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Education Funding

Money Woes Hitting Home for Schools

By Joetta L. Sack — June 05, 2002 7 min read

It’s the end of the school year, but the leaders of the Cedar Rapids, Iowa, schools will have a hard time putting 2001-02 out of their minds.

First, the district took a big financial hit when the legislature cut the state education budget at midyear, even as district expenditures, particularly for employee health insurance, skyrocketed. With no relief in sight, the district trimmed teaching jobs, laid off central-office workers, and cut some academic programs just to meet its budget.

Then, last month, the school board decided it had no choice but to increase its property-tax levy, a move that wasn’t popular with local residents.

Cedar Rapids is not alone.

Coming off a year in which many states made midyear budget cuts, scores of districts nationwide are considering raising property taxes and studying other local revenue sources just to fill the holes left by the leaner state budgets and to meet the most critical areas of their own spending plans.

“The problem is fiscal problems roll downhill, and they’re landing right at the feet of local school districts,” said Anne L. Bryant, the executive director of the National School Boards Association in Alexandria, Va. “School districts are suddenly being faced with something they haven’t faced in a long time: real cuts.”

Knowing that other school systems are in a similar situation is small consolation for Cedar Rapids officials.

“This is about as bad as anything I’ve gone through in my 32 years” as a superintendent, said Lewis Finch, the superintendent of the 18,000-student district. “I’ve gone through some major cuts before, but relatively speaking, this has probably been the greatest-impact recession.”

And with the nation’s economic footing still shaky, it’s not clear when relief will come.

On top of those concerns, schools are facing potentially expensive new accountability costs under the recently reauthorized federal Elementary and Secondary Education Act, known as the “No Child Left Behind” Act of 2001.

Steve Smith, a policy analyst with the National Conference of State Legislatures, said he had seen many local jurisdictions seeking new revenues as states cut budgets. In an April report, the Denver- based-NCSL said that 17 states had cut education budgets.

“Some places are definitely going to have to look at” raising taxes, Mr. Smith said.

But others argue that in a depressed economic situation, raising taxes will hurt future revenues and make matters worse.

“It’s economically disastrous to raise taxes during a recession,” said Pete Sepp, a spokesman for the National Taxpayers Union in Alexandria, Va. Further, he added, local budgets ballooned during the 1990s, outpacing inflation and population growth.

“To say the gravy train should go on uninterrupted ignores the reality that many people are unable to pay exorbitant taxes,” Mr. Sepp said.

Local Impact

The Cedar Rapids district never really got to share the largess of the 1990s economic boom, Mr. Finch said. Instead, his state cut taxes, and is now unwilling to raise them.

“In essence, we’ve cut off our lifeline. Rather than suggest we increase our revenue flow, the response is simply to cut,” he said.

“I don’t like to raise property taxes,” he added, “but we had no choice.”

In recent months, the district has had to cut $3.5 million from its $170 million budget for fiscal 2002. It has laid off 25 percent of its central- office administrative staff and eliminated 20 teaching positions this year, and plans to eliminate 40 teaching jobs next year. Officials are still working out details for next year, but Mr. Finch predicts there will likely be larger class sizes, fewer curricular choices, and no staff-development programs.

In addition, the district must deal with the public relations fallout from raising local taxes, which would amount to about an 8 percent increase. This is the first time the board has substantially increased property taxes in the past decade.

Other districts, large and small, are facing similar dilemmas.

In Orlando, Fla., a measure to increase the sales tax one-half cent and increase taxes related to tourism, while slightly lowering the property-tax rates in response to concerns for the area’s many elderly and retired residents, is gaining momentum. The residents will vote on the proposal, which would direct revenues to the 154,000-student Orange County district schools, in September.

If approved, the added revenue would mainly go toward construction and remodeling of school facilities, necessities that the state hasn’t been able to provide, said Renae Benoit, a spokeswoman for Change for Kids, a coalition of residents and education groups promoting the tax measure.

“The schools are really overcrowded,” she said. “Also, a lot of our schools are aging and need a lot of repair work.”

Responding at least in part to the state’s $1.2 billion midyear budget cuts, four other Florida counties have also voted to increase local taxes.

Elsewhere, South Carolina school districts are also reeling from two state budget reductions midway through the year, totaling $160 million out of a $2.5 billion budget, said Ellen Henderson, the director of member services for the South Carolina School Boards Association.

“Most districts have had to use contingency funds just to make it through,” she said. Several have already begun looking at tax increases, she added.

In Atlanta, meanwhile, the school board has tentatively scaled back a scheduled reduction in residents’ property-tax rate, after state revenues for the 60,000- student district’s budget fell short of projections.

Matter of Survival

For some, finding new tax revenue is a life-or-death matter.

In Wynot, Neb., state budget cuts could force the shutdown of the Wynot Public School, a K-12 facility that for decades has been the centerpiece of the rural town in the northeast section of the state.

The district has seen its state aid, which makes up about one-third of its $1.5 million budget, cut by $71,000 this year, and lawmakers are planning to cut another $14,000 or so next year, said Richard M. Higgins, the principal of the school.

The town is tentatively slated to vote in August on whether to raise the property- tax levy to keep the school operating. Mr. Higgins said it was a tough sell to the mostly poor farm community.

“Now it’s up to the local districts to decide how bad they want to keep their schools open,” he said. If the levy fails, the school’s 171 students likely will have to be bused to other communities.

Districts across the Midwest with declining enrollments, including Cedar Rapids, are particularly vulnerable to state aid formulas that dole out funds on a per-pupil basis.

It is a poignant reality for Mr. Higgins: “There’s just not any kids around any more.”

‘A Lot of Bleeding’

In other areas, some districts are learning the downside of new funding formulas: While overall state aid has gone up, their portions of that aid have decreased.

The Sioux Falls, S.D., school board is making significant cuts in its budget for the upcoming school year. The 19,900-student district lost $3.4 million from state aid out of its $85 million budget, and realized it would either have to make cuts or raise more money.

School board President Roger R. Risty said the state’s funding formula does not do enough to keep up with inflation, and thus the few districts in the state that have increasing enrollments lose out.

The city’s voters, though, recently rejected a plan that would have kept property taxes, which are scheduled to decrease, at the current level in order to make up for the shortfall. Mr. Risty said that means the board will have to consider cuts, such as eliminating athletic programs or raising class sizes.

“There’s going to be a lot of bleeding over this,” Mr. Risty said. Once parents see the board’s predicament firsthand, though, he believes there will be a greater push for increased taxes.

In some places, states are trying novel ways to raise money in light of budget shortfalls. And Ms. Bryant of the NSBA predicted more schools would turn to corporate sponsorships and other commercial arrangements to gain revenue.

In Oregon, state law caps property-tax levels, and most districts are at or near the caps. Further cramping local budgets, the state’s general fund came up short this year, forcing lawmakers to cut $120 million from Oregon’s $5.5 billion biennial K-12 budget.

But the state also allowed residents to give back their income-tax refunds for public schools by checking off a box on their income-tax returns. In the end, $675,000 was returned.

“It’s nice and of course people are appreciative,” said Barbara Wolfe, a spokeswoman for the Oregon Department of Education. “But the actual dollar amount per school is so small, it doesn’t do much to help them make up the extensive cuts.”

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A version of this article appeared in the June 05, 2002 edition of Education Week as Money Woes Hitting Home for Schools

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