Under proposed budget, most school districts would get less state aid, have to reduce property taxes

Despite a majority of Wisconsin school districts losing substantial amounts of state aid, most districts will be forced to reduce school property taxes under Gov. Scott Walker’s proposed budget, unless voters agree to raise revenue limits, a new University of Wisconsin–Madison study finds.

“The combined impact of Governor Scott Walker’s proposal to reduce state aid to schools by 8.4 percent and to lower the state-imposed revenue limits by 5.5 percent would sharply limit overall resources available to local school districts,” says Andrew Reschovsky, an economist with the La Follette School of Public Affairs at the University of Wisconsin–Madison.

The Legislature’s Joint Finance Committee is expected to address the school funding provisions in the proposed budget soon.

In 329 of the state’s 424 school districts, school boards would not only be prevented from raising property taxes to make up for lost state aid, but they would be required to reduce property taxes to satisfy the new revenue limits. These property tax cuts can be avoided only if school districts pass referendums to raise their revenue limits.

“Sixty-five percent of the state’s public school students are enrolled in districts that would have to reduce school property taxes if they cannot pass referendums to maintain current funding levels,” Reschovsky says.

The revenue limits, which have been imposed on school districts since 1993, place a ceiling on the amount of money each district can raise from the sum of general aid from the state and local property taxes. Although the governor’s budget would force the majority of districts to reduce property taxes, in 95 districts taxes could be increased without referendums because in those districts state aid reductions would result in spending levels falling below revenue limits.

Reschovsky’s analysis is based on his estimates of general state aid and revenue limits for next school year assuming the enactment of the governor’s budget. These estimates, which are presented in a new La Follette School working paper, are necessary because the data for final aid calculations are not yet available.

“Although actual allocations will differ from my estimates, the general patterns of aid and revenue limits outlined in the paper present a reasonable forecast of the effects of the governor’s budget proposal,” he says.

On average, the proposed reduction in revenue limits would reduce resources available to school districts by $541 per pupil, Reschovsky says. Because the average reduction in general aid is $455 per pupil, many school districts would be forced to reduce property taxes or enact referendums to raise their revenue limits.

To demonstrate the impact of the governor’s school funding proposals, Reschovsky classifies districts by their property wealth per student, by their location, such as city, suburb or rural, and by the percentage of their student bodies from poor families.

Reschovsky finds that per-pupil reductions in revenue limits would be larger in districts with greater property wealth. Conversely, per-pupil general aid reductions would be greatest in districts with the lowest property wealth per pupil. The largest required reductions in property taxes would occur in districts with high levels of property wealth per pupil.

The study also finds that the largest required reductions in property taxes would occur in suburban Milwaukee school districts. “Without referendums, these districts would have to decrease taxes by $271 per student,” Reschovsky says. “Although the majority of school districts serving small towns and rural areas would be required to decrease property taxes, 79 of the 95 that could increase taxes without referendums serve small towns and rural areas.”

The governor’s budget proposal would result in larger per-pupil reductions in general aid in districts with the highest levels of student poverty, Reschovsky adds.

Reschovsky points out that one way policymakers could reduce spending cuts would be to limit reductions in revenue limits to an amount smaller or equal to reductions in state general aids. “Although such a provision would allow additional spending by many districts, the largest beneficiaries would be districts with the highest value property per student,” Reschovsky says.

To reduce spending reductions in districts with many poor students, Reschovsky suggests adding a poverty weight to the state general aid funding formula. With a poverty weight, each student who qualifies for free and reduced price lunch would count as more than one student in the state funding formula.

“Thus, with a poverty weight of 0.25 and 100 students who qualifying for the lunch program, a district would receive funding for 125 students in the state’s allocation of general aid,” Reschovsky says. “With 42 percent of Wisconsin students eligible for the lunch program, adding poverty weights to the school funding formula would allocate more money to districts that face the extra challenges of educating students from poor families.”