Education Funding

Wis. Districts Chafe Under State’s Revenue Limits

By Julie Blair — January 27, 1999 6 min read
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First, the Sturgeon Bay school district slashed funds for building maintenance. Then it cut classroom aides and administrative assistants. This school year, it ended a popular middle school track program and laid off the choreographer of the high school’s nationally recognized swing choir.

The changes in the 1,500-student district in Wisconsin’s scenic Door County reflect $500,000 in cutbacks the district has endured over the past three years to remain in compliance with the state’s controversial system of paying for schools.

“We’re going to have a shortfall of $54,000 next year,” said Robert Grimmer, the superintendent of schools in Sturgeon Bay, where this year’s budget is $12.7 million. “By the 2003-04 school year, we’re going to have a $370,000 shortfall,” he predicted, unless the district finds new sources of revenue.

In 1993, the legislature imposed revenue caps on all 426 districts in Wisconsin as part of an initiative to increase state aid to schools while easing property-tax rates. In essence, Wisconsin agreed to boost the state government’s spending on schools in return for freezes on local property taxes.

Like a handful of other states that have taken similar approaches, Wisconsin is getting mixed results. Proponents say the current formula helps minimize disparities between rich and poor districts and returns local control to voters. But critics argue that it does just the opposite.

“Caps are not a flexible way of dealing with changing environments,” said Andrew Reschovsky, a professor of public affairs at the University of Wisconsin-Madison. To cope with the caps, many districts are asking voters to pass local referendums to boost their local school budgets. “Eventually, we’ll need to go back to the drawing board and think of a different system of state aid that doesn’t stimulate spending,” he said, referring to the referendums.

‘Penny-Wise’?

Under the 1993 legislation, the state agreed to pay two-thirds of the costs of public education--up from 42 percent in previous years. The measure froze the amount of money that could be raised through general aid and property taxes at 1992-93 levels to ensure that the state could pay its share of school bills. Increases in teacher salaries and benefits are limited to 3.8 percent a year.

Each year since then, districts have been allowed to increase their budgets by $211 per student to account for inflation. Districts that need additional funding are allowed to ask voters to increase school budgets through referendums. If a referendum passes, the state then must hike its funding to keep up its two-thirds spending commitment.

Sixty-four percent of 314 superintendents polled by the Wisconsin Education Association Council over the past school year to determine the impact of the revenue caps said the law is hurting their districts; 24 percent said the caps were neither positive nor negative. Only 12 percent of the respondents said the caps had had a positive effect, according to the WEAC, an 86,000-member affiliate of the National Education Association.

Some 84 percent of districts have cut at least one program since 1993 to comply with the caps. Of the districts that made cuts, most deferred building and grounds maintenance or improvement projects and delayed technology purchases. Many opted to increase administrators’ workloads and delayed hiring new staff members. One-third of the state’s districts dipped into savings to cover their budgets.

“After almost five years of revenue limits, we’re seeing most districts concerned about whether they can afford the cost of education in the next three to five years,” said Karen Royster, the executive director of the Milwaukee-based Institute for Wisconsin’s Future, a nonprofit organization that researches school-finance issues.

Lawmakers will likely debate the finance issue in the legislature this year and attempt to modify the policy, said Sen. Alberta Darling, the ranking Republican on the Senate education committee and its former chairwoman. One option may be to make construction, technology, or special education costs exempt from the caps.

“Its quite simple--we’re broke,” said Storm L. Carroll, the superintendent of the 330-student Laona district in northern Wisconsin. “People donate [soda] cans so that we can run our music program.”

State funding is tied to enrollment. So, by the 2003-04 school year, Mr. Carroll estimates his property-poor district will have lost 30 students and 15 percent of the state aid that now pads out its $3.3 million budget. Some $300,000 in state aid and $200,000 in tax revenue will disappear.

Referendum Options

Wisconsin is not the only state to have imposed revenue limits.

California led such efforts in 1978 when voters agreed to Proposition 13, a statewide ballot measure that capped local property taxes and cut the local revenues typically allotted in schools in half.

Today, 27 states have set state policies limiting spending in one form or another, said Terry N. Whitney, a senior policy specialist for the National Conference of State Legislatures in Denver.

“Property-owners come out ahead, but school districts and children come out at the back end,” Mr. Whitney said. In order to comply, states “are making program cuts--summer school, music, art, speech and debate--and bumping up class size.”

Such efforts, a reaction to 50 years of increases in school funding, have worked to slow spending, said John Augenblick of the Denver-based school finance consulting firm of Augenblick & Myers. Still, “school districts are lucky to keep up with inflation,” Mr. Augenblick added.

Proponents of the Wisconsin plan say that districts in need of more money can ask voters to increase spending and that many have done so successfully. In the last election cycle, for instance, one-fourth of the state’s districts held such referendums; 77 of 184 questions passed, raising some $27.4 million for schools, said Greg Doyle, a spokesman for the state education department.

“If people have to cut programs, it is because they couldn’t sell them to the public,” argued Michael M. Birkley, the legislative director for the Madison-based Wisconsin Property Taxpayers Inc., a tax watchdog group that monitors school spending. “If people are willing to do more, well, then, let them do that. The revenue caps forced them to ask the people.”

But school officials counter that raising taxes is hard in communities where many citizens live on fixed incomes or already pay high taxes for schools and municipalities. Even wealthy districts struggle to pass referendums because of state-imposed tax penalties placed on 91 districts with higher-than-average property values.

“Sometimes I wonder why school districts are the only ones that have to go to referendum,” said Dale N. Larson, the superintendent of the 750-student Algoma district in northern Wisconsin. “Prisons don’t have to go to referendum. A lot of city and municipal governments don’t have to go to referendum. At times, it is easy to feel singled out.”

Meanwhile, 101 districts have taken their gripes to court, charging that the state’s funding policies are unconstitutional and unfair. Though the plaintiffs lost the first few rounds, lawyers for the districts say they will appeal to the Wisconsin Supreme Court.

Districts aren’t the only ones scrambling to find funds.

State officials are worried, too, about making good on their mandated share of school spending. The state paid $8.73 billion to local schools over the last two-year budget cycle and will spend $9.59 billion over the next two years, the department of revenue reports.

“The number of referendums has just exceeded our capabilities in keeping up with our two-thirds commitment,” Sen. Darling said. “By trying to combine tax reform and education into one strategy, we inherited huge challenges.”

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A version of this article appeared in the January 27, 1999 edition of Education Week as Wis. Districts Chafe Under State’s Revenue Limits

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