K-12 education is the single largest expense for taxpayers at both the state and local level in Wisconsin. Funding for schools comes from three main sources – state aids, local property taxes, and a small share from federal aids. The state provides two major types of aids: general aids, which are unrestricted and are distributed using a complex formula intended to equalize differences between property tax-rich and -poor districts; and categorical aids, which are typically targeted for specific purposes, such as assistance for students with disabilities.
Figure 4 shows how state funding for K-12 education declined and then rose again between 2010-11 and 2018-19. Total spending for all school aids rose by $570 million, or 10.6 percent during the period, roughly the rate of inflation.
The biggest share of that increase came in the current state budget, which increases all aids by $197.0 million (3.6 percent) in 2017-18 and another $254.3 million (4.7 percent) in 2018-19. The 8.3 percent two-year increase is the largest since the 9 percent rise in 2005-07.
Additionally, at the end of the legislative session this year, the governor and lawmakers provided $6.5 million more in categorical aids for sparsely-populated school districts in 2018-19 and an additional $15.6 million in revenue limit authority for low-revenue districts.
In recent years, general school aids have fluctuated. They declined from $4.7 billion in 2006-07 to $4.3 billion in 2012-13 and have risen slowly every year since. Categorical aids have undergone more changes. In the 2011-13 budget, the state established and expanded a new form of categorical aids known as per pupil categorical aids. Like general aids, per pupil aids can be used for any purpose, but they are distributed on a flat per student basis outside the general equalization aids formula and the revenue limits described below. That means they do not account for the property tax base in a district or other factors that measure residents’ ability to pay for schools. These aids have risen from about $40 million in 2012-2013 to $549 million in 2018-19.
A controversial element of K-12 education finance is revenue limits, which essentially restrict how much schools may raise property taxes from one year to the next. Revenue limits are predicated on a district’s combination of state general aids and property taxes and are established on a per pupil basis.
The stated purpose of revenue limits is to prevent local property taxes from increasing substantially to replace state funds in years when those dollars decline and to provide property tax relief in years when state funding increases.
The state largely has frozen per pupil revenue limits since 2015; schools may exceed the limits if voters approve a local referendum, which they have done in a growing number of school districts.
Critics complain that the revenue limits penalize fiscally responsible districts that were spending at relatively low levels when revenue limits were imposed in 1993-94, locking them into low-spending levels ever since. Critics also say revenue limits harm districts with higher per-pupil costs due to declining enrollments. A blue-ribbon legislative panel led by Rep. Joel Kitchens and Sen. Luther Olsen is examining the school finance system and is expected to make recommendations later this year.
Finally, funding for the University of Wisconsin represents another aspect of state support for education. The state spends about $1 billion in state tax dollars annually on the University of Wisconsin System. The 2017-19 budget provides an increase of roughly $120 million in state funds over 2015-17.
Despite this increase, state general revenue support for the UW System has declined as both a share of the System’s budget (from 24.2 percent in 2006-07 to 17.1 percent in 2016-17) and as a share of the state’s general fund budget (from 7.9 percent in 2005-07 to above 6 percent in 2017-19).
As shown in Figure 5, tuition comprises a growing share of UW System revenues. In the late 2000s, tuition was increased to offset state funding cuts. Since 2013, the state has frozen tuition for in-state undergraduates.
Gov. Walker has said he intends to continue the freeze for another four years; Democratic candidate Tony Evers has indicated he supports a freeze, but not for how long.
Questions for candidates:
5) Should the current general aids system for K-12 schools be changed? To what extent should funding increases for per pupil categorical aids continue as well, or should future increases be directed toward general aids versus per pupil categorical aids?
6) Should state funding for the UW System budget increase and, if so, by how much? Where should this additional funding come from?
Next week, state-local relations.