Proposed Budget Would Force Most School Districts to Cut Property Taxes

Monday, May 16, 2011 at 9:10 PM by

We already know that Governor Walker’s proposed budget would result in deep cuts to state aid to public schools. A new study by University of Wisconsin professor Andrew Reschovsky (link updated as of July 2011; see note at end of this post) gives a more complete picture about how school funding will change if the Governor’s recommendations are enacted. Not only will schools receive less in aid from the state, but more than three-quarters of school districts will have to reduce the amount of revenue they raise at the local level as well, unless the voters approve a referendum increasing the revenue limit.

In addition to a decrease in state aid, the proposed budget calls for reducing each school district’s revenue limit, which restricts the amount of money schools can raise from the sum of general school aids and property taxes. The average per-student reduction in state general aid is $455, which is less than the average revenue limit reduction of $541. This means that in districts in which the reduction in state aid is less than reduction in the revenue limit, the school district will have to reduce property taxes to comply with the revenue limit.

Here’s an example to show how school districts could be forced to reduce property taxes: Let’s say an individual school district loses $350 in general aid per pupil, but the revenue limit decreases $500 per pupil. The district will have to decrease property taxes by $150 per student to comply with the lower revenue limit.

A snippet from the paper sums up the findings:

“In 329 of the state’s 424 school districts, the reduction in general school aids under the Governor’s budget proposal would be smaller than the reduction in each district’s revenue limit. As a result, unless voters choose to increase their revenue limit, local school districts will be forced to reduce property taxes. Assuming no successful referenda, school property taxes would need to be reduced by $89.4 million, an average reduction of $159 per student. The largest tax cuts would occur in high property wealth districts. In many districts these property tax reductions would occur even though the local school districts would be forced to reduce educational programs and increase class sizes. In the remaining 95 districts, where reductions in general aid are larger than revenue limit reductions, school boards would be able to raise property taxes without a referendum. In aggregate, property taxes in these districts could be raised by $15.4 million, an average of $52 per student.”

Professor Reschovsky describes a possible solution that would eliminate the likelihood that schools already receiving significant decreases in state aid will need to further decrease their revenue by reducing property taxes. He points out that the budget could be modified so that no school district would have to reduce its revenue limit by an amount greater than the reduction in general school aid. The Joint Finance Committee is scheduled to vote on general school aids and revenue limits on Thursday; the Legislative Fiscal Bureau budget paper for this item is here.

Stay tuned for tomorrow, when we’ll be taking a closer look at how the reduced revenue limits will impact school districts with various characteristics.

Tamarine Cornelius

P.S. Slightly off topic, but still worth noting: It’s telling to see the per student reductions in general state aid broken down by the percentage of students eligible for free or reduced price lunch in the district. Schools with more than 60 percent of their students eligible for free/reduced lunch can expect a per-student reduction in general state aid of $524, dwarfing the $279 decrease that districts with less than 10 percent of their students with free/reduced lunch can expect.

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 Proposed Budget Would Force Most School Districts to Cut Property Taxes

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