Wisconsin Taxpayer Magazine Increasing Complexity, Unplanned Change: The Story of School Finance in Wisconsin

September 2015  •  Vol. 83 No. 7/8
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  • Summary
  • Press Release
  • Wisconsin spends more public dollars on K-12 education than any other program. However, due to its complex nature, school finance is not well understood. The complicated “three-legged stool” approach implemented in the mid-1990s was more about property tax control than school finance.
    Viewed as a property-tax relief plan, it was largely successful. However, recent tightening of state revenue limits has left some districts struggling to fund rising costs, such as utilities and transportation.

  • Todd A. Berry or Dale Knapp
    608-241-9789
    wistax@wistax.org

    Revenue, Enrollment, Aid Trends Changed from 1990s

    Decades of Small Changes Have Big Effect on School Finances

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         MADISON—Although changes in school finance have been small and incremental over the past two decades, the cumulative effect is that in 2015 it bears only limited resemblance to the mid-90s, the Wisconsin Taxpayers Alliance (WISTAX) concludes in a new report appropriately titled “Increasing Complexity, Unplanned Change: The Story of School Finance in Wisconsin.” In it, the nonprofit, nonpartisan research group examines multi-year trends in school revenues, enrollment, state aid, and property taxes, to reach that assessment.
          During 2012-15, state-local school revenues per student rose an average of 1.5% per year, slightly less than the inflation rate, which averaged 1.7% annually. That was a departure from 2003-11 when their annual increases of 3.0% per year exceeded inflation (2.4%). The last four years are a bigger departure from 1996-2003, when per student revenues rose at more than double the inflation rate (4.6% per year vs. 2.4% for inflation).
    If total (not per student) school revenues are adjusted for inflation, they declined in 269 districts during 2012-15, 42% more than in 2003-11 (189 districts). Declining K-12 enrollment, modest state aid changes, and limited increases in state-mandated revenue limits help explain the pattern.
         Statewide, enrollments are down 2% since 2003. However, that decline masks much larger, and sometimes earlier, changes in individual districts. During 1998-2015, enrollments fell in nearly two-thirds of districts statewide; in more than one-third, declines exceeded 15%. Dropping enrollment was most prominent in northern and southwestern Wisconsin. In the north, total enrollment fell 7.5% during 1998-2015, with 85% of districts experiencing a drop. In the southwest, enrollment fell 18.6% with 94% of districts declining.
         Since school revenue limits (the combination of state general aid and local property taxes) are calculated on a per student basis, enrollment change affects a district’s total revenues. While per student limits historically increased with inflation, that changed in 2010 when allowable increases were reduced from $275 per student to $200. Since then, revenue limits have been cut or increased only modestly.
         Due largely to recurring state budget problems since 2001 and to accelerating Medicaid costs, growth in state school aids has slowed significantly over the years. During 1997-2003, aids climbed 33.9%, fulfilling a state commitment to provide two-thirds of state-local school revenues. However, following repeal of that commitment in 2003, growth was cut in half (14.4%) during 2003-09. Following a 2.0% reduction in 2010 and an 8.1% cut in 2012, aids resumed modest growth, rising 7.1% during 2012-15; however, they remain below 2007 levels.
         The tightening of school revenue limits has resulted in a slowing of annual school tax increases which averaged just 0.3% during 2011-15. That is a departure from an average of 4.5% per year during 1998-2011, and an even larger departure from average annual increases during 1985-2003 (7.6%).        WISTAX notes that the original goal of the state limits was to rein in school levy growth while providing districts with inflationary revenue increases.
          The new report also provides a brief history of Wisconsin school finance since the 1970s and includes a timeline of significant changes.
          A free copy of The Wisconsin Taxpayer magazine, “Increasing Complexity, Unplanned Change: The Story of School Finance in Wisconsin” is available by visiting www.wistax.org; emailing wistax@wistax.org; calling 608.241.9789; or writing WISTAX at 401 North Lawn Ave., Madison, WI 53704-5033.

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