The Funding of Public Education in Wisconsin: Is a Crisis Brewing

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The Funding of Public Education in WisconsinIs
a Crisis Brewing?

• Andrew Reschovsky
• Professor of Public Affairs and Applied Economics
• Robert M. La Follette School of Public Affairs
• University of Wisconsin-Madison
• reschovsky_at_lafollette.wisc.edu

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Major School Funding Policy Issues

• Is it possible to improve the quality of
  education in Wisconsin using our current funding
  system?
• Is more money needed in order to improve
  educational standards and student performance?
• Where should the money come from?
• Should we reduce the reliance on the property tax
  for the funding of our schools?

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The Quality of Public Education in WisconsinAre
There Reasons to be Concerned?

• National Assessment of Educational Progress
  (NAEP) Wisconsin students perform above the
  national average, but
• Nearly ¼ of our students score below basic in
  8th grade test (23 in reading and 24 in math)
• Racial differences are larger than in most
  states
• Below Basic White Black
• 8th grade reading 18 56
• 8th grade math 16 70

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The Quality of Public Education in WisconsinAre
There Reasons to be Concerned? (cont.)

• Because of the revenue caps most school districts
  are cutting programs and increasing class sizes
• A number of small districts are on the verge of
  collapse, e.g. Florence
• Todays educational standard arent high enough
  to adequately prepare students for success in the
  global economy of 2015 and thereafter

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An Overview of the Current School Funding System

• Revenue from all 3 levels of government
• 52 from the state 42 from local school
  districts
• Most state aid allocated through equalization aid
  formula
• Local school district spending decisions
  restricted by revenue caps
• NCLB requires annual increases in the share of
  students (in each subgroup) achieving
  proficiency

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State School Aid in 2006-07
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State Equalization Aid

• For most districts, aid consists of 2 parts
• A fixed amount per student that is smaller in
  districts with higher property value per student
• An amount that is a fraction of last years
  spending
• For 2/3 of districts fraction is gt0, thus aid
  encourages spending
• For 1/3 of districts fraction is lt 0, thus each
  dollar of extra spending reduces next years aid

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Evaluating the Equalization Aid Formula

• Formula is designed to achieve access equality
  and spending equality
• Access equality exists when equal property tax
  rates allow equal levels of spending
• Formula is reasonably effective in meeting both
  equity goals
• But, the formula is not designed to assure that
  districts have sufficient resources to meet
  states student performance standards

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The Evolution of the Current School Funding
System (cont.)

• In 1993, Legislature enacted the revenue cap
• Annual limit on the increase in the sum of per
  student property tax and equalization aid revenue
• 1993 spending pattern frozen in place
• The cap is currently about 257/student
• Revenue can exceed cap only if voters approve
  (via a referendum)
• As a result, average K-12 mill rate fell by 6.8
  mills, a 43 reduction, between fy96 fy06.

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What is Wrong with theCurrent Funding System?

• Equalization aid formula and revenue caps takes
  no account of the differences across districts in
  expenditure needs--the minimum amount of money
  per pupil a district needs to meet the states
  student performance standards
• Expenditure needs vary for reasons outside the
  control of local school districts

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What is Wrong with theCurrent Funding System?
(cont.)

• Expenditure needs vary because of differences in
  students
• Student from poor families
• Minority status
• Mental and physical disabilities
• Limited English proficiency
• And differences in school districts
• Number of students, i.e. scale diseconomies
• Area cost of living, Milwaukee metro vs. rural
  North

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What is Wrong with theCurrent Funding System?
(cont.)

• Revenue caps take no account of differences in
  expenditure needs and for rate of increase in
  costs of health care, etc.
• Passing override referenda made very hard because
  many districts are penalized by aid formula for
  any increase in spending
• e.g. to increase spending per pupil by 100,
  Madison must increase property taxes by 162
• Ability to recruit high-quality teachers is
  limited, especially in difficult environments

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What is Wrong with theCurrent Funding System?
(cont.)

• Evidence that costs of special education are
  rising faster than available revenues and hence
  are crowding out funding of regular education
• Because property tax rate reductions provide
  untargeted tax relief, those facing high burdens
  (e.g. moderate-income elderly) receive little tax
  relief

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Elements of a Reformed School Funding System

• Adopt an expenditure-need adjusted foundation
  formula
• Aid is gap between each districts foundation
  level and what it can raise from a standard
  property tax rate
• Hold districts accountable for meeting student
  performance standards
• Assure that on the margin 100 of extra
  spending is funded by the local property tax
• This creates fiscal discipline and negates the
  need for a revenue cap
• Expand circuit breaker type property tax relief
  as a means of targeting property tax relief