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More School Budget Cuts Averted

December 02, 2013 By Jeff Van Wychen, Fellow and Director of Tax Policy & Analysis

Going into the 2013 legislative session, real (i.e., inflation-adjusted) per pupil state operating aid to Minnesota school districts were slated for another decline on top of the double digit drop that occurred over the preceding decade. Thanks to progressive state policymakers, that outcome was averted. Per pupil state operating aid to Minnesota school districts will increase one percent above the rate of inflation in FY 2014 and three percent above in FY 2015, thanks to the school funding package approved during the 2013 session.

A recent Minnesota 2020 report examined trends in real per pupil state operating aid, property taxes, and revenue since FY 2003, including projected funding levels for FY 2014 and 2015, based on information provided by the Minnesota Department of Education (MDE). That analysis showed that state operating aid to Minnesota school districts are projected to increase by $436 per pupil in constant 2014 dollars—an increase of 5.2 percent over the two year period. With this increase, approximately one-third of the real per pupil aid loss that occurred from FY 2003 to FY 2012 will have been restored.

MDE projections released last April are identical to the projections released last month except for one thing: the April projections were based on the old law in place prior to the 2013 session, while the more recent projections are based on the budget approved by state policymakers last May. By comparing these two sets of projections, we can evaluate the effects of the funding levels under the new law passed during the last session relative to levels that would have been in place in the absence of those changes.

Real Per Pupil Change in School District Aid Since 2003

From FY 2003 to FY 2012, real per pupil state operating aid to Minnesota school districts declined by 18.0 percent, before rebounding by two percent in FY 2013. Prior to the school funding package approved by state policymakers last session, the decline in aid to school districts was projected to resume in FY 2014 and 2015; over this two year span, state aid was projected to decline by $114 per pupil in constant FY 2014 dollars—a decline of 1.3 percent. Thanks to the 2013 school funding package, that 1.3 percent decline was transformed into a 5.2 percent increase.

Most of the school aid increase provided during the 2013 session will translate into increased school funding. Under the old law, real per pupil school operating revenue was projected to decline by 1.4 percent from FY 2013 to FY 2015; under the new law, it is projected to increase by 3.8 percent. Meanwhile, real per pupil school operating levies (i.e., property taxes) in FY 2015 under the new law are projected to be 1.5 percent less than what they would have been under the old law.

Partially in response to the school funding increase, the drumbeat of “excessive state spending” is already being sounded from “no new tax” proponents. It is worth remembering that even after the state aid increase approved by progressive state policymakers during the last session, state operating aid to Minnesota school districts is still projected to be nearly $1,200 (11.6 percent) per pupil less in constant FY 2014 dollars than it was in FY 2003—the year of the full state takeover of general education costs.

The school funding decline that occurred from FY 2003 to FY 2012 led not only to an increase in class sizes, reductions in course offerings, and an overall deterioration in the quality of public education in Minnesota, but also to burgeoning school property taxes. These trends were projected to resume in FY 2014. However, thanks to the actions of Governor Dayton and progressive state legislators during the 2013 session, these outcomes have been averted for at least the next two years.

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  • Jerry Von Korff says:

    December 9, 2013 at 10:57 am

    One assumes that MN 2020 continues to use the governmental implicit price deflator in these charts.  If that is true, it is well to remember that the primary driver of governmental prices is the collective bargaining process and the wages and benefits that are negotiated.  There is another shoe to be dropped, and that is the long term impact of whatever compensation increases have been agreed to, or which have not yet been agreed to in this year’s negotiations. 

    It appears possible that Governor Dayton intends to repeat the Ventura mistake by squandering the state surplus to improve the DFL’s election chances on tax increases.  If he does that, the cuts will start again.  Minnesota’s school funding system is fundamentally broken.  Periodically, a decent funding year occurs.  Everybody celebrates and raises compensation as if the good years are going to continue forever.  Then the politicians bleed down the surplus to nothing, and several years of near zero funding increases occur, creating another round of cuts.  The DFL has not “solved” this problem.  It is hoping to avoid the problem until the election is over.  One appreciates the temporary help, but the system is still fundamentally broken.

  • Jeff Van Wychen, MN 2020 says:

    December 15, 2013 at 10:42 pm

    The article does indeed adjust for inflation using the state & local implicit price deflator.  You are correct that collective bargained wages and benefits make up a major component of local government costs.  However, over the last decade the growth in the Employment Cost Index (calculated by the Bureau of Labor Statistics) is about the same for the public sector as it is for the private sector.  In other words, public sector wages and benefits have grown no more rapidly than private sector wages and benefits over this period.

    Regarding Dayton’s intentions, to my knowledge the only use of the surplus he has proposed thus far has been tax cuts—specifically: (1) repeal of the three controversial B to B taxes enacted during the 2013 session and (2) federal conformity for the marriage penalty, earned income tax credit, etc.