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Minnesota Lawmakers Boost State Share of School Funding

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Minnesota schools will get a greater share of their funding from the state government beginning next year, under a property-tax overhaul passed by the legislature last month.

Approval of the plan was a significant political victory for Gov. Rudy Perpich, who missed President Bush's education summit to shepherd the bill through a special legislative session.

The measure was a modified version of Mr. Perpich's proposal to have the state assume greater responsibility for state-mandated programs, in return for requiring municipalities and counties to assume more of the cost of local programs.

The bill also sets the stage for further, and potentially more dramatic, shifts in state funding for education and other programs, according to Gary P. Farland, director of finance and analysis for the state education department. It mandates that a legislative commission study the whole system of state and local finance.

The most substantial shift in the bill approved by lawmakers gives education $100 million that formerly was earmarked as unrestricted aid for local governments.

In return, local governments have been given greater authority to raise property and hotel-motel taxes to make up for the lost state aid.

"It's sort of a textbook good-government idea," Mr. Farland said. ''It's an attempt to get more efficiency through accountability."

By forcing local governments to fund their own programs, he said, "you force people to consider the tradeoffs."

The immediate impetus for the legislature's action came from concern that property-tax bills in the state would increase by more than 14 percent next year, state officials said.

State Share to 64 Percent

Legislators attempted to limit the increases and to simplify the state's property-tax system in a bill passed during the regular session. Governor Perpich vetoed the measure, however, arguing that it did not carry the reforms far enough.

The new law does not increase total revenues for education, state officials said.

It does, however, reduce local district's reliance on property taxes, and increases the state's share of education funding from 61 percent to an estimated 64 percent.

Lawmakers have been "fighting hard to keep education support around the 62 percent level, but it had fallen to 60.9 percent for the current year," said William Marx, a fiscal analyst for the House Ways and Means Committee.

By raising the state's share to 64 percent, he said, "some people are hoping that it will start a trend for the future."

The bill also simplifies the state's property-tax structure. For example, the number of classifications of property subject to differing tax rates was reduced from 21 to 10 and ultimately will be decreased to 8.

Equity Issues

Minnesota has set the level of local-school property taxes and assumed the major share of education funding since 1971, when lawmakers revised the state's school-funding scheme in response to the first wave of finance litigation in other states.

The new law does not directly address equity issues raised in a pending school-finance lawsuit filed by 44 districts, which are challenging the state policy that allows local districts to adopt "excess levies" if approved by voters.

The bill requires school districts to hold a public hearing and to send letters to all voters outlining the details of proposed levies, including estimated costs for representative properties.

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