The Basic Attributes and Goal of Wisconsin Education Finance
By Michael Ford, Volume 26, No. 7, May 2013
A fundamental tension between state and local control lies at the heart of Wisconsin’s school finance system. For much of Wisconsin’s history, schools boards were responsible for deciding how much to spend on education, and how much revenue to raise via the property tax levy to fund spending. However, the balance tipped in favor of the state in the 1993-’94 school year, when the state imposed revenue limits.
Revenue limits cap how much additional money school districts can raise for each pupil through a combination of state aid and property tax. Since their inception, revenue limits have increased annually at roughly the rate of inflation. The imposition of revenue limits defined one basic attribute of education finance in Wisconsin: Maintaining the status quo. Consider:
- Increases in revenue limits use the previous year as a base, ensuring that the largest predictor of spending is how much a district spent in the previous year.
- Revenue limits increase at roughly the rate of inflation, keeping overall school finance formula revenues, in inflation-adjusted dollars, relatively constant.
- The distribution of total state and local spending by school district remained steady between 1999 and 2012. In 1999 the 100 districts receiving the most state and local revenue per student received 117% of the state average of state and local revenue. In 2012 that number was 119%. Similarly, the 100 districts receiving the least state and local revenue received 88% of the state average of state and local revenue. In 2012 that number was 87%.
- A state aid program called special adjustment aids ensures districts cannot receive less than 85% of the state aid they received in the previous year.
- The enrollment number used to generate payments to schools is a three-year average. It is designed to cushion districts against sudden increases and decreases in enrollment.
A second key attribute of Wisconsin’s school finance is property tax relief. Because the total amount of state aid and local property taxes districts can raise is capped by revenue limits, increases in state aid generally serve to lower the property tax burden rather than increase total education spending. In other words, increases in state aid do not necessarily translate into increases in overall spending. In the 1996-’97 school year, the state of Wisconsin committed to funding two-thirds of the local and state cost of K-12 education.
This commitment, combined with strict limits on school board levying authority and the school levy tax credit, suggest that property tax relief was a major goal of Wisconsin’s education finance system in the late 1990s. Although the state’s two-thirds funding commitment was repealed in 2003-’04, the school levy credit and revenue limits remain, suggesting that property tax relief continues to be a major goal of Wisconsin’s school finance system.
A third key attribute is direct democracy. Districts are empowered to exceed revenue limits only if a referendum is passed empowering them to do so. Since 2008, 83 of the state’s 424 school districts passed a referendum to exceed revenue limits. In addition to going to referendum, school districts may also choose to levy under the maximum allowable amount. Seventy-seven percent of school districts did this in 2011.
A fourth key attribute is tax-base equalization. In laymen’s terms this means that districts with low property values receive more of their funding through state aid than districts with high property values. In other words, poor districts receive more aid per pupil and rich districts receive less. As demonstrated in the final section of this report, this attribute is a consistent feature of Wisconsin school finance in recent history.
A fifth key attribute is a lack of predictability. Though the fundamental workings of the school aid formula are relatively consistent, the impact on specific districts is dependent on:
- Politics: How much money will the Legislature put into school aids? How much will the Legislature increase per-pupil revenue limits? Will categorical aids continue to be funded? Should all categorical aids continue to be funded?
- Enrollment: How many students live in the district? How many will attend traditional public schools? Are enrollments rising or declining? What about total statewide enrollment?
- Property values: Is the school district getting richer or poorer? What about other school districts? Is the school district gaining or losing on the state average over time?
The final key attribute of Wisconsin’s school finance is the increasing use of categorical aids that exist outside the school aid formula to fund specific programs and students. In 2000-’01, Wisconsin spent about 11 cents in categorical aids for every dollar spent on equalization aid; in 2011-’12, the state spent 18 cents in categorical aids per dollar spent on equalization aid. The growing use of categorical aids to fund specific programming such as the SAGE small class-size program suggests that the overall goal of Wisconsin education finance is gradually shifting away from tax-base equalization and toward the funding of specific programs. Notably, categorical aids have been favored across the political spectrum as a vehicle to fund favored reforms. Rarely are categorical aids defunded.
At its most basic level, the goal of education finance in Wisconsin is simple: Fund the free education guaranteed to Wisconsin pupils in the state constitution. But that basic goal begs many questions. Is the goal to fund individual districts, schools or pupils? What exactly is meant by public education? Can public education occur in a nonpublic school? How does the public know that a uniform level of education is funded? The scope of this report is to give readers a base level of knowledge of school finance that helps them better consider these questions.
Read the full report here.
Russ Kava and Rick Olin, “Local Government Expenditure and Revenue Limits,” Madison, Wis., Wisconsin Legislative Fiscal Bureau, 2013.
Wisconsin Information Network for Successful Schools, http://winss.dpi.wi.gov/, and author’s calculations.
State Aid to School Districts, Wisconsin Legislative Fiscal Bureau, January 2011.
Wisconsin Department of Public Instruction, Custom Referenda/Resolution Reports, http://www2.dpi.state.wi.us/sfsref/ref_Home.aspx.
