Large, small school districts strike compromise on state aid dollars

2013-04-24T21:05:00Z 2013-12-17T15:42:42Z Large, small school districts strike compromise on state aid dollarsBy KEVIN O'HANLON / Lincoln Journal Star JournalStar.com

After bludgeoning each other over how to divvy up nearly $1 billion in state aid during the next two years, Nebraska’s rural and urban school districts appear to have reached a compromise to head off a legislative blood-bath on the issue.

“There’s something in there for everyone,” said Sen. Kate Sullivan of Cedar Rapids, who chairs the Legislature’s Education Committee. “I feel good about what we’ve accomplished.”

Both sides have been in intense negotiations to work out a compromise on the school aid bill (LB407). The details of the compromise -- still subject to challenge and change -- will be vetted next time the bill is  debated. That likely will come Thursday.

Large schools have said they want more state aid, but that would require taking money from smaller schools or increasing the total amount of state aid. Smaller schools favor formula changes that would allow more districts to get aid -- even if they had property tax levies well below the maximum.

"The basic premise of the state aid formula is that everyone pays their fair share. Some districts aren't," said Bill Mueller, a lobbyist for the Omaha-area Millard School District.

In Millard, for example, the owner of a $100,000 house pays more than $1,000 a year in taxes to support public schools. By comparison, the owner of a $100,000 house in Perkins County pays about $600.

So which school district is more deserving of state aid?

Enter TEEOSA, the acronym for the state school funding formula, officially known as the Tax Equity and Educational Opportunities Support Act.

At its most basic, the formula distributes so-called equalized aid to schools using an equation that determines the schools' needs, then subtracts their resources. Figuring out the needs and resources for each district is where it becomes complicated -- some would say incomprehensible.

School districts operate under two state-mandated caps.

The first limits the amount by which they can increase spending from one year to the next, historically 2.5 percent.

The other caps how much money they can raise through property taxes. That now is $1.05 -- the maximum tax a school district can levy against each $100 a property is valued at for tax purposes. The owner of a home valued at $100,000 in a district with a $1.05 levy would pay $1,050 in taxes each year to support local schools.

Schools below the $1.05 cap could raise property tax rates to make up for any loss in state aid. But most of the state's largest school districts -- Lincoln and Omaha and seven others -- are at or near that $1.05 limit.

Schools can exceed the $1.05 only with voter approval, which some already have. Omaha, for example, is at $1.07.

Meanwhile, property values in most large school districts, which have more students and lower per-student costs, have stagnated or grown just modestly, meaning the districts aren't seeing much growth in what they can bring in through property taxes.

Conversely, agricultural land values in some rural areas have seen double-digit increases, meaning those districts could take in much more property tax revenue if they chose to.

Lincoln Public Schools takes in just over $5,000 a year in property taxes for each of its 36,000 students. Perkins County, by comparison, could collect some $19,600 per student if it increased its property tax levy from its current 79 cents to the $1.05 cap.

But raising property taxes is hardly politically expedient for school board members, so no districts under the cap are stepping forward to say they'll raise more money by increasing their tax levies.

Mueller said Millard's state aid has decreased $10 million during the past three years while the district added 650 students and cut 60 teacher and staff positions.

"When districts have tax levies that are almost one-half the levies others have, it is clear that there's a problem," he said. "When schools like Millard and Omaha and Bellevue and Lincoln and Grand Island add more students in one year than makes up an entire school district in greater Nebraska, we have to look at how we distribute state funds.

"What some are attempting to do now is change the formula so that districts don't have to contribute and they still get state aid. We are treating low-taxing districts as though they are high-taxing districts. They are not. We are changing the basic format of how state aid is distributed."

Sen. Jim Scheer of Norfolk said, "The issue at hand is not a question of a flawed formula so much as it is an economic reality.

"The fact that urban property values have remained largely stagnant is an economic problem, not a formula problem," he said. "Small districts' expenditures are going up despite losing students. They have the same costs as the year before because they have just enough staff to teach the bare minimum classes. All districts are having a difficult time now, regardless of size.”

Reach Kevin O'Hanlon at 402-473-2682 or kohanlon@journalstar.com.

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