Stimulus, state funds, and property taxes. And a whole lotta school funding questions for tomorrow

Tomorrow may be the most important Joint Finance Committee meeting of this budget cycle. Not only will the $12 billion in state spending for K-12 education be discussed and voted on for the next 2 years, but we'll also see what will be done with the huge amount of money that is going to schools from DC, which is more than double what districts were getting before COVID was a thing.

First, let’s get a picture Wisconsin’s schools were funded in the pre-COVID era, courtesy of the Legislative Fiscal Bureau.

Note the $844.4 million that the Feds paid toward education in the previous school year, which is a fraction of what is paid out overall. Then realize that more than $2 billion in federal money is slated to go to Wisconsin’s school districts due to the stimulus measures that became law in December and March, and needless to say, it’ll be a big deal.

However, many of these funds have to pay for expenses incurred to adjust school staff and classrooms to the realities of the COVID World.

3. Allowable activities for LEAs under ESSER include coordinating with public health departments to prevent, prepare for, and respond to coronavirus; professional development for staff on sanitation and minimizing the spread of infectious diseases; purchasing educational technology (including hardware, software, and connectivity); providing mental health services and supports; and planning and implementing activities related to summer learning and supplemental after school programs. Under ARPA, LEAs must use at least 20% of their funds to address learning loss through the implementation of evidence-based interventions, such as summer learning or summer enrichment, extended day, comprehensive afterschool programs, or extended school year programs. A full list of allowable activities under each act is included in Attachment 1. Funds must be obligated no later than September 30, 2022, under the CARES Act, no later than September 30, 2023 under the CAA, and not later than September 30, 2024, under ARPA. (These deadlines include one additional year beyond the date included in the federal legislation. Under the federal Tydings Amendment, LEAs can carry over federal education funds for one additional year beyond the period for which they were appropriated.)

In addition, there's not a lot of discretion as to which districts get funds, and how much, because most of the funds are already accounted for.

Ninety percent of Wisconsin's total ESSER III funding (or $1,386.7 million) must be distributed directly to local educational agencies (LEAs) according to the formula used for the 2020-21 distribution of Title I Part A funds under the ESEA, which is based on a census count of the number and percentage of low-income pupils residing in each district.

LEAs are required to allocate at least 20% of these funds to address learning loss through the implementation of evidence-based interventions, such as summer learning or summer enrichment, extended day, comprehensive after-school programs, or extended school year programs. These interventions must respond to pupils' academic, social, and emotional needs, and must address the disproportionate impact of COVID-19 on underrepresented student subgroups, students experiencing homelessness, and children and youth in foster care. Allowable uses for the remainder of the funds are defined under the federal Act, and include preparedness and response efforts related to the COVID-19 pandemic; training and professional development related to sanitation and preventing the spread of infectious disease; purchasing educational technology equipment; providing mental health services to pupils; any activity authorized by other specified federal education acts, including the ESEA and IDEA; addressing learning loss among pupils, including low-income pupils, pupils with disabilities, and English language learners; and other activities that are necessary to maintain operations and provide services during the pandemic…Grant recipients may use ESSER III funding for expenses incurred between March 13, 2020, and September 30, 2024.

DPI’s current plan has every school district in Wisconsin receive at least $600,000 in ARPA ESSER III funds, but most districts get more than that, based on total enrollment and poverty levels. In Milwaukee’s case, those factors combine for a whole lot of ARPA money.

Top K-12 school districts receiving ARPA funds
Milwaukee $505.8 million
Racine $53.1 million
Kenosha $44.9 million
Green Bay $44.7 million
Madison $42.6 million
Beloit $18.9 million
Janesville $16.7 million

For districts (and especially Milwaukee), one of those items that federal funds can be used for is to fix backlogged infrastructure, lessening the need to go into debt and referendum to pay off those expenses. This will also make it easier to pay for everyday operations with regular funding.

Previous estimates put the total amount of building improvements needed in Milwaukee schools at about $970 million. So far, the district has earmarked about $200 million in its federal relief funds for facilities improvements.

"They can't accomplish all of it to federal funds, but the federal funds certainly give them an opportunity to address existing facility needs," said Ari Brown, another co-author of the report. "That can then free up money in other parts of their budget."

Other school districts have similarly said they plan to put federal dollars toward facilities improvements — particularly HVAC systems and ventilation, which became an even more pressing concern during a respiratory pandemic.

The LFB also reminds us that there is a maintenance of effort requirement that says the state cannot pay less in support than they did (from 2017-2020) which tries to prevent ALEC states from using the federal dollars as an excuse to cut state aid to K-12 education.

As a condition of receiving ESSER funds, states are required to fulfill a maintenance of effort requirement. Under the CARES Act, each state's application for funds was required to include assurances that level of state support for elementary and secondary education and higher education (including state funding to institutions of higher education and state need-based financial aid) would be maintained in 2019-20 and 2020-21 at least at the state's average level of support provided in the three previous fiscal years. Under the CAA and ARPA, the proportion of state spending allocated to K-12 and higher education in 2021-22 must be maintained at the same level as the state's average allocation in the 2016-17, 2017-18, and 2018-19 fiscal years. ARPA requires that this proportion be maintained in the 2022-23 fiscal year as well.

That part may play a big role in the debate tomorrow, especially after comments from a top GOP legislator that appeared in state newspapers today.

“I think we’re good for right now,” Senate President Chris Kapenga said in an interview Tuesday. “My gut is there’s not going to be a big push in the caucus to increase funding.”

What do public schools have to do with life in Waukesha County, anyway?

There's another wacka-doodle idea from the Delafield Dumbass in that article where he wants to have 1 school district in each county, but we'll hold off on that, and stick with the overall funding question for now.

Not adding state funding might mean that "the proportion of state support for elementary and secondary education" wouldn't be the same as they were from 2016-2019, and Wispolitics says that might put the full $1.5 billion from the Feds in jeopardy.

The LFB paper prepared for tomorrow’s hearing doesn’t calculate the state’s average allocation over those years. But a WisPolitics.com check of past LFB documents show the state budgeted 32.7 percent of GPR for general school and categorical aids for K-12 over that period. Under Evers’ budget as introduced, he called for spending 32.9 percent of GPR on general and categorical aids in the first year of the biennium and 33.6 percent in the second.

But if the WisGOPs keep the state spending amount at the same level that was spent in 2021, would that end up violating the Federal rules? And would WisGOPs care if it did, figuring that wrecking Wisconsin publicm schools might work in their favor for 2022? (do NOT ignore this possibility)

If WisGOPs have an ounce of decency and savvy, they'll make sure they don't violate that maintenance of effort, and could get tax cuts and limited spending in the process. How? Let's allow LFB to explain how the state’s revenue limits apply and how they are calculated.

Under revenue limits, the amount of revenue a school district can raise from general school aids, property taxes, and exempt property aid is restricted. A district’s base revenue in a given year is equal to the restricted revenues received in the prior school year. Base revenue is divided by the average of the district’s enrollments in the prior three years to determine its base revenue per pupil. In 2020-21, a $179 per pupil adjustment is added to each district's base revenue per pupil to determine its current year revenue per pupil. Current year revenue per pupil is then multiplied by the average of the district’s enrollments in the current and prior two years to determine the district’s initial revenue limit. There are several adjustments that are made to the initial revenue limit, such as the declining enrollment adjustment and the low revenue adjustment. A district can also exceed its revenue limit by receiving voter approval at a referendum.

But note that the amount of money that comes in from federal sources is not generally part of that limit. And as you saw earlier, local property taxes are a big part of paying for K-12 schools in Wisconsin, so could the Federal money be used to replace that part of the funding equation?

In other words, couldn’t the next couple of years have a school funding model that ends up along these lines? 1. Federal funds - Big jump. 2. State aids – Similar or slightly higher. 3. Property taxes – Not as much This can be done via a tiny increase in the revenue limits for the 2021-23 biennium, which still increases the amount of resources going to schools, and allowing property taxes to be cut.

There also could be a change in how Wisconsin distributes state aid to K-12 schools, as a reaction. Here’s the LFB's reminder on how that works today.

The basic concept of equalizing the fiscal capacities of school districts has been promoted through the equalization formula since 1949. The formula uses equalized property valuations per pupil to measure fiscal capacity. To equalize the tax bases of school districts, districts with lower per pupil property values receive a larger share of their costs through the formula than districts with higher per pupil property values. In the 2020-21 aid year, the district with the highest property value per pupil had 44 times the property value per pupil as that of the lowest district. The district at the 90th percentile had over three times the property value per pupil of the district at the 10th percentile. In the absence of a significant commitment to tax base equalization, it would be difficult, if not virtually impossible, for districts with the lowest property values per pupil to provide a reasonably equal educational opportunity for students as districts with the highest values could.

This makes sense as a matter of fairness, but it also means that property-rich areas have to make up more of their school funding with property taxes vs state aid. Combine that with the huge amounts slated for higher-poverty, urban districts from ARPA, and might we see WisGOPs try to change the state aid formula to redirect those funds away from places like Milwaukee and into rural and (especially) suburban districts? Watch for it.

The WisGOPs are clearly cooking something up, because they usually wait to do K-12 schools at the end of a budget, because it’s by far the largest expense that the state pays for. So whatever is chosen on Thursday, it’ll likely guide the rest of the budget strategy in a time when the state has plenty of resources, but a lot of questions left on who is (and is not) going to get them.