Tuesday, March 14, 2006

TPA and Schools: The Rich Get Richer

I know everyone’s excited about another of my smarmy “here’s how much I know about the TPA” posts, but I saw something I thought deserved comment. So grab some NoDoz and Mountain Dew (the crack cocaine of soft drinks) and try to stay awake.

The guiding principle behind the current school financing formula is equalization (which, ironically is why it is called the “equalization formula.” I, personally,would be much more comfortable with something like the "Harriet Tubman Memorial Formula"). In essence, the formula separates school districts into “rich” (high property value) districts and “poor” (low property value) districts. The state then gives state tax money to the poor school districts, since they have a lower property tax base from which to fund their district budgets. They give a lot less money to the rich districts, which are left to fund their budgets almost entirely from the property tax. Broadly speaking, this is supposed to provide a level playing field for the children of Wisconsin by equalizing the spending between rich and poor districts.

The TPA makes an interesting change, however, that disequalizes this balance. The amendment caps school district revenue at a set percentage, but considers only property taxes as revenue – not state school equalization aids. Since rich school districts use the property tax more heavily than the poor districts, this allowable inflationary increase will benefit the rich districts much more than the poor districts, since the allowable increase won’t be applied to revenue provided by the state.

Let me put this in language that a dope like me can actually understand. Let’s say you have two school districts of similar enrollments, but one has high property values and per pupil spending, and gets a low amount of state aid. The other is on the low end of property values, spends less per pupil, and gets a ton of state aid. Then let’s apply a 3% TPA revenue cap to these districts. It would look something like this:

District A (Poor)

Total Students: 912
Spending/Student: $9,276
State Aid: $7,279,812
Property Tax Levy: $2,059,675
Percent State Aid: 77.9%
3% Levy Increase: $61,790

District B (Rich)

Total Students: 943
Spending/Student: $10,197
State Aid: $2,810,149
Property Tax Levy: $9,008,765
Percent State Aid: 23.8%
3% Levy Increase: $270,263

Incidentally, these are real examples from two real districts. District A is the Iowa-Grant school district, and District B is the Glendale-River Hills school district.

So, as you can see, the wealthy district will be able to spend more than the poor district since the 3% increase applies to a larger portion of their budget. And year after year, this will compound to make the inequities greater and greater.

Granted, as the state increases school aids, District A will get a larger percentage of that aid. However, if the state is also subject to a 3% revenue cap, there’s no way it will be able to use all of that revenue to spend on schools, and will likely never be able to meet the amount needed to make this an even funding swap.

The current statutory revenue limits take into account total revenues when capping how much revenue a school district can take in. Revenue limits are set by statute and give a district a flat dollar per-pupil amount that they can raise in revenue (say, $210 per pupil, for example). Then the state sets how much they will give districts (say, $140 per pupil, or two-thirds of the allowable increase) and the district is allowed to make up the remaining $70 per pupil via the property tax. In this system, all the revenues a school district collects factor into the revenue cap.

In fact, the legislature can't even apply a percentage cap to total district revenue or spending, as a flat percentage would allow big spending districts to increase revenue more than low spending districts. A 3% cap means more money to a district that spends $10,000 per student than one than spends $7,000 per student. And the system does not allow richer school districts' spending to grow faster than the poorer districts'. The TPA would have to feature a flat per-dollar increase for districts statewide, which is essentially what current law allows (and that hasn't been revoked in over a decade.)

The current funding formula that features state aid, statutory revenue caps, and the QEO is hanging by a thread. The Wisconsin Supreme Court barely upheld the formula in a challenge a few years ago, and this new system could cause significant legal problems if it disequalizes the current system.

This isn’t a criticism of the concept of capping school property taxes, just a suggestion how the TPA could be changed to make it both equitable and constitutional (and yes, you can actually end up with an “unconstitutional” constitutional amendment if two provisions conflict). The TPA can cap school revenue, but it has to count state aid as revenue in order to remain consistent with the spirit of equalization.

I’m sure the public will have this all understood by the time they go to the ballot box. Just as soon as they pick the next "American Idol."

UPDATE: The actual language from the Wisconsin Constitution (Article 10, Section 3) governing equality of school districts is:

District schools; tuition; sectarian instruction; released time. Section 3. [As amended April 1972] The legislature shall provide by law for the establishment of district schools, which shall be as nearly uniform as practicable; and such schools shall be free and without charge for tuition to all children between the ages of 4 and 20 years; and no sectarian instruction shall be allowed therein; but the legislature by law may, for the purpose of religious instruction outside the district schools, authorize the release of students during regular school hours.