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Published in Print: December 5, 2007, as Cross-Currents Roil School Finance Debate

Cross-Currents Roil School Finance Debate

Georgia policymakers may weigh tax cuts, concerns about equity.

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What one education advocate describes as a “perfect storm” over school finance is brewing in Georgia, as a top lawmaker pushes to replace local property taxes for education with a statewide sales tax, even as the state gears up to fight a lawsuit from school districts over the current funding formula.

Under Speaker of the House Glenn Richardson’s proposed constitutional amendment, property taxes that now support schools would be eliminated, and instead, a sales tax of 4 percent would be collected on all services and retail purchases. The state would then distribute revenue back to local school districts, though the detailed formula has not yet been made clear.

But Joseph G. Martin, the executive director of the Consortium for Adequate School Funding in Georgia— a group of 51 low-wealth districts suing the state—says the plan represents a power grab by legislative leaders.

“We know there are problems in property taxes, but we can’t bring ourselves to support it,” Mr. Martin said of the proposal. “Not only would it be a financial disaster, but it would be a huge shift of power.”

Taxes Rising

Nevertheless, the Republican speaker’s plan is bound to get attention when the legislature’s 2008 session opens in January, as will any proposals for school funding reform yet to be recommended by a task force formed by Gov. Sonny Perdue, also a Republican.

Property taxes in Georgia, Speaker Richardson said in a Nov. 7 press conference, increased by $1.5 billion between 2005 and 2006, bringing them to almost $10 billion. “The rising amount of property tax is something our citizens cannot afford to pay,” he said.

Georgia is hardly alone in feeling the squeeze. Escalating property taxes are a nationwide concern, said Michael P. Griffith, a school-finance-policy analyst at the Denver-based Education Commission of the States.

“Sometimes you get the property- tax situation forcing a change in education funding,” he said, and sometimes it’s the other way around. Property taxes and school finance are “two sides of the same coin,” he said.

In New Jersey, for example, uncertainty continues over the details of Gov. Jon S. Corzine’s yet-to-be-unveiled school finance formula—a concern especially among school officials in the so-called Abbott districts, where spending has been mandated by the state supreme court in the education adequacy case Abbott v. Burke.

But Mr. Corzine, a Democrat, also signed legislation last year providing rebates and tax caps for New Jersey homeowners, who pay some of the highest property taxes in the country.

“The issue [in New Jersey] has always been that when the legislature decided to step back in and rewrite the formula, how would they do that in a way that sustains adequacy?” said David G. Sciarra, the executive director of the Education Law Center, in Newark, N.J., which brought the lawsuit against the state. “How can you do this without substantial revenue?”

In Georgia, the split between state and local responsibility for school funding has stayed at around 60 percent state and federal, and 40 percent local, on average. But those figures vary widely by district, said Laura Reilly, a spokeswoman for the Georgia School Boards Association.

“At the local level, you’ll hear that [local percentages] are going up, and districts are responsible for more of the funding,” she said.

Even so, the association isn’t in favor of Speaker Richardson’s proposal. If approved by at least two-thirds of the Republican-controlled House and Senate during next year’s session, it would go before the voters next November as a proposed constitutional amendment.

“We have always felt that the property tax is more stable than a sales tax,” Ms. Reilly said. “It’s not up to the whims of the economy.”

That’s what lawmakers in Michigan discovered after eliminating all property taxes in 1993 and increasing a variety of other taxes. A year later, they reinstituted some property taxes after the state ended up losing about $2 billion in revenue as a result of the change, according to a report by three Michigan education groups.

Mr. Griffith of the ECS added that he will be surprised if Mr. Richardson’s plan wins approval.

“It’s very difficult to get the political will you will need to make this kind of huge change,” he said, especially since “we’re heading into a really unsure economy.”

Many of Mr. Richardson’s Republican colleagues in Georgia—including Gov. Perdue—aren’t backing the plan. But neither are they convinced that a lawsuit is the best way to revamp the school finance formula.

The consortium of districts that sued the state in 2004 argues that the current funding model doesn’t cover what it costs to provide students an adequate education.

All local systems use local money to make up the difference, but some are not able to raise as much tax money as others, leaving them with less for expenses such as materials and staff. The districts want the legislature— or the courts—to revamp the tax code and the finance formula to address the inequities.

Court Battle Looms

Even though the two sides have repeatedly met in the hope of reaching a settlement, the state is prepared to fight, as shown by its hiring of Sutherland, Asbill, & Brennan, a major law firm in Atlanta, and the same one that has represented New York, Florida, and other states in school finance litigation.

The plaintiff districts are being represented by lawyers from another Atlanta firm, Rogers & Hardin.

The process of collecting depositions in the case, Consortium for Adequate School Funding in Georgia v. The State of Georgia, is now almost complete. A trial is set to begin next fall in Fulton County Superior Court, although it could start earlier if the state doesn’t ask for summary judgment, meaning that the new judge assigned to the case would issue a ruling without a full trial.

Investing in Excellence

In the midst of trial preparation, Gov. Perdue’s Education Finance Task Force, which began meeting about the same time the lawsuit was filed, is wrapping up its work and is expected to make recommendations soon.

The group is working to replace the state’s 22-year-old Quality Basic Education formula with a new model—something Mr. Perdue is calling Investing in Educational Excellence.

According to Dean Alford, the chairman of the task force, who runs a service company in the utility industry, much of the committee’s work has focused on redefining the relationship between the state and its school districts. He said that instead of state rules on how money should be spent and accounted for, the task force is moving toward “contracts”— a term now used in New York state—meaning that districts would receive more flexibility in spending and curriculum decisions in exchange for improved student performance.

Rather than falling back on phrases familiar in school finance circles, such as “categorical funding,” or “student weights,” Mr. Alford came up with the term “strategic multiples,” to refer to the additional needs some students have that require more funding, such as a disability, living in poverty, or being gifted.

The task force members, he said, are still “tweaking” the cost model, which Mr. Alford describes as “the amount needed in the classroom to get the job done.”

He added that Mr. Richardson’s plan has generated conversation among the members, but it hasn’t affected the task force’s work. The plan, he said, merely “changes the mechanism of how local dollars are collected.”

The speaker’s proposal, the impending court case, and the governor’s task force are all adding up to what Mr. Martin of the consortium of plaintiff districts called “a perfect storm” over school finance in the state.

“You’ve got these separate things all going on simultaneously,” he said, but added that the task force’s work makes the lawsuit even more necessary. “What is recommended will not be meaningful if it isn’t backed up by adequate funding.”

Vol. 27, Issue 14, Page 16

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