A proposed change in the Minnesota school-aid formula would raise the level of state support for local districts by about 15 percent, but at the same time would reduce state-subsidized property-tax credits, thereby leaving the amount of money schools receive essentially unchanged.
Currently, the state supplies about 60 percent of local education funding; if lawmakers approve the plan, that proportion would rise to 75 percent.
The proposal, prepared jointly by a gubernatorial commission and the state departments of revenue and finance, will be presented to the legislature in January, said Ronald Hackett, school-aid analyst in the department of finance.
The plan, part of a total overhaul of the state’s tax system, would abolish a requirement that school districts levy 23.5 mills in local property tax in order to be eligible for state aid. The $700 million yielded locally each year by these mandatory levies would be replaced from the state3treasury, according to Daniel Loritz, assistant commissioner in the state department of education.
In exchange, the state will reduce or eliminate state-paid homestead and agricultural credits, according to Mr. Loritz. The amount now paid by the state for those credits, which are essentially rebates on property taxes, is almost equivalent to the amount of property-tax levies, Mr. Loritz said. Thus, a property owner’s savings from the reduced property taxes would be offset by the reduction of credits.
Tax Relief Unchanged
"[The credits] will simply be moved within the school-aid formula,” Mr. Hackett said. “The credits will be restructured so they replace what would have been paid in mills. Property-poor districts will not get any more or less, and the amount of tax-relief aid will remain unchanged. We are just reorganizing it under different headings, so we can eliminate working at cross-purposes.”
However, under the current system, if local districts vote to raise the property tax above the minimum required level, the state partially subsidizes the increase by contributing additional credits, Mr. Loritz said.
Under the new system, the state would partially subsidize increased levies within an established aid formula, but property owners would have to pick up the total cost of any extra property taxes the local district might impose to pay for an increase in education costs.
Mr. Loritz said the change in the school-aid formula would provide greater stability and would allow the education portion of the state budget to be decided at the same time as the rest of the budget, rather than a year earlier, as is currently the case.
‘Good Look Needed’
Willard Baker, executive director of the Minnesota State Boards Association, said the proposal is “worth taking a good look at.”
“It obviously increases the state participation in terms of support, which would be moving in the right direction,” he said. “But we also want to make sure we don’t become too dependent on state aid.”
