Education Spending Update - March 14, 2024

Nicole Lee (Director of Education Finance, Agency of Education) began the House Ways & Means hearing on Thursday with a presentation of recent Education Fund projections following school budget defeats. They have received preliminary redrafted budgets from 18 districts (out of 30 that were defeated) that represent a weighted average increase of 12.17%. These 18 budgets represent just over a quarter of all students in the state, but notably don’t include Milton or Washington Central.

Julia Richter (Senior Fiscal Analyst, Joint Fiscal Office) offered her update next on the Education Fund Outlook. Even with a new $20M cloud tax and the revised budget projects, the average statewide projected property tax increase comes back at 17.6%.

Chairwoman Kornheiser attempted to redirect the conversation towards “the out-year problems,” saying that they had “have solved this-years’ problem.” They really are stuck on the same questions raised in January when they first started digging into these numbers.

Representative Anthony surmised that “some of the intermediate steps they have discussed (removing some expense from the Education Fund, new revenue streams, etc.) would ease the cliff in time.”

NOTE: Because of the dynamics of the state’s education funding system, adding new revenue sources will only fuel more spending. Removing expenses will likely have the same effect as it will buy down local property tax rates.

Representative Masland was curious about the true effectuality of “income sensitivity.”

Representative Sims asked about the funding category of Universal School Meals in the outlook ($24M). She asserted that testimony indicated that it provides for good learning, yet it subsidizes wealthy families. She made a comparison to transportation, which we also provide to all students.

Kornheiser noted that some districts already serve universal meals out of Education Fund, and some don’t. Forcing them all to use the Education Fund appropriation creates an “equity” by taking that difference away.

Anthony suggested pulling Pre-K out of district budgets also and funding it directly out of the Education Fund.

Sims came back to a concept that the legislature has been struggling with, how to differentiate different classes of property. Currently the state only has homestead and non-homestead property. There has been a push to tax second homeowners at a higher rate, but then that introduces a problem of how to distinguish them from “my deer camp, my general store, etc.) as Sims puts it. “I have trouble seeing the rationale to pay the distinctly different burden of our shared investment in education.” Others agreed with this assessment.

Kornheiser stated that “this is quite a conundrum that we find ourselves in. There is no easy path through it. The pressure that we heard today was significant (earlier at House Education Joint Hearing). There is no magic money printing solution and at the end of the day we can move lines around on a spreadsheet (from Ed to GF and back) and that is not going to create new money. We can raise new revenue from the Education Fund that will likely be more regressive than the property tax, which is one of the most progressive tax sources we have, even though it doesn’t feel good.”

NOTE: This is what we have been saying from the beginning of this crisis. There are no good revenue sources and even if there were we need to realize that this is a spending problem.

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