By Sam Walseth, MREA Lobbyist
Governor Ventura’s now infamous “Big Plan” in 2001 included a state takeover of the general education levy whereby school property taxes were reduced and the state promised to pay the difference with new state revenue. The new revenue never materialized. The legislature didn’t adopt Ventura’s sales tax reform and then a decade of recessions, including the great recession, ensued.
As rolling state deficits, inflationary increases and unfunded mandates eroded the purchasing power of the basic formula allowance, schools turned to voters for a safety valve of funding through the referendum program.
While the referendum program became an important piece of education funding stability, a serious financial inequity emerged between school districts across the state. The 5th-95th funding gap (which measures the difference in school district general education aid including operating referendum money) was on the decline prior to the Big Plan. ‘
However, the 18.6% differential from a decade ago has grown to almost 32% in the wake of constant school district referendum campaigns. The biggest “winners” in the referendum game have primarily been metro area schools that have pushed the average level of referendum authority to over $1,000/pupil. Those on the losing side include 54 districts in Greater Minnesota who have less than $300/pupil in referendum authority, including 34 with no authority at all.
Advocates for metropolitan districts argue this differential is simply a result of higher employee costs and associated costs of living in the twin cities. Advocates for Greater Minnesota schools have maintained that this growing funding gap is leading to a two tiered system of education options for Minnesota’s students and the staff who provide for them. One thing we have agreed on is the need for more state aid for all students and the ability of their elected boards to have some amount of discretionary levy authority.
2013 Session Solution
As the 2013 legislative session got underway, new DFL majorities were promising several things: rebalancing the fiscal relationship between state and local governments, reducing property taxes, and closing school finance inequities that had grown since the Big Plan went into effect.
Two key players in the legislature emerged to tackle the issue of school levy inequities. Senate Tax Chairman Rod Skoe (Clearbrook) and House Education Finance Chairman Paul Marquart (Dilworth). Both legislators made serious strides to help districts at the bottom end of the referendum game. Both sought legislation to get everyone to at least $300/pupil derived from Referendum Market Value (RMV). Both sought school board levy authority to accomplish this; Rep. Marquart through the existing RMV equity levy and Sen. Skoe through the existing referendum program.
In the end, Sen. Skoe’s proposal to change permanent law to allow school boards to set the first $300/pupil of referendum authority won. This was largely due to his commitment to spend $65 million from the Omnibus Tax Bill to equalize referendums with a large portion of equalization aid focused heavily on a new first tier of $300/pupil.
Rep. Marquart won too, because he accomplished an equity provision through the Tax bill, allowing him to reallocate his “equity” money elsewhere in the Omnibus E-12 Bill, including all day K, basic formula and special education money. This worked extremely well from a public school advocacy standpoint.
School boards and administrators should understand the $300/pupil board approved referendum revenue from the context of closing the 5th-95th equity gap. This provision is really aimed at the 54 districts with less than $300/pupil in authority; a means of bringing the bottom up.
If your district has existing referendum authority greater then this amount and it doesn’t expire for some time yet then there’s really no point in your board taking action to set the first $300/pupil on RMV. The proposal does NOT increase your existing authority. It simply replaces a portion of voter approved authority with board approved authority and you get the enhanced equalization on the first $300/pupil either way if you qualify. As your existing authority expires, that’s the time to have your board weigh the pros and cons of setting the first $300/pupil in authority.
The Location Equity Twist
Then there’s Location Equity Revenue (LER). There’s a long story to this and much of it has to do with the political chess game in St. Paul (attend your fall area meeting for the skinny on this), but the short of it is that greater Minnesota districts with more than 2,000 students can convert another $212/pupil of referendum authority to board approved authority. Metro area districts can convert $424/pupil for the LER levy. In fact, MDE is interpreting the LER levy as an automatic conversion because it was placed within the general education revenue statute. The only way a qualifying district can opt-out of the LER levy is if their board takes action by August 30 each year. The MDE is also interpreting the new LER levy such that a district qualifying for LER with less than $300/pupil in referendum authority can “stack” the two levies. The $212 LER levy is applied first, unless a board opt-out by August 30th, and then a board has until September 30th to set the first $300/pupil in referendum authority.
The New Reality & Where to Go From Here
One of the significant results of the 2013 session was blowing the lid off of school board levy authority. It now exists in permanent law, although applied differently across school districts. There are emerging school finance issues in the wake of these changes, including:
- Why greater Minnesota with more than 2,000 students qualify for LER? Why not at 1,500 students?
- Why not 750? Does qualifying for Small Schools Revenue mean you shouldn’t have board discretionary authority?
- What are the real cost differential between greater Minnesota schools?
- What are the real cost differentials between metro and greater Minnesota districts?
- And many, many more….
Probably more important than the debate among school officials over regional finance issues is the new reality of school board levy authority entering the public and political arena. The public is keenly aware of their long standing right to vote on school referendum questions. A few of the questions I have in light of new board levy authority include:
- Will school board usage of the new levy authorities backfire locally? Will it trigger a backlash at the Capitol?
- Will greater Minnesota boards utilize this authority and raise property taxes?
- Will the legislature be willing to raise taxes again in the near future or do local levies become the only answer?
Be sure to attend an MREA Area Meetings to help us explore answers to these questions. The MREA platform was very successful this session, but it needs an update in light of the watershed changes from the 2013 session. Be a part of designing the future advocacy for students across greater Minnesota.