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Oregon Panel Urges School-Finance Overhaul

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Oregon's school-finance system produces "great inequities" for both taxpayers and students and requires a "revolutionary" change, a blue-ribbon panel appointed by Gov. Neil Goldschmidt has concluded.

Because of the state's heavy reliance on property taxes to fund its schools, the 11-member commission wrote in a 110-page report submitted to the Governor on Sept. 1, "the quality of education available to a student ... is, to a great extent, determined by where he or she happens to reside."

The existing system, it said, "has eroded the level of support for some school districts to the extent that equal educational opportunities are not available to all," despite the state constitution's mandate for "a uniform and general system of common schools."

In the short term, the group urged, state lawmakers should place a referendum before voters calling for the establishment of a minimum property-tax base in all 304 school districts.

At present, nearly a third of the state's districts lack such taxing authority, thus requiring them to ask local voters to approve an operating levy every year. During the past decade, voters have forced shutdowns of schools in 12 districts by rejecting such levies.

As a long-term goal, the commission recommended that the state scrap its current finance system in favor of a new "basic-education guaranteed-funding program." The new system would require Oregon to nearly double the current level of state suppport and would result, the panel said, "in a significant reduction in the reliance on property taxes.''

The commission did not specify a revenue source for the new state funds. Instead, it listed several options.

During the past six years, voters have twice rejected measures that would have established a state sales tax and permitted a reduction in property-tax rates.

Lawmakers created the school-finance commission in 1987 after a series of districts closed due to voter rejection of school operating levies. As a stop-gap measure, the legislature last year also established a financial "safety net" for such districts that allows them to maintain, but not increase, their tax rates for the previous year.

State education officials estimate that as many as 54 districts will fall into the safety net this year. Last year, 38 districts were required to use the emergency tax procedure.

In its report, the commission noted that per-pupil expenditures among districts range from $2,591 to $7,612, and that local property-tax rates range from $3.20 to $27.61 per $1,000 of assessed value. The state, it said, currently ranks fourth in the nation in terms of school revenues generated by property taxes and 48th in terms of revenues provided by the state.

Initial reactions to the group's recommendations have been favorable. Last week, for example, Governor Goldschmidt described the report as the "next step on the road to stability in school finance and equitable property-tax relief."

Mr. Goldschmidt, who has indicated that he will use the report in developing his legislative package for the 1989-90 biennium, added that the state "must have a system that is fair to all children of Oregon.''

"Educational quality must not be an accident of birthplace or residence," he said.

In a prepared statement, Verne Duncan, the state school superintendent, said the commission's plan "provides stability to schools, equity to students and taxpayers, reduces the heavy reliance on property taxes, and allows for local control of education programs beyond the 'basics."'

In addition to suggesting the establishment of a tax base for all districts, the commission said that in the short term the legislature should:

Allocate $150 million to districts during the next biennium to lower property taxes by 5 percent, and another $30 million for districts that have low per-pupil expenditures and/or high tax rates.

Distribute an additional $105 million through the school-finance formula to cover the cost of enrollment increases.

Raise spending for special education by $30 million.

Earmark $2.5 million to establish both a statewide testing program in grades 3, 5, 8, and 11 and an annual self-evaluation program for districts.

The proposed new finance system, which was recommended as a long-term solution to property-tax inequities, would require the state to set a minimum local tax effort for districts; define the components of a "basic education"; and provide support to equalize spending in excess of the cost of providing a basic education.

R.L. Rose, the commission's executive director, said that if the legislature adopted the panel's longterm recommendations, state aid to schools would have to be increased by an additional $400 million to $600 million a year. Currently, the state provides $500 million a year.

Finding a source for those new funds will be a major problem for the legislature, predicted Floyd McKay, the Governor's spokesman. He said some business organizations had suggested that state officials give up trying to enact a sales tax and instead use motor-vehicle taxes as a funding source for schools.

The legislature is also expected to take a close look at the commission's suggestion that it consider reducing the number of districts by one-third by requiring the state's 100 elementary districts to merge with high-school districts.

"That's going to cause some political consternation," Mr. Rose said.

But, he added, most elements of the package should garner widespread support.

"If you take the package as a whole," he said, "it holds together philosophically and lays the foundation for moving us in a new direction."

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