School finance overhaul no easy task

After years of complaints from constituents, Wisconsin lawmakers say they are serious about overhauling the state's school funding formula.

But it will be no easy task, with daunting legal and political risks. And without a large infusion of cash — from the state, local property taxpayers or both — it is unlikely to succeed, many say.

"Unless we can put a lot more money into it, there will be winners and losers. And that will be a challenge for us," said state Rep. Joel Kitchens (R-Sturgeon Bay), vice chairman of the Assembly Education Committee, who has been tapped by Speaker Robin Vos (R-Rochester) to spearhead the process.

Educators, including Superintendent of Public Instruction Tony Evers, welcomed the overture.

"I'm pleased to hear that," said Evers, who has asked the Legislature for an additional $700 million for schools in the next biennium.

"My guess is they have heard what I've been hearing all this time — that the system is broken, so let's fix it."

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For Wisconsin's 424 school districts, few issues are as vexing, or as important, as school finance. It affects everything they do. And they take issue, not just with how much money the state contributes, but also the formula the state uses to distribute that aid, and controls lawmakers have put in place to keep local property taxes from spiraling out of control.

The net result, they say, is a system in which students are valued differently depending on where they live; districts are unable to keep up with inflation; and districts cut programs or go begging for additional funds through referendums that only exacerbate the disparity between the haves and have-nots.

"I wouldn't call us a have-not. But we were locked into a rate that limits us to less than the state average," said Todd Gray, superintendent of the Waukesha School District, who also welcomed the review. "We've been able to manage pretty well. But the last year or two things have gotten much tighter.

"We're making do. But how long we can do that, I don't know."

Kitchens said it will not be a quick fix. He plans to assemble a bipartisan task force with members from both the Senate and Assembly and to travel the state to talk with educators. He said he would hope to have a proposal for the 2019-'21 state budget.

School funding in Wisconsin is complex. Kitchens called it "one of the most complicated things we deal with." There are, maybe, a few dozen people in the state who understand it entirely. Here's a shorthand version of how it works:

How the formula works

In Wisconsin, state and local governments spend about $10.5 billion annually on education. That comes primarily from two sources: local property taxes levied by each district and state funding tied to enrollment and local property values. High-value districts get less in state aid, while low-value districts get more. That's intentional, so poor kids get the same access to education as rich kids, but it doesn't always work that way.

Some districts get little or no state aid because they're deemed "property rich," even if many of the people who live in those communities are not. Districts levy their property owners for the balance of their school costs, leading to broad disparities in how much districts spend per child. For example, schools in places like Kewaunee and Mukwonago can raise and spend about $9,200 per child, compared with $15,000 or more in places like the Nicolet Unified High School District, Green Lake and Maple Dale-Indian Hill — even more in some districts with extreme transportation costs.

Kitchens voiced concerns, especially about rural schools, but urban districts face similar concerns.

In 1993, in an effort to rein in local property taxes, the state imposed revenue caps that limit how much money districts can raise from the state and their local levies. Districts were locked in at the time at their current spending levels, so low-spending districts got less and big-spenders more. Initially, the caps rose in step with inflation, but that ended in 2009. They took a big hit — $529 per student — with the passage of Act 10 and the 2011 budget bill, and have only inched up since. The Act 10 legislation also helped lower costs for districts, by requiring employees to contribute more toward health and retirement benefits.

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As school district budgets were squeezed — by a combination of the revenue caps, declining enrollments and hundreds of millions of dollars in cuts to state aid in more recent years — they turned to referendums. Historically, about half passed, exacerbating the inequity.

School districts and many parents have complained about the system for years, but lawmakers have been loath to dive in because of the potential political fallout. They have gotten an earful from school officials in recent years as they've traveled the state, some as part of Vos' task forces on rural and urban education. Among the complaints: Cutting costs in districts with declining enrollment, much of the state these days, is difficult because of fixed costs; and just because a community's home values are rising doesn't mean its residents' incomes are, and so some may be less likely to pass referendums than others.

Without a significant state contribution, more funds would need to come from local property taxpayers, many of whom already complain they're being priced out of their homes. Lifting the revenue cap creates the same problem. And tweaking the distribution formula — say, taking funds from wealthier districts and spreading it out more evenly — would almost certainly ignite a revolt from the losers.

"When people express their wish to change the school funding formula, they are virtually always looking for more money for their district," said Emily Koczela, a lawyer and former public school board member and administrator who is now chief financial officer for Messmer Catholic Schools.

"And if you ask them, 'Would you accept a better formula if it meant less for your district?' the answer is always no."

Evers, the state superintendent of schools, has proposed his own fixes, what he's calling the Fair Funding for our Future initiative. It would, among other things, guarantee a minimum of $3,000 in state funding for every student; incorporate a poverty factor that accounts for families' ability to pay, not just their property values; and restore the revenue limit authority — the amount districts can raise for each student — to $200 to $204 annually.

Test for lawmakers

Sen. Luther Olsen, the Ripon Republican who chairs the Senate Education Committee, said the willingness to tackle that issue will suggest how serious lawmakers are about reform.

"There are three questions you have to ask: What do you want to change? What problem are you trying to fix? And are you willing to have winners and losers? If you don't have an answer to those three questions, you're not serious."

In addition, he said, previous efforts to change the formula came with significant contributions from the state, an estimated $500 million under Gov. Lee Dreyfus and close to $1 billion under Gov. Tommy Thompson.

"It's not a formula problem, it's a budget problem," said Koczela, who was referring to the state, but says districts have a responsibility to rein in costs, as well.

She said lawmakers will have to ensure that any overhaul does not increase the inequity among the state's schoolchildren, or the state would likely face litigation. Changing the formula to distribute more to more affluent districts would be the most obvious example. But even lifting the revenue caps could have the same effect, she said, noting that school boards in affluent communities would have an easier time raising taxes for schools than those in poorer communities.

"The formula is about justice. It's aimed at being sure that a poor kid in a poor district has the same shot as a rich kid in a rich district," she said.

"And as soon as we change that, there's a lawsuit, and we lose it."

The willingness to pump more money into public schools — even as they look to expand the taxpayer-funded voucher program for private schools  — is a shift for Republicans, who have been vilified by Democrats and progressives in recent years for cuts to public education.

"There is a perception that we are not friendly to education," said Kitchens, "and we are trying to change that."