Poorer Districts Will Take Bigger Aid Hit in Budget

Tuesday, May 17, 2011 at 10:30 PM by

Yesterday, we highlighted a new paper by UW Professor Andrew Reschovsky (link updated 7/26/11 — see note at end of post) that described how and why the proposed state budget would both cut state aid to schools sharply and force most districts to reduce property taxes.

You can read yesterday’s post for a more thorough explanation, but here’s a quick summary, expressed in an equation:

Revenue limits = General state aid + Property Taxes

The biennial budget proposes decreasing revenue limits by 5.5 percent between fiscal year 2011 and 2012. The budget also reduces general aid to schools by $390.5 million in FY 2012 and $358.8 million in FY 2013. For many schools, the reduction in aid is less than the decrease in the revenue limit. This means most districts – more than 75 percent – will have to cut property taxes to stay under the revenue limits.

Professor Reschovsky’s paper includes interesting information about how schools will fare under the proposed budget. We made the information into charts in order to have visual representations of the budget’s effects and show how the reductions in state aid will impact districts by characteristic.

Poorer districts will be harder hit by the reduction in state general aid. The chart below shows that districts with less than 20 percent of their students eligible for free or reduced price school lunch will have an average general aid reduction of $378 per student, compared to $467 for schools with half or more of their students eligible.

Districts with the highest property value per student would experience the smallest per capita reduction in aid. Districts with an equalized property value per student of $750,000 or greater would have per student general aid reductions less than half as much as poorer districts, as shown in the chart below. This is because the formula for distributing general aid is based partly on reducing disparities in school financing between property-rich districts and property-poor ones. Districts with a high property value per student tend to receive less general school aid per student, which means their cut in aid is smaller.

The flip side is that the 5.5 percent cut in the revenue ceiling means that wealthier districts will have to cut their property taxes more, unless they get approval through a local referendum to exceed their district’s cap. Getting such referenda approved is never easy, but the property-rich districts will probably fare better in that regard than poorer districts.

One of the characteristics of the proposed 2011-13 biennial budget is that the cuts fall most heavily on low-income families. We’ve seen this dynamic play out in cuts proposed to Medicaid, the Earned Income Tax Credit, subsidized child care, and the Homestead Credit. That trend continues in the proposed cuts to public education, which fall most heavily on poorer districts.

Tamarine Cornelius and Jon Peacock

NOTE 7/26/11: After the biennial budget was passed, Professor Reschovsky revised his analysis to take into account changes made during the budget process. This revision somewhat changes dollar amounts and other figures cited in this blog post. For example, in his post-budget passage analysis, Professor Reschovsky determined that in 241 of the state’s 424 school districts, the revenue limit reduction from the 2010-11 school year is greater than the reduction in school aid, down from 329 districts in the earlier analyis.

While the exact figures have changed somewhat given the modifications the Joint Finance Committee made to the Governor’s budget, the general trends in the analysis remains the same.

Categories: 2011-13 biennial budget, Blog, EDUCATION, property tax | Comments Off on Poorer Districts Will Take Bigger Aid Hit in Budget

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