State Budget Problems Impact Schools, Taxpayers
State Aids Cut, Revenue Limits Tightened, "QEO" Repealed

MADISON—State school aid cuts and tighter state revenue limits on how much school districts can raise will make 2009-10 one of the most challenging years that both school districts and taxpayers have experienced in decades, according to a new analysis from the Wisconsin Taxpayers Alliance (WISTAX), a nonpartisan research organization now in its 78th year.

Facing budget deficits in the billions, state government is cutting aid to local districts by 2.7% in 2009-10, the first aid reduction in modern memory. Generally, state spending on school aid has always grown steadily—from $2.19 billion in 1993-94 to $5.4 billion in 2008-09. During the mid- to late-1990s, annual increases averaged 5.0%. Even with recent state financial difficulties and cuts to other programs, aid grew an average of 2.3% per year since 2003.

Of all districts, WISTAX estimates that 94 will see aid drop 15% or more. The five with the largest cuts are: North Lakeland, -100%; Swallow, -16.6%; Wisconsin Dells, -16.0%; Elcho, -15.7%; and Princeton, -15.4%. Districts with the largest losses tend to be "property wealthy," often with declining enrollment. WISTAX also notes that 90 districts are projected to receive more general aid, including 16 that will get at least 5% more.

By individual district, WISTAX estimates that 181 districts face potential 2009-10 school tax hikes of 10% or more. Another 111 could have tax increases in the 5% to 10% range. Only 48 districts—about one in nine—are likely to cut property taxes this December.

With less state aid, local school districts have several options. They can dip into reserves to cover the losses; trim budgets to reflect the revenue reduction; or—to the extent allowed by law—increase school property tax levies. Overall, the potential school tax increase for December 2009 could approach 7.8% statewide if all districts taxed to their revenue limit, WISTAX estimates. The last time larger increases were recorded was in 1988-92, when tax increases accelerated from 8.1% in 1988 to 10.7% in 1992. The following year, the legislature enacted revenue limits and restricted growth in school compensation (the qualified economic offer, or QEO).

The new state budget makes one other change that has potential adverse impacts. It repeals the QEO compensation limits enacted 17 years ago. The repeal could mean that schools will face more rapid increases in compensation, forcing them to cut programs and staff. It could also mean that school tax increases will accelerate as they did 20 years ago. "Only time will tell, " observes WISTAX President, Todd A. Berry.

For a free copy of the WISTAX report, "State budget woes mean school, taxpayer problems," write WISTAX, 401 North Lawn Ave., Madison, Wisconsin 53704; e-mail wistax@wistax.org; or call 608.241.9789.