Report: Funding formula ‘wealth adjustment’ could put more financial pressure on schools

A new and controversial piece of a proposed new school funding formula could force some districts to lean even more on property taxes.

That is, if they can convince voters to pass a levy.

“Children would continue to be reliant on voters to ensure sufficient resources are available for their education, and some may still not receive the education they need to succeed as a result,” the nonpartisan Idaho Center for Fiscal Policy said in a report issued Tuesday.

The report centers on one component of the new formula: a “wealth adjustment” based on a district’s property values. The concept — a “noble goal,” as the center writes — is to move money to districts with relatively low wealth.

But the resulting funding shift would put pressure on dozens of school districts, large and small, according to the report.

All told, 115 of the state’s 173 districts and charter schools would be on the wrong end of the wealth adjustment.

If the new formula and the adjustment had gone into effect in 2018-19, 57 districts would have been ineligible for the wealth adjustment. In all, 32 of these districts would have received fewer dollars from the state. Fremont County would have absorbed the biggest drop, in excess of $1.2 million.

The effects could vary greatly, however. Here are two examples from the report:

  • The West Ada School District would have taken nearly a $1.2 million hit. But the state’s largest school district also has a broad tax base, West Ada could have made up the loss with a levy that would have increased taxes by $5 on $100,000 of taxable value. And West Ada already has a supplemental property tax levy on the books, like 92 other districts across Idaho.
  • Owyhee County’s Pleasant Valley School District would have taken less than a $36,000 hit, but the impact could be severe for a remote district with only six students. In order to make up the lost state funding, the district would have to pass a levy costing $173 on $100,000 in taxable revenue. Pleasant Valley does not collect a supplemental levy, and has not done so for at least two decades.

“Voters may be more inclined to agree to a lower tax rate than a higher one, making it more difficult for some schools to raise revenue than others,” the authors wrote.

The wealth adjustment is proving to be one contentious spot in the simmering debate over the funding formula rewrite. During a legislative listening session on Thursday, speaker after speaker criticized the mechanism, and no speaker supported it.

A draft of the bill was released on Jan. 31. The bill has not been formally introduced in a legislative committee; that might happen next week.

Idaho has not rewritten its funding formula since 1994. Addressing the formula could prove to be one of the most complicated issues of the 2019 session — since the formula is used to carve up the largest single piece of the state budget, affecting some 300,000 students.

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