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Mont. Adopts Radically Revised School-Finance System

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Seeking to head off two school-finance-equity lawsuits and put an end to four years of litigation, the Montana legislature has adopted a radically revised school-finance system.

A key feature of the new plan, passed last month, requires all school districts in the state to spend between 80 percent and 100 percent of a formula-derived optimum funding level.

The measure is expected to force a number of districts to raise property-tax levels in order to meet the state minimum. Combined with a cut in state education aid resulting from a projected budget deficit, the result may be significantly higher property-tax levels that, some officials fear, could ignite a taxpayer revolt in the state.

The new formula, created by the state legislative auditor's office, uses several pieces of spending data to derive a statewide ideal budget level for local districts.

The law then requires all districts over the next five years to increase local taxes, if necessary, to bring their budgets up to 80 percent of the optimum spending level, while barring districts from spending more than the standard.

"It's a dramatically different approach from what we've had before ... and it remains to be seen to see if it will equalize,'' said Greg Groepper, an assistant state superintendent of public instruction.

Based on statements by the plaintiff districts that are challenging the state's existing finance system, it seems likely that the new law will meet the demands for equity contained in the lawsuits, offficals said.

"The plaintiffs ... tended to testify in favor of the legislation, because it froze the high-spending districts,'' said Rep. Ray Peck, a member of the House select committee that approved the new formula.

'Can You Fix It?'

The formula was developed at the request of legislative leaders hoping to forestall a judicial solution to the school-finance crisis that has dominated the last two sessions, said Scot Seacat, the legislative auditor.

Early in the session, Mr. Seacat said, "they came to me and asked me a simple question, 'Can you fix the formula?'''

The formula developed by analysts bases the optimum funding level on an entitlement of $18,000 for elementary school districts, many of which are quite small, and $200,000 for K-12 districts.

To that amount, the formula then adds a per-pupil entitlement at the elementary level of $3,500 for the district's first student, declining by 20 cents per student for the first 1,000 students before reaching a "stop loss'' level.

For K-12 districts, the formula sets the per-pupil entitlement at $4,900 for first student, declining at the rate of 50 cents per student for the first 800 students before reaching a stop-loss point.

The new formula also includes a special-education component that the state pays to every district.

The combination of those three amounts determines each district's maximum budget. In combination with state aid, which is weighted toward property-poor areas, districts have to produce local revenues that reach 80 percent of the standard.

During legislative action, the formula was amended to equalize school-building funds and subsidize debt-service levies.

Due to a lack of public confidence created by the state's fiscal difficulties, many districts have been unable to float bonds to repair aging buildings--in one case, to replace a school that was razed by fire. (See Education Week, Jan. 8, 1992.)

Taxpayer Wrath Feared

Mr. Groepper and others said they expect districts to have some difficulty in realigning their spending and taxing patterns to meet the conditions of the revised finance formula, which takes effect on July 1.

"I was very reluctant'' to have the plan take effect so soon, Mr. Peck said. "But the committee voted to implement it immediately because of the press of the two court cases.''

Officials also are concerned that districts will feel the wrath of taxpayers when they have to raise additional revenue to replace state aid lost when lawmakers cut $29 million out of the education budget.

Taxpayers on average will see a 12 percent property-tax increase this biennium, and in some cases increases of 35 percent, Mr. Peck said.

"We very well may have a taxpayer revolt in Montana,'' he warned.

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