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Wisconsin Act 16
In 1993, Wisconsin Act 16 capped the amount of revenue school districts can raise from property taxes and state aids at 1992-93 levels.(1) The Legislature sought to control increases in property taxes by limiting the total amount of money that public school districts could raise from one year to the next.(2) For example, during the 1993-94 school year, the annual increase was limited to $190 per student.
Beginning with the 1994-95 school year, the per-pupil dollar amount was to be adjusted for inflation. However, in 1995, the original legislation was changed; the revenue controls were made permanent, and the per-pupil increases were set at a fixed dollar amount ($200 per student in 1995-96, $206 for 1996-97, and slightly less than $209 per student in 1998-99). In 1995, the state also committed to fund two-thirds of the costs of public education.(3)
As a result of the state paying a greater share of school costs, property taxes for the average Wisconsin homeowner declined approximately 5.6 percent from 1995 to 1996. Between 1996 and 1997, property taxes also showed a slight drop. However, by 1998, property taxes were again increasing at an annual rate of close to 5 percent.(4) It is estimated that in 1998 schools collected approximately 47 percent of the local property tax; the remaining 53 percent will be for “other” (including county and municipal governments, and technical colleges).(5)
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Property Taxes in Wisconsin Wisconsin's property taxes are among the nation's highest. The Legislative Fiscal Bureau concludes that an important reason is that property taxes represent the primary source of revenue for local governments in the state. In addition, since 1970, residential and commercial property owners have borne an increasing share of property taxes, while owners of other forms of property, particularly manufacturing and agricultural, have seen a decline.For example, in 1970, residential property accounted for 50.6 percent of net property taxes. That figure reached 64 percent in 1996. By contrast, manufacturing property, which accounted for 17.7 percent of the net property taxes in 1970, now represents approximately 5 percent of the total. Among the reasons for this shift in tax burden is legislation passed in 1974 that exempted manufacturers' machinery and equipment (M&E) from local property taxes. During the 1998 legislative session, business computer equipment also was exempted from taxation. |
Studies by WEAC and WASDA on the Impact of Revenue Caps
Over the last five years, the Wisconsin Association of School District Administrators and the Wisconsin Education Association Council have surveyed public school superintendents to learn how revenue caps are affecting districts. Each year, a report has been issued. This paper summarizes the results of the 1997-98 study, although it makes reference to earlier studies as is appropriate.
The response rates of superintendents consistently have been high: 79 percent in 1994, 77 percent in 1995, 70 percent in 1996, 72 percent in 1997, and 74 percent in 1998. Over the five years, the average number of districts returning questionnaires has been 315 out of 426. In 1997-98, 314 districts representing 722,000 of the state’s 881,000 students (82%) participated. The set of districts participating in each of the five years is not identical. Nonetheless, superintendents from the same districts tended to participate during each of the five years.
The questionnaires sent to superintendents during each of the five years have been relatively short (two pages) and have included a core set of questions that have been nearly identical in wording. As appropriate, new questions have been included each year to obtain answers to specific and unique concerns. All responses have been treated anonymously.
Significant Findings in 1997-98
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Sample of Written Comments by Superintendents "It [revenue caps] has not yet caused us to lose programs or staff but only because we are a growing district. If we start losing students, it will hurt."" Devastating - our students have suffered from lack of resources the last three years. It cost our district $450,000 total of lost revenue. We can never replace that. Total budget $1,192,000. You do the math!!!!" "Our fund balance is cut in half, we are in need of technology, and we need technology exemptions from cap." "Things haven't been all bad, there have been controls; however, we can't go where we would really like to go." "Lack of resources. Textbooks, supplies, material - no increase in five years. Starting to affect staff/student ratios negatively." "We have not been able to advance our curriculum and have appropriate staff." "We have larger classes - unable to fund newly needed sessions - unable to adequately maintain buildings." "Revenue caps put you in a "holding" pattern with a cumulative long-term effect." "It has created a mind-set of status quo." |
In each of the five studies, superintendents were presented with a list of cost-cutting actions and asked to indicate which ones had been implemented in their districts during the previous school year. On the following page, Table 1 shows the number of cost-cutting actions taken by school districts for each of the last five school years.(7)
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There are four steps in calculating a school district's revenue limit.
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Overall, districts report an average of 5.7 cuts in 1997-98 (the median number of cuts is five). Furthermore, 84 percent of districts report at least one cut in 1997-98.
As these figures are considered, two points are important:
Note that the number of cuts reported by superintendents in 1997-98 is fewer in 24 of 25 categories than in 1996-97. The only category showing an increase in the two-year period is use of the fund balance to support the budget. Although there is this slight decline over the last two years, keep in mind that the effects of cuts are cumulative over time. This suggests that for the majority of districts conditions did not improve between 1997 and 1998.
Among the factors that may account for this decline in the number of cuts are the following:
Relationship Between the Number of Cost-Cutting Measures and Changes in Student Enrollment
Over the past several years, superintendents from districts with stable or decreasing student populations have been most critical of the revenue caps. By contrast, superintendents from districts in which the student population is increasing have tended to report fewer cuts in programs or services. The data collected in 1997-98 again show that districts with declining enrollments are affected most by the revenue caps. However, the differences among districts based on enrollment trends are not as dramatic as they were in previous years. The data collected in this study do not explain why these differences are smaller than in prior years. As shown in Table 2, the 31 districts that had a decrease in student population over the previous three-year period report between six and seven cuts. Districts with increasing student populations report between five and six cuts.
Perceptions About the Long-Term Effects of The Revenue Caps
In 1994, 90 percent of superintendents said that the long-term consequences of the revenue caps would be negative for their district’s programs and services. Answers to a similarly worded question in this year’s study show that two-thirds of superintendents say the effect has been negative.
In this year’s study, 309 superintendents answered the question, “In your opinion, what has been the long-term effect of the revenue caps on your district’s programs and services over the past four years?” Of this number, 38 superintendents (12.3%) reported that the effects have been “Positive” or “Somewhat Positive.” About one in four (23.9%) answered “Neutral,” while 197 superintendents (64%) said that the effects had been “Somewhat Negative” or “Negative.”
Opinions of Superintendents about Specific Changes in the Revenue Caps Legislation
Superintendents were asked five questions about the existing revenue caps law. Only a small proportion of superintendents (9.5%) favored keeping the revenue caps law as it is, making no changes for the foreseeable future. Eighty-two percent opposed the status quo. On another question, nearly one-half of superintendents (47.9%) said they favored an outright repeal of the revenue caps law (31% oppose repeal of the law, while 21 percent said they neither opposed nor favored repeal).
Between these two extremes, superintendents were asked to respond to other options. Two-thirds favored keeping the revenue caps law in place, but allowing greater increases in spending from year to year. Likewise, 87 percent said they would like to change the revenue caps law by allowing school boards greater flexibility to exceed the caps. Finally, slightly fewer than two-thirds of superintendents (62.3%) favored the use of alternative taxes (such as sales or income taxes) to support public schools.
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Significant Findings from Previous Studies
Conclusion
During the first five years that the revenue caps were in effect, the vast majority of Wisconsin’s public school districts, and especially districts with declining enrollments, made cuts in programs and services. Due to the fact that Wisconsin’s public school population will drop by more than 5 percent between 1999 and 2007, most districts will experience the kinds of problems faced until now only by declining enrollment districts. To some extent, declining enrollments will lower the rate of increase in the local property tax; however, property taxes will continue to increase.
As legislators and others continue their deliberations over property-tax burdens, revenue controls, qualified economic offers, and educational accountability, conditions in local school districts are unlikely to improve. The opinions and experiences of superintendents represent almost all of the empirical data available on how the revenue caps are affecting the programs and services offered by school districts. More than any other individual, the local school superintendent is in a unique position, for he or she is responsible for working with the school board to develop the annual budget, all the while having to address the needs and concerns of parents, students, school employees, and members of the larger community. Their views are important and deserve to be heard.
— WEAC Division for Instruction and Professional Development
(1) Wisconsin Act 16 (1993) also changed the state’s mediation-arbitration law for teachers. The law stipulates that a combined salary and fringe benefit offer of at least 3.8 percent, constitutes a Qualified Economic Offer, which is not subject to mediation-arbitration. For administrators who are not covered by the collective bargaining agreement, the total amounts available for increases in salaries and fringe benefits can be one of the following: (1) 3.8 percent of the total prior year’s costs of salaries and fringe benefits for such employees, or (2) the average total percent increase in total salary and fringe benefit increases per employee provided by the school district for the most recent 12 month period ending on June 30.
(2) Superintendents from low spending districts consistently have argued that this legislation has penalized them for spending less than other districts or for having a “bare bones” budget during the base year of 1992-93.
(3) This is an average figure for all districts. The percent varies by the property value of districts.
(4)“Success Rate Drops for School Referendums,” Milwaukee Journal Sentinel, November 12, 1998. Also see “Property Tax Gains Up to 5.2 Billion.” Wisconsin State Journal, Madison, Wisconsin, July 16, 1998. According to figures released by the Department of Revenue in December 1998, school taxes increased 5.61% during 1998: “School Tax Rise ‘Shocks’ Zeuske,” The Capital Times, December 11, 1998.
(5) Information provided by Robert Lang, director of the Legislative Fiscal Bureau.
(6) This was the area of greatest change between 1996-97 and 1997-98: 60.9% to 44.1%.
(7) As these data are reviewed, note that the percent figures shown in this table treat each cost cutting action as being equivalent. In other words, there is no distinction between a district that eliminates a few hundred dollars from a program and a district that eliminates the program entirely.
(8) According to data provided by DPI, 389 referendums were passed since the revenue caps went into effect. Most were for building and maintenance; however, 92 were passed to exceed the revenue controls.
(9) The revenue controls were modified by providing: (1) $3.2 million for holding school districts harmless from declining enrollments which exceed 2% in the 1997-98 school year, and modify the provision to authorize a 75% hold harmless provision in 1998-99; (2) $3.9 million for school districts to recognize 20% of their summer school enrollment; (3) $3 million for a one-time per pupil revenue control inflationary increase from $206 to $209 in the 1998-99 school year; (4) $2 million to increase the low revenue limit exemption from $5,600 per pupil to $5,900 in 1997-98 and to $6,100 in 1998-99; and (5) a modification of the Transfers of Service Law to provide more flexibility under the revenue controls. The Governor made a partial veto reducing the Legislature’s request to allow school districts to spend $217 per pupil in the second year. The governor also partially vetoed the Legislature’s request for declining enrollment relief beyond the current biennium, committing to address this issue in the future.
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