School Property Tax Relief in Wisconsin

Association for Equity in FundingMilwaukee, January 19, 2012

Andrew ReschovskyProfessor of Public Affairs and Applied

EconomicsRobert M. La Follette School of Public Affairs

University of Wisconsin-Madison

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Outline

Analysis of the School Levy Credit and the First Dollar Credit

Assessing other kinds of property tax relief Revenue caps and levy limits Circuit Breakers—the homestead credit

Equitable school funding and effective property tax relief

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General Aid Equalization Aid $4,722,745,900 $4,799,501,900 * $4,652,500,000 ** $4,652,500,000 $4,261,954,000 $4,293,658,000 High Poverty Aid 9,000,000 12,000,000 18,700,000 18,700,000 16,830,000 16,830,000 Low Revenue Ceiling Aid 6,200,000

Categorical Aid Special Education 350,192,500 368,939,100 368,939,100 . 368,939,100 368,939,100 . 368,939,100 High Cost Special Ed. 3,500,000 3,500,000 3,500,000 3,500,000 3,500,000 . 3,500,000 SAGE 111,984,100 111,984,100 109,184,500 109,184,500 109,184,500 109,184,500 English Language Learners 9,890,400 9,890,400 9,544,200 9,544,200 8,589,800 8,589,800 Transportation Aid 27,292,500 27,292,500 26,337,300 26,337,300 23,703,600 23,703,600 Sparsity Aid 0 3,644,600 3,517,100 14,948,100 13,453,300 13,453,300 All Other Categorica Aid 105,672,400 125,652,900 123,128,300 121,381,400 81,106,000 126,505,100

Total Categorical 608,531,900 650,903,600 644,150,500 653,834,600 608,476,300 653,875,400

Total State Aid $5,340,100,000 $5,462,405,500 $5,315,350,500 $5,325,034,600 $4,893,460,300 $4,964,363,400

Addendum: School Levy & 1st $ Credits $672,400,000 $822,400,000 $892,400,000 $897,400,000 $897,400,000 $897,400,000

*Includes $552,278,000 of federal stimulus (ARRA) funds**Includes $236,722,000 of federal stimulus (ARRA) funds

Fiscal Year 2012 Fiscal Year 2013Fiscal Year 2008

Wisconsin State School AidsFY 2008 through FY 2013

Fiscal Year 2011Fiscal Year 2009 Fiscal Year 2010

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Percentage Change in Inflation-Adjusted Componentsof State Support for Public Education, 2008 to 2013

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Analyzing the School Levy Credit

Credit is allocated to municipalities in proportion to their share of the statewide school property tax levy Property wealthy municipalities generally

have higher property tax levies and hence get larger credits

Within a municipality, each taxpayer’s credit is equal to her share of total municipal assessed property value Those with more valuable property tend to

have higher incomes and lower property tax burdens

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Who Benefits from the School Levy Credit?

71% of residential property tax revenue is paid by Wisconsin homeowners on their principle residence

This means that only 51% of the School Levy Credit provides tax relief to WI homeowners on their principle residence

About 26% of credit goes to owners of non-residential property (many of them non-residents) and non-resident owners of vacation property in Wisconsin

Average credit ~ 16% of property tax levy

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Less than 250,000 3 8,202 1.0% $411250,000-324,999 24 22,900 2.7% 455325,000-400,000 84 203,871 23.7% 590400,000-499,999 86 221,697 25.8% 683500,000-749,999 127 250,698 29.1% 958750,000-999,999 47 106,664 12.4% 1,3321,000,000-1,999,999 33 37,442 4.4% 1,8092,000,000 and over 21 8,903 1.0% 2,767

Total 425 860,377 100.0% $869

Number Percentage CreditNumber

School Levy Credit per Student, 2008-09by Equalized Property Value per Student

per Student

School Levy

per Student of Districts of Students of Students

Equalized Property Value

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School District

Appleton Area 14,472 $686Beloit 7,183 368Green Bay Area 20,451 665Iowa-Grant 761 498Madison Metropolitan 25,003 1,636Menomonee Falls 4,117 1,397Mequon-Thiensville 3,647 2,054Middleton-Cross Plains 5,870 1,511Milwaukee 87,140 549River Ridge 551 571Stanley-Boyd Area 964 438Superior 4,906 597

State Average $869

Students per StudentSchool Levy Credit

School Levy Credit per Student in SelectedWisconsin School Districts, 2008-09

Number of

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First Dollar Credit

Credit goes to all improved parcels Credit = school mill rate x credit base

(first $X of assessed value) $X determined each year by the total dollar

amount allocated to the First Dollar Credit In 2010(11) credit base = $6,900; average

credit = $67

Credit as a % of levy higher for low-value property

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Tony Evers Proposal to End theSchool Levy Credit

Proposal: Use the money now allocated to the SLC for equalization aid

Analysis: As long as the revenue cap remains unchanged, any additional aid will translate into property tax relief

The taxpayers who benefit the most from the reform proposal will be different than those that benefit from the SLC, but in the end total property tax relief and total school revenues will remain unchanged

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Criteria by Which to JudgeProperty Tax Relief Policies

Tax relief measures should not interfere with the freedom of elected local officials to determine the level of property taxation within their community

Relief measures should do nothing to limit or distort the essence of the property tax as a tax on the market value of property

Property tax relief should be targeted to taxpayers for whom the property tax causes substantial economic hardship

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Assessing Property Tax Reliefin Wisconsin

School revenue caps and county and municipal levy limits reduce local control

They provide untargeted property tax relief by forcing reductions in mill rates

These limits take no account of variations across communities in the “costs” of providing public services

The effect is inadvertently to create tighter limits in the places facing higher costs, e.g. more low-income students to educate

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Assessing Property Tax Reliefin Wisconsin (cont.)

Targeted property tax relief only through the Homestead Credit 2009-10, $129.2 mil. to 76,200 claimants Total credit = 1.4% of total property tax

levy Maximum credit = $1,184; maximum income

for eligibility=$24,500

DOR estimated that only 43% of eligible taxpayers received the credit

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Gross and Net Property Tax BurdensWisconsin Homeowners, 2005

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General Number of Average Reduction Number of Average IncreaseAid School Districts per Student School Districts per Student

Less than $300,000 16 18,356 2.1% -$527 -$176 13 $399 3 $338$300,000-$374,999 58 152,430 17.8% -534 -546 27 238 31 0$375,000-$450,000 86 198,732 23.2% -511 -533 22 168 64 123$450,000-$549,999 73 159,705 18.6% -501 -562 11 86 62 99$550,000-$749,999 96 195,768 22.8% -506 -460 74 108 22 161$750,000-$999,999 44 95,308 11.1% -573 -263 43 313 1 190$1,000,000-$1,999,999 30 28,395 3.3% -602 -49 30 553 0 0$2,000,000 and over 21 8,564 1.0% -639 -14 21 625 0 0

Total 424 857,258 100.0% -$524 -$465 241 $222 183 $114

*Average reductions calculated only for those school districts required to reduce property tax levies to meet revenue limits.

**Average increases calculated only for those school districts allowed to increase property tax levies.

Equalized Average Change per Student

Changes in Revenue Limits and General Aid between 2010-11 and 2011-12by Equalized Property Value per Student

Property Value RevenueNumber Number PercentageMandated Property Tax Reductions* Allowable Property Tax Increases**

Limitper Student of Districts of Students of Students

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Number of Wisconsin School Districts That Took Following Actions This Year

Wisconsin Assoc. of School Boards Survey (Nov. 2011)

YES NOIncrease elementary class sizes? 144 207Cut/increase class sizes: AP? 51 285Foreign language? 90 264Math/English/Science/Social Studies? 126 229Art/Music/Phys. Ed.? 159 196Vocational/Tech? 155 193Increase student fees? 78 278Cut sports or extracurriculars? 40 319

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Number of Wisconsin School Districts Expectations About Next Year’s Cuts

Wisconsin Assoc. of School Boards Survey (Nov. 2011)

Same 122Greater 116Less 47Don't know 72No answer 67

Next Year's Cuts

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Federal Number of Number of

5th percentile Median 95th percentile range ratio1 districts students

United States $8,135 $11,259 $23,611 1.9 13,525 48,187,791

Kentucky 8,548 9,728 11,725 0.4 174 666,019Alabama 9,077 10,165 12,597 0.4 131 742,919Tennessee 6,949 7,932 9,873 0.4 135 966,963Maryland 13,257 14,470 18,915 0.4 24 845,700Wisconsin 10,634 12,235 15,962 0.5 426 867,929

Wyoming 14,499 20,255 41,772 1.9 48 85,991Arizona 7,263 10,209 21,256 1.9 216 987,234New Hampshire 11,128 15,849 32,745 1.9 162 195,668Alaska 12,049 25,997 53,648 3.5 53 130,624Nevada 9,426 11,037 45,484 3.8 17 428,776

Total revenues per pupil at the 5th percentile, median, and 95th percentile & federal range ratio, FY2008

Total revenues per pupilState

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Fiscal Equalization Among K-12 School Districts, 2010-11

Success in Achieving Access Equality and Spending Equalization

Spending-Effort Ratio

Less than 250,000 3 7,542 0.9% 8,029 11,654 10.0 1,171250,000-324,999 28 25,353 3.0% 7,437 11,391 9.8 1,166325,000-400,000 80 246,228 28.7% 6,795 12,256 10.5 1,172400,000-499,999 93 178,976 20.9% 6,122 11,230 9.4 1,190500,000-749,999 125 266,892 31.1% 4,779 11,501 9.8 1,172750,000-999,999 44 95,308 11.1% 2,336 12,100 9.9 1,2261,000,000-1,999,999 30 28,395 3.3% 974 13,166 8.3 1,5822,000,000 and over 21 8,564 1.0% 131 14,854 4.7 3,132

Total 424 857,258 100.0% $5,302 $11,815 9.8 1,202

Spendingper Student

MillRate

General Aidper Student of Districts of Students of Students per Student

Property Value Number Number PercentageEqualized