Saturday, April 10, 2021

Sorry WisGOP, K-12 stimulus can't allow you to cut state funding. But you could cut property taxes

I wanted to go over the Legislative Fiscal Bureau's memo of K-12 funding for Wisconsin that is coming as a result of the 3 Federal stimulus acts of the last year.

It's a lot of money, needless to say.

The Fiscal Bureau points out that there are some significant strings attached to this federal money, which forces Wisconsin to keep up its share of funding for 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 2019-2020 and 2020-2021 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.

Granted, this is a little less in Wisconsin than what we have been doing in the last 2 years, given that Evers got a decent increase in K-12 funds from the Legislature (albeit a lot less than what Tony wanted). But it also means that a Republican talking point of “why don’t we just use the federal money to replace state money” doesn’t quite work out here, because if those state funds to schools were cut, then they’d lose the state money as well.

LFB says that the March stimulus has other rules that can reduce the amount that GOPs might want to cut for school districts that serve a high proportion of poor students.
Additionally, ARPA includes two provisions requiring the state to maintain its current level of support for high poverty school districts: (a) per-pupil state funding cannot be reduced for any high-need district by an amount that exceeds the overall per-pupil reduction in state funds across all districts in 2021-22 or 2022-23; and (b) per-pupil state funding cannot be reduced for any highest poverty district in 2021-22 or 2022-23 below the level of funding provided to that district in 2018- 19. High-need districts are defined as those that meet the following criteria: (a) in rank order, have the highest percentages of economically disadvantaged pupils in the state; and (b) collectively serve not less than 50 percent of the state’s total enrollment of pupils. Highest poverty districts are defined as those that meet the following criteria: (a) in rank order, have the highest percentages of economically disadvantaged pupils in the state, and (b) collectively serve not less than 20 percent of the state’s total enrollment of pupils. The school district maintenance of effort requirements do not apply to a district that meets any of the following criteria: (a) total enrollment of less than 1,000 pupils; (b) operates a single school; (c) serves all pupils within each grade span with a single school; and (d) demonstrates an exceptional or uncontrollable circumstance, such as unpredictable changes in pupil enrollment or a precipitous decline in financial resources, as determined by the federal Secretary of Education.
The memo doesn’t say which districts fall under these high-need and high-poverty definitions, but that will certainly play into how the state’s funding distribution of general aids and related support is adjusted in the overall budget.

The December and March stimulus bills also had a combined $144.6 million to “non-public schools”, with December’s $67.1 million in CAA funds having to be obligated by mid-August. LFB describes how DPI will send out those funds.
DPI indicates that under the CAA, EANS funding will be allocated as follows: (a) $480 for each pupil enrolled in the private school; and (b) an additional $480 for each low-income pupil enrolled in the school. To be eligible for funding, a private school must meet the following criteria: (a) be non-profit; (b) have submitted required documentation of its status as a private school for the 2020-21 school year; (c) was in existence prior to March 13, 2020; and (d) did not and will not apply for and receive a Paycheck Protection Program (PPP) loan under the Small Business Administration that is made on or after December 27, 2020.
I would guess this gets repeated for the ARPA funds, which would come out in the 21-22 school year, and the rest can be made up by the private schools (if there are costs to make up) through tuition and/or other outside support.

While the conditions on the extra federal aid limits any cuts in state aid, it also identifies an opportunity from other parts of the funding picture for Wisconsin schools. And that’s in the revenue limits and allowable property taxes for those schools. Remember that the revenue in those limits are (roughly) a combination of state funding and property taxes.

With that in mind, it seems logical that you could raise revenue limits by a decent amount for the next 2 years (allowing for more resources to go into the schools) while also allowing for a property tax cut because that type of funding can be supplanted by the money coming in from DC. Given that state support isn’t being cut, it doesn’t violate the rules connected to the stimulus funds. But it does allow for a sizable property tax cut for Wisconsinites.

It also could be the start of an important reform in our state, where property taxes stop being so much of the revenue that goes into schools. This would follow other substitutions of state vs property tax funding in the past, such as the removal of the Forestry Tax and expanding the School Levy tax credit. And unlike those Walker-era moves, they won’t be regressively targeted where the richer the property, the more of a tax cut you get.

If you’re concerned about a property tax reduction for schools being regressive, you could limit the property tax write-off to $500 or $1,000, much like what is already done with the $300 limit on the property tax credit that is already in place. That would be better for equity than the WisGOPs’ plan for a $1 billion property tax rebate, as that is a straight 10% payback, so someone who pays $4,000 would get $400 back, but someone who pays $10,000 would get $1,000 back.

In looking at this shot of K-12 funding from DC, it really can lead to a bigger change that moves the job of funding schools back toward the state and the Feds, and lowers our relatively high property tax burden. Given that many of us in Wisconsin can’t write off our property taxes at the federal level anymore, due to the GOP Tax Scam, it seems like smart politics and a fairer deal.

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