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Minnesota’s school-finance inequities have multiple causes

When voters head to the polls next month in the 113 communities [PDF] where school referenda are on the ballot, the number most will have on their minds is the one that’s likely to show up on their property-tax bill.

Those few who have been paying attention to their local referendum campaign are like to have heard the cost to homeowners expressed as a particular number of dollars per $100,000 of their house’s assessed value.

And so regardless how they vote, most people will consider their community’s housing base and assume that property values have everything to do with whether their schools are wealthy, like White Bear Lake, or impoverished, like Brooklyn Center.

Strictly speaking, all of that is true. But when it comes to explaining the inequities in school finance in Minnesota, it’s only part of the picture.

The other two key factors: The amount of commercial and industrial property being taxed along with those homes; and the 18 years that have elapsed since the state revisited the formula it uses to smooth out the resulting inequalities in school revenues.

The underlying calculations make the 60/40 funding shift seem simple indeed.

Different bang for the bucks
For example, the owner of our hypothetical $100,000 home in Wayzata pays $165 in property taxes earmarked for schools, which receive $1,531 per pupil in levy funding. Meanwhile, the owner of a house with the same value in Centennial pays $145 toward a levy that contributes $689 per student.

Taxpayers, in other words, are not getting the same bang for their hard-earned bucks. 

Who’s to blame? Lawmakers have failed to adjust the formula for equalization, the state aid “match” — think revenue-sharing, as in Major League Baseball — that is supposed to provide relief to taxpayers in districts with less expensive homes.

(And arguably lawmakers have participated in the creation of a school funding system that’s so complicated most Minnesotans have no idea whether school funding is up or down, as asserted by both political parties, much less whether it adequately funds education as mandated by the state’s constitution.)

In 1993, 65 percent of Minnesota districts had referenda, and state equalization aid made up 5 percent of the $361-a-head total. Equalization peaked three years later at 38 percent.

As housing values rose, driving down the crude number of dollars districts were entitled to, the Legislature failed to adjust the formula. Numbers began falling dramatically in the early part of the last decade in part because of former Gov. Tim Pawlenty’s policies. 

Today, 89.6 percent of school districts have levies averaging $1,055 per student. State equalization makes up 8 percent of the total.

Where the wealth is
The rest of the reasons underlying the inequities are historical, however. Most of Minnesota’s property wealth — the aforementioned commercial and industrial land — is located in the cities and first-ring suburbs.

“That’s because that’s where the roads are,” explained Brad Lundell, executive director of Schools for Equity in Education (SEE), a St. Paul-based nonprofit that advocates for more than 50 Minnesota districts on the losing end of the spectrum. Many were small towns when those first-tier suburbs were landing manufacturing facilities, office parks and malls.

Another illustration: In Minnetonka, home to Ridgedale and lots of commercial real estate, the levy on a $100,000 home is $200. But schools get $1,890 per student. Homeowners in Forest Lake pay $125 toward a $725 levy.

Lundell, whose website is home to an impressive collection of documents that might well be titled, “School Finance for Dummies,” has come up with a system for expressing this bang-for-bucks equation SEE calls the referendum revenue per burden.

Using this calculation, Orono’s high-end housing market earns it a 14.25. The working- and middle-class bedroom communities of SEE member Anoka-Hennepin, meanwhile, garner a 4.42.

Not all of SEE’s districts serve kids from communities typically thought of as poor. Stillwater is a member, as are Rosemount-Apple Valley-Eagan, South Washington County and Northfield.

For the record, SEE does not maintain that all districts should have the same amount of money. The group would like taxpayer dollars in each to stretch as far, however.

A proposed solution
SEE’s proposed solution would look a lot like the financial restructuring proposed last spring by a task force appointed by Gov. Mark Dayton. In essence, the fix proposed [PDF] by that group would roll most levy dollars into a general, statewide education referendum. In addition, the group would like to see the equalization formula brought up to date.

In the meantime, what’s an education-minded voter in a place like Forest Lake to do? Unfair though the system is, Lundell would have them vote to renew or even increase their local levy.

“SEE districts are well below the state average in terms of state funding per pupil,” he said. “Referenda are one way to close that gap.”

And even if a structural solution were to pass a GOP-dominated legislature, chances are revenue for schools will still be scarce when the 2013-2014 state budget comes up for debate.

“Passing a levy this year is one way to head off a funding gap in the next three to four years,” said Lundell.

Comments (10)

  1. Submitted by Ray Schoch on 10/18/2011 - 10:04 am.

    Sigh.

    As in other states, the notion of “equal opportunity” becomes something of a cruel joke with funding disparities like this. The situation makes an even more cruel joke of legislative shell games with state aid. Some of the legislators involved in this shameful nonperformance of a constitutionally-mandated duty would have the public believe that they are “constitutional conservatives,” an assertion that would be laughable were the consequences not so dire and long-lasting to the state, and its children, as a whole. Those same people, who claim to be adults, richly deserve to be replaced at the earliest opportunity by people who actually ARE adults.

  2. Submitted by Thomas Swift on 10/18/2011 - 12:27 pm.

    What Beth fails to disclose is that despite the local levy disparity, when all the obfuscation and mumbo-jumbo is set aside and when all the dollars are added up, it is MPS & SPPS that receive and spend the most money per pupil….and still have the worst grad rates.

    Is that Tim Pawlenty’s fault too, Beth?

  3. Submitted by Van Mueller on 10/18/2011 - 01:28 pm.

    This a clear and concise explanation of the school funding dilemma in Minnesota.. Not only is the funding unfair but it is inadequate. After 18 years of studies and more studies accompanied by inaction we are not treating both our children and out taxpayers unfairly. SEE and Parents United have great information but are unable to convince state policy makers to act. Instead of addressing the issues that Beth speaks to the state borrows billions from the school districts and creates more injustice . At one time Minnesota was a leader in the nation on school funding . We are no longer!

  4. Submitted by Joe Musich on 10/18/2011 - 04:25 pm.

    #2

    As you continue your occupymnpost intellectual vandalim, I wonder if I will ever see you post at a health article at this site?

  5. Submitted by Thomas Swift on 10/19/2011 - 08:48 am.

    “At one time Minnesota was a leader in the nation on school funding . We are no longer!”

    Yeah, I think sometimes we lose sight of the fact that when it comes to the government school system, it’s all about the money…thanks for keeping us on track, Van.

  6. Submitted by Ray Schoch on 10/19/2011 - 11:58 am.

    Occasionally, Mr. Swift goes beyond the merely silly and doctrinaire, and wanders off into a kind of right-wing Disneyland. Comment #5 is a nice illustration.

    “…the government school system…” Really? The implication is that “the government” is, somehow, a foreign one. Have we been occupied by some foreign power, forcing us at gunpoint to send our children to schools paid for and run by people from some other country / planet whose malevolence is unbridled? Please, spare us the conspiratorial rhetoric.

    Almost nothing in the United States is more locally-controlled than your local school district. Board members, in most instances, have to live in the community and run for election with some frequency. Local prejudices are typically built into the curriculum in a host of ways, from school holidays to various school rituals, including sports, and, when I was teaching, a daily recitation of the pledge of allegiance. The money to run this enterprise comes primarily from local residents and the state, with the federal government – our very own government, lest some of us forget – contributing less than 10 percent of most district budgets. Public schools are at least as American as apple pie.

  7. Submitted by Tom Miller on 10/19/2011 - 12:23 pm.

    A lot of it is about money. That’s a good reason to vote for a levy. Think of it as a premium payment on property value insurance. Using Anoka-Hennepin as an example, it will take 21 years of tax savings to equal a 5% drop in property value should the levy renewal fail.

    The value of social amenties, such as golf courses, schools and parks, in a community is monetarized (through the magic of the free market) into the price buyers are will to pay for real estate. Anything that happens in the state’s largest school district is big news. If the levy fails, and high school class sizes hit 50 or more, no one with children will want to move to the district. Businesses will not have a quality schools as an enticement to prospective employees. All property owners will lose money.

    If the levy fails, the owner of an average $180,000 home in the district will save $427 per year in property taxes. If the value of the property decreases by 5% – a conservative estimate – it will be a $9,000 loss.

    Studies by major universities (University of Chicago, University of Louisanna, Tufts and Clemson and others) as well as the Federal Reserve Bank of St. Louis all find that an identical property will be worth 10% – 20% less in a low-quality district compared to a high-quality district. %5 is a low-ball realistic estimate.

    The real estate market is tough right now; trying to sell a home in any district where a levy fails will be even tougher.

  8. Submitted by Thomas Swift on 10/19/2011 - 03:30 pm.

    “The implication is that “the government” is, somehow, a foreign one.”

    Perhaps that’s the implication you settled on Ray, but it certianly is not one I was making. By “government schools”, I’m speaking of the ones our MN constitution mandates MN government to provide.

    Further, with a clarification, I agree with your assertion that “Almost nothing in the United States is more locally-controlled than your local school district”; the clarification being that it is true the NEA local bargaining unit has direct, day to day control, but under the overall supervision of the national, of course.

  9. Submitted by Thomas Swift on 10/19/2011 - 04:47 pm.

    Tom, there is a minimum cost to schools, beneath which they cannot operate, but we are so far from that low bar it’s not a valid issue.

    On the other end of the spectrum, we see that at some point, money ceases to add value. This is illustrated by the fact that as I said earlier, our two lowest performing districts spend the most; by a sizable margin I must add.

    Back in the salad days of public education, districts would sell excess levy referendums with the promise of lower class sizes, or technology upgrades, or enhanced curriculum offerings.

    Over time, even the most inattentive taxpayer couldn’t ignore the fact that the districts never delivered the goods as promised; the money simply “dissapeared”.

    I agree that schools effect property values, but so do bathroom upgrades. Given the realities of public education in this country, the latter is the better investment.

  10. Submitted by Eric Larson on 10/19/2011 - 11:01 pm.

    Beth Hawkins! You have been a good journalist for years. But you missed something or were hiding something on this one. All the work you put into this article….was it for show? Why not take a look at the per pupil funding of the 10 largest suburban districts ( only comparisons really) and then compare it to ISD #1 Willing to bet that 4 of them get by on 75-80% of what Mpls gets. Every single one of them will spend 15-20% less then Mpls.

    This discrimination against none-urban schools has been going on for decades. Why doesn’t 728 or 287 sue Mpls and the state for equal funding. Put an end to this malpractice.

    Here is a link to a 2008-9 report from the MN Business Coalition. And please no badmouthing their report. They are as honest of Minnesotans and Hawkins quoted. They got the facts on their side. Read ’em.

    And don’t tell me how many ESL’s and single moms you have in the city. I’ve got 11 kids with in two hundred feet of my house who’s parents speak little English and I’m in an supposedly upper middle class suburb.

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