Agreement requires Therefore, monies paid to charter schools may not be included in the calculation of the MPP.
Precedent: The 2004 opinion (No. 7154) of then Attorney General Mike Cox stated that charter schools are not limited to any geographical area of the State. Charter schools do not possess the sovereign powers of the state, not are they controlled by the electorate, as were political subdivisions of the state in 1978.
III. Funded Mandates
The Headlee Amendment requires that the State fund activities and services that it mandates be performed by Local Governments after 1978. Funding of these mandates by the State may not be included in calculating the MPP
Argument: Headlee permits only those State payments to local governments that are made in the form of aid to be included in the MPP calculation. The required funding of State mandates does not constitute payments in the form of aid to local governments.
Precedent: The 1989 decision of the Court of Appeals in Oakland County v. Department of Mental Health holds that payments made to fulfill obligations of the State are not permitted to be included in the MPP calculation. Payments made to fund obligations imposed on Local Governments by the State are governed by the same principle.
The State’s actions have resulted in significant material damages to local governments. The shortfall in payments resulting from these three accounting maneuvers by the State is extreme. For example, by not including Proposal A monies alone, the State paid only 35.54 percent of the MPP to local governments — a shortfall of $2.5 Billion. Local governments have taken many hits in recent years, and the State’s deliberate and continual miscalculation of the MPP has compounded the damages in communities throughout Michigan.