Wisconsin’s School Revenue Squeeze Gets National Attention

Thursday, February 7, 2013 at 1:58 PM by

Governing.com Article Raises Questions about Who Should Set Property Tax Rates 

Schools in Wisconsin are caught in a very difficult position because their budgets get squeezed by rising costs, cuts or freezes in state aid, and state-imposed revenue caps that are increasingly tightening the state’s grip on local property taxes.  Governing.com examines the fiscal challenges of Wisconsin schools in a very good article today.

“A 20-year-old cap on how much property tax revenue Wisconsin public school districts can earn has become a thorn in the sides of local officials as shrinking home values and dwindling state funding have put a squeeze on their budgets. As the provision comes under increased scrutiny in that state in the wake of the Great Recession, larger questions are being raised [about] whether limiting local public education revenue is a sustainable policy for the future.”

I’d like to think that the 2013-15 budget will provide some relief for schools, but I’m not very optimistic.  Although I think many legislators in both parties understand the need to loosen the current constraints, I suspect that the general framework of the governor’s budget will make it very challenging to make the changes that are needed.

In the past, when state aid to schools was keeping up with inflation (more or less), most state lawmakers were proponents of “local control.”  They were content to let locally elected school boards decide, based on the needs of their community and the input of their constituents, how much their district would increase property taxes to supplement their allotment of state aid.  However, in times when aid is being cut (relative to increased costs), state lawmakers fear that they could be charged with causing property taxes to rise to fill the funding gap.  Those fears erode legislators’ support for local control, and bolster support for tighter revenue caps (which limit each district’s growth in state aid and property taxes combined).

Looking ahead to the 2013-15 budget, if the state cuts income taxes and transfers General Fund dollars into the Transportation Fund, there won’t be much left for increasing school aid.  And if school aid increases lag well behind the growth in costs, then I expect the Governor to once again recommend very tight revenue caps.  Those policy choices would be especially problematic for the poorer districts that are most dependent on equalization aid, but they would hurt the vast majority of our schools. 

For better or worse, the last biennial budget gave school districts more “tools” to manage costs, and reduced aid to compel districts to make those changes.  Now that those cost-cutting changes have been made, and many districts have nonetheless had to cut teaching positions because of the aid cuts and revenue caps, we eventually have to confront the question of if/when local officials should be given back authority to determine property tax rates.  The Governing.com article quotes UW professor Andrew Reschovsky on that point:

We pay a lot of lip service to local control. You would think that core to local control would be the ability of local taxpayers to make decisions about how much to spend.  So why are we seeing state governments limiting the ability of local school districts?

Let’s hope that debate gets a through airing during deliberations on the biennial budget.  

To learn how revenue caps work or more about other aspects of K-12 financing in Wisconsin, see the “School Finance 101” primer by the WI Association of School Boards.   

Jon Peacock 

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