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Good Intentions Won’t Replace Revenue

October 09, 2012 By Joe Sheeran, Communications Director

Education finance experts can do all of the tweaking, restructuring, even overhauling they want, they’re still not going to implement an adequate school funding formula without more state revenue. 

As part of this mission, Minnesota’s Education Finance Working Group has been listening to local school leaders. At a basic level, the group wants to simplify a complex education financing formula to provide local districts more flexibility, make funding more transparent, and fund schools to meet student achievement goals.

Simplifying the formula is where most conservatives and progressives agree. At one recent listening session, an education policymaker joked that guest speaker Dr. Tom Melcher, Director of School Finance for the Minnesota Department of Education, is one of three people who actually understands the current formula, and the other two have passed away.

That said; here’s a little context. In the 2012-2013 school year, districts will receive $5,224 per pupil base state funding. Additional state funding is based on a number of factors per pupil, including gifted and talented, sparsity, and limited English proficiency. Factoring in local levies and federal funding brings the total to about $10,600 per pupil. Still, Minnesota ranks 22nd nationally (behind Wisconsin at $11,364) in overall education spending, compared to our mid-to-high teens ranking through the 1990s.   

Simplifying the formula is only one part of the equation. Here’s what complicates the mission: the Finance Working Group has laudable goals, aiming to fund all-day Kindergarten for students in poverty, increase PreK funding, reduce property tax levy reliance, and better fund schools in need. The group hopes to achieve these outcomes without reducing any district’s current funding. That will take a significant amount of new investment, far more than legislative conservatives have been willing to finance.

Over the last decade, state education funding has declined 13 percent per pupil, adjusted for inflation, according to the Minnesota Department of Education. As a result, local property owners have voted to increase their own taxes significantly to make up these losses and ensure their schools have adequate resources. Property taxes have gone from comprising 12 percent of total education funding in 2003 to 20 percent this school year, according to Melcher’s school finance data.

Here’s what it means for local property taxpayers: inflation-adjusted referendum revenue has doubled from $352 per pupil a decade ago to $724 in Fiscal Year 2013, as shown in the graph below using the IPD, a measure of inflation based on goods and services purchased by governments.

[graph: click blog title to view in browser]
click to enlarge
Source: Minnesota Departmnet of Education

Local funding hasn’t increased proportionally, however. It’s hard to imagine this regressive, unsustainable education finance system will not result in statewide education disparities, an outcome the Minnesota Miracle sought to avoid.

Administrators and school board members attending last week’s Finance Working Group’s listening session at the Association of Metropolitan School Districts’ meeting expressed support for reducing levy reliance. Levies pit communities against schools, building distrust of educators, with students caught in the crossfire. It seems every fall they’re out trying to convince voters to raise property taxes to make up for state funding declines. Instead of politicking, administrators say, they should be working on improved instruction and other education priorities.

In an era of open enrollment, parents vote with their feet, said one. If we can’t pass a levy and have to cut programs, then parents will send their children to the districts that can pass the levy.

Even with steady inflation-adjusted funding, Minnesota schools face two costly new challenges in a 21st century education system: universal post-secondary readiness and changing demographics. Since the late 1990s, Minnesota students living in poverty increased by 11 percent, now accounting for more than 37 percent of all students, due in large part to a shrinking social safety net that increased the state’s overall poverty rate.

Melcher’s presentation also highlights a 4.5 percent increase in students with limited English and a nearly three percent increase in students needing special education over the same period.

Changing demographics also present a problem in passing levies. As communities age, funding for programs geared toward older citizens will compete with local education dollars. 

While a simpler financing formula will better accommodate local needs, especially in workforce training and changing demographics, just shifting money from one pot to another won’t solve a decade of state education underfunding. It also runs the risk of meeting one set of education needs at the expense of others.

State level “no-new-tax” policy boxes in lawmakers. It relies on accounting gimmicks, making it appear there’s more funding in one pot without acknowledging another pot now has fewer dollars. Lawmakers might be able to swing a few more bucks to a new education formula, meeting its overall funding goals without taking from other schools. However, with no new state revenue, lawmakers will shortchange other budget priorities—say health care, pollution control or public safety.

In absence of increased state revenue, legislators are just moving money around without moving Minnesota forward. It’s time to stop protecting the richest 2 percent at the expense of the state’s progress.


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Minnesota’s Education Finance Working Group is in the process of trying to fix the state’s broken school funding formula which suffers in part from severe, on-going disinvestment. Inflation-adjusted state education funding has declined 13 percent since 2003, resulting in an over-reliance on property taxes that now comprises 20 percent of total education funding, up 8 percent in a decade. This regressive, unsustainable reliance on property taxes will create statewide education disparities. Why do lawmakers protect the top two percent of income earners at the expense of education, especially when the middle-class are willing to raise their own taxes to adequately fund schools?

What education funding goals will move Minnesota forward?

Share your thoughts

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  • Eric Andersen says:

    October 15, 2012 at 11:00 am

    If you own a $200K house in Minnesota the average portion of your property taxes going to schools is $800.
    Here in Grand Rapids - one of the few districts without an operating levy and due to our large number of retired/vacation property owners we won’t be passing one - the amount is $374. 
    How are we making it?  Huge class sizes, classroom budgets cut to the bone and the least number of teachers possible(quite a few work in 2-3 different buildings each day.) 
    Any further cuts from the state and Grand Rapids will have no choice but to give a very different education than districts that can pass levies.
    I guess we are not trying to give all Minnesota’s kids a equal educational opportunity.

  • Daniel Sellers says:

    October 17, 2012 at 8:21 am

    I always find this argument fascinating.  I actually don’t mind paying increased taxes.  I think paying taxes is important.  As an educator, I think paying for education is important.  But, at what point do taxpayers start to ask for some accountability in the system?

    Teachers unions want more and more money with less and less actual accountability for any type of performance.  I would be happy to increase my own property taxes if it meant we could pay our best teachers more money and there also realistic paths to remove ineffective teachers from the profession.

    Take a look at this infographic produced by USC:

    By a significant amount we spend more money per-pupil than any other country in the world.  And, what are the outcomes of that investment?  We trail Russia, Australia, Japan, and Canada in actual student performance (along with many other countries). 

    The day the teachers unions begin to operate like true professionals and put into place real accountability measures (instead of saying “no” to every single attempt at meaningful change that would benefit students), I think we’d see many more individuals acros this state support more money for education.

  • Eric Andersen says:

    October 17, 2012 at 1:48 pm


    “Teachers unions want more and more money”
    - Minnesota ranks 35th in the nation for percent increase in teacher salaries over the last decade - teacher salaries have not kept up with inflation in Minnesota.

    “with less and less actual accountability”
    “remove ineffective teachers from the profession”
      - Legislation was passed last year that addresses exactly these concerns.  It always has been and will be the job of principals to identify and remove ineffective teachers.

    “we spend more money per-pupil than any other country”
    - Educating all students is much more expensive.

    “We trail Russia, Australia, Japan, and Canada in actual student performance”
    - Compare US schools to countries with similar poverty levels and we outscore every country in the world in every poverty category.

  • Daniel Sellers says:

    October 18, 2012 at 8:45 pm

    I believe that we should encourage more talented individuals to join the teaching profession.  We do that by holding them accountable and rewarding our best teachers. 

    For example, today, Diane Ravitch said that teachers only account for about “10-15% of student effectiveness.”  As a former teacher, that’s sad to me.  I became a teacher because I believed that I could change a students life, and I still do believe that teachers can change a kids life.

    I think we should be promoting a message that teachers are important and they matter.  Not promoting a message that teachers can’t make a difference.  I worry that is degrading to the teaching profession.