Review of Wisconsin s School Finance System and its Impact on the Sheboygan School District

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1 Review of Wisconsin s School Finance System and its Impact on the Sheboygan School District Presented by Bambi L. Statz, Ph.D. Emeritus Professor, UW-Whitewater Executive Director, Association for Equity in Funding November 27,

2 State Support for K-12 = Property Tax Relief General Aids Categorical Aids Humke Elementary School Nekoosa, WI

3 General Aid: Equalization Aid DISTRIBUTION based on local Ability to Pay State guarantees a certain level of tax base behind each child. Results in more state aid to poorer communities and less to wealthier ones Local Factors: Local Property Value Compared with state average (Wealthier districts get less state support; poorer ones get more) Local Spending (Lower levels of spending are shared by state at a higher ratio; Spending above 90% of state average receives lower ratio of state support) Number of Pupils (factors compared on per pupil basis) Source: LFB Paper #26, January 2011

4 Property Value Disparities Equalization Aid: Property valuations range from $186,900/P in Beloit to $9.03m/P in North Lakeland, a ratio of 47:1 between the most and least property wealthy districts in the state. State Average = $555,356 Sheboygan = $351,543 Source: DPI Oct 15, 2012 State Aid Certification Press Release (NR ) 4

5 PRIMARY AID Primary Cost $1,930,000 PRIMARY GUARANTEE $1,000 Primary Cost Ceiling LOCAL $350,000 18% $180 STATE $1,580,000 82% $820

6 SECONDARY AID Secondary Cost $ 1,105,090 SECONDARY GUARANTEE $9,005-1,000 = $8,005 Secondary Cost LOCAL $350,000 32% $2,882 STATE $ 755,090 68% $6,123

7 TERTIARY AID Tertiary Cost $ 555,356 TERTIARY GUARANTEE Any Amt. Over $9,005 Tertiary Cost e.g. $1,000 LOCAL $350,000 63% $630 STATE $ 205,356 37% $370

8 General Aid = $4,811,500, = $4,671,200, = $4,671,200, = $4,285,000, = $4,310,488,000 3 Largest Categorical Aid = $650,900, = $644,200, = $653,800, = $608,500, = $653,875,400 School Levy Credit = $822,400, = $892,400, = $897,400, = $897,400, = $897,400,000 Sources: LFB Paper #26, January 2011 and 2011 WISCONSIN ACT 32

9 General Aids increased $31.7M or 0.7% over last year - still down 7% from two years ago. And yet, increased payments to public schools are actually less due to enhanced aids to choice and charter schools: Milwaukee Parental Private School Choice Program = $59.4M taken from MPS Racine Parental Private School Choice Program = $1.236M taken from Racine Unified SD 20 Independent Charter Schools in Milwaukee and one in Racine = $59.8M taken from all WI SDs ($943,000 from Sheboygan SD) 9 Source: DPI Oct 15, 2012 State Aid Certification and Press Release (NR )

10 General Aids actually distributed to schools include the following: Equalization Aid = $4.193B Integration Aid = $68.8M Special Adjustment Aid = $31.7M High Poverty Aid = $16.8M Note: 272 or 64% of WI public SDs will receive less school aid for than they did last year. Source: DPI Oct 15, 2012 State Aid Certification and Press Release (NR ) 10

11 School Levy Credits Funding for Levy Credits (School Levy Credits and First Dollar Credits) has proliferated while direct aid to school districts has diminished.

12 Levy Credits (Includes school levy credits, first dollar credit, and the lottery and gaming credits) DISTRIBUTION Based on each municipality s share of statewide levies for school purposes during the preceding three years. Municipality s 3-Year Average School Levies Statewide 3-Year Average School Levies Source: LFB Papers #21 & #27, January 2009 Local Factors: Local Spending (Higher spending means more credit) Local Levy (Higher taxes means more credit) Direct State Aid (Lower state aid means higher local levy, means more credit)

13 SCHOOL LEVY & 1 st Dollar TAX CREDITS Prior to 1990, Levy Credits = $169 M and were equalized $ 319m m Nearly a Decade = $ 469m m $ 593m m $ 672.4m m $ 822.4m m $ 892.4m and after m $ 897.4m

14 Differing Effects of the 2 Largest Forms of State Support (Aids v. Credits) on Local Taxes Taxpayers in every district gain from Levy Credits (both School Levy Credits and First Dollar Credits) Property poor/low spending districts will receive more state support when funds are channeled as Equalization Aid Property wealthy/high spending districts will receive more state support when funds are channeled as School Levy Tax Credit Why is this important? There has been a shift from Equalization Aids to Levy Credits Per LFB analysis, Disadvantages 70% of WI SDs

15 LFB Analysis: Shift of $747.4M School Levy Credits vs. Equalization Aid to in School District Loss School District Gain Appleton -$2,460,110 Crivitz $1,199,074 Baraboo -$812,613 Drummond $1,020,634 Sheboygan -$91,133 Elcho $806,260 Delavan-Darien -$919,700 Elmbrook $12,132,922 East Troy -$698,069 Gibraltar $1,605,973 Fond du Lac -$1,313,439 Green Lake $1,034,812 Hudson -$1,823,001 Hayward $3,194,244 Kenosha -$2,842,143 Mequon-Thiensville $7,487,810 Marshfield -$1,053,006 Northland Pines $3,657,577 Mosinee -$418,468 Phelps $550,762 Mukwonago -$1,355,671 Sevastopol $1,291,729 Oak Crk-Frank -$1,711,559 Spooner $2,117,850 Owen-Withee -$89,065 Three Lakes $1,495,773 Racine -$6,299,947 Webster $1,432,684 Waukesha -$3,031,465 Weyerhaeuser $296,963 Wauwatosa -$2,475,613 Williams Bay $1,429,572 West Bend -$2,784,119 Wisconsin Dells $2,070,942 Total No. of SDs 295 = 70% Total No. of SDs 130 = 30% Source: LFB Paper dated February 2, 2010

16 CESA No. of School Districts CESA Comparisons State Equal Val per Pupil Tax Rate State Equal Aid per Pupil Levy Credit per Pupil Tot Exp per Pupil CESA #3 31 $427,989 $10.34 $6,613 $704 $13,003 CESA #4 26 $434,902 $9.66 $6,624 $682 $12,571 CESA #5 35 $592,752 $8.97 $5,066 $831 $12,025 CESA #6 42 $544,661 $8.16 $5,727 $723 $11,547 CESA #7 37 $519,411 $8.40 $5,962 $719 $11,941 CESA #8 27 $572,480 $8.69 $5,616 $832 $12,918 CESA #10 30 $441,794 $9.19 $6,236 $672 $11,738 CESA #11 39 $587,520 $9.17 $5,097 $894 $12,000 CESA #1 43 $761,529 $8.71 $4,121 $1,110 $11,992 CESA #2 74 $739,529 $8.45 $4,631 $1,036 $12,403 CESA #9 22 $1,003,934 $6.02 $5,070 $1,006 $12,923 CESA #12 17 $854,675 $7.17 $4,518 $1,012 $13,208 State Ave (K-12) $560,976 $9.18 $5,373 $847 $12,366 Below Average Levy Credit = 277 SDs Source: School Facts 10 by WTA Above Average Credit = 156 SDs with lots of out of state property owners

17 Who Pays & Who Benefits from Levy Credits? All WI residents contribute to GPR through income and sale taxes. Only 51% of the total school levy credit reduces property taxes of WI homeowners on their primary residences. 9% of the levy credits go to Wisconsin residents who own vacation property 26% go to owners of nonresidential property and non-wisconsinites who own vacation homes in the state Property owners in the poorest school districts (in terms of property wealth) received an average credit equal to $375 per student. The size of the average credit going to taxpayers in school districts with higher levels of property wealth per student increases with district wealth. Property owners in the state s 21 propertyrichest districts received average per student credits of $2,596, nearly seven times the average credit going to taxpayers in the poorest school districts. Source: Andrew Reschovsky's study of levy credits:

18 State Funding for K-12 Education to ($ in Millions) Annual Appropriations State Budget Act $ Chge to % Chge General School Aids $4,613.9 $4,722.7 $4,731.7 $4,811.5 $4,671.2 $4,671.2 $4,285.0 $4, $ % Categorical Aids School (Property Tax) Credits State Resident Schools Total State Funding $545.2 $571.1 $608.5 $650.9 $644.2 $653.8 $608.5 $653.9 $ % $469.3 $593.1 $672.4 $822.4 $892.4 $897.4 $897.4 $897.4 $ % $10.4 $10.4 $11.5 $11.5 $11.8 $11.2 $11.2 $11.2 $.8 7.6% $5,638.8 $5,897.9 $6,024.1 $6,296.3 $6,219.5 $6,234.2 $5,802.0 $5,873.0 $ % 82% 73% of Total 8% 15% of Total Source: ACT 32 State Budget - LFB

19 School District School District Comparisons Equal. Value per Pupil Total Exps per Pupil Tax Rate Equal Aid per Pupil Property Tax per Pupil Levy Credit per Pupil Sheboygan $ 372,028 $ 13,013 $ $ 5,897 $ 4,497 $ 659 Green Lake $ 3,503,363 $ 20,375 $ 4.85 $ 131 $16,977 $2,938 Nekoosa $ 840,458 $ 12,100 $ 9.15 $ 3,105 $ 7,693 $1,153 Three Lakes $ 2,830,586 $ 15,636 $ 4.99 $ 202 $14,125 $2,579 Stevens Point $ 530,206 $ 12,310 $ 9.48 $ 5,574 $ 5,027 $ 763 Mequon-Thiensvl $ 1,298,892 $ 12,614 $ 8.73 $ 597 $11,340 $2,038 Wisconsin Rapids $ 383,030 $ 11,899 $ 8.93 $ 6,679 $ 3,422 $ 563 Wisconsin Dells $ 1,374,392 $ 11,970 $ 6.77 $ 461 $ 9,309 $1,600 State Average (K-12) $ 560,976 $ 12,366 $9.18 $ 5,373 $ 5,144 $847 Key: 1 st district in pair gets Below Average Credit; 2 nd district receives Above Average Credit Sources: School Facts 10 by WTA and Feb 2010 LFB analysis

20 State-Imposed Revenue Limits Limit the amount of revenue school districts can raise from: general state aid and local property taxes Revenue Limits were imposed unfairly in

21 WI Revenue Limit History Year Year Allowable Increase $190 or Cpi-u (3.2%) - $355/pupil $ or Cpi-u (2.3%) - $255/pupil $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (reduced from $275) % from 10-11; +$50/P in

22 REVENUE LIMITS ENCOURAGE SEEKING OTHER, NON-TAX, SOURCES OF REVENUE Student Fees Fundraising Commercial Contracts Foundations Fund Balance These alternatives, if used to meet ongoing operational needs, are: Inequitable, Unstable, Reduce State Sharing (cost local taxpayers), and put off the inevitable

23 Ways that the WI school finance system could treat children and taxpayers more fairly: Transfer state support from Levy Credits to Direct Equalization as they originally were Appropriately fund needs of disabled students, economically disadvantaged students, and students with limited English language skills as required by Supreme Court (Vincent v. Voight) Modify or eliminate State-Imposed Revenue Limits Restore General Aid Formula Factor definitions to represent excessive spending and excessive wealth Revisit other Public Policy & Funding Decisions including Private School Choice, Public School Open Enrollment, and Charters that draw funds away from public K-12 providers Visit us at