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Part 2 on school funding in Nebraska: An original intent of the Tax Equity and Educational Opportunities Support Act (TEEOSA) passed in 1990 was to reduce local reliance on property taxes for K-12 education. In theory, by providing greater state aid to districts the burden on local taxpayers would be reduced, especially in districts with a lower property tax base.
After 25 years of expansion and revision of the funding formula, there is greater inequity in state support between school districts than ever before. Instead of strictly supplementing local resources, the school aid formula has created two distinct categories of schools: those who receive equalization aid and those that do not. Because of the influence of agricultural land value on the “resources” calculation of the TEEOSA formula, the distinction is largely urban and rural.
Among the almost 80 school districts that receive state equalization aid, the average amount of aid is approximately $3,100 per student. This is highly variable however, ranging from under $100 to over $10,000 per student. Schools with larger populations of non-English speaking students and special needs students receive significant state aid.
Approximately 20% of K-12 students in Nebraska do not receive any state equalization aid funding. While these districts receive state support for meal programs and special education, almost the entire cost of education is borne by local taxpayers.
To illustrate the differences in state aid: a student in Hastings Public Schools receives $5,200, a student in Lexington receives $6,200, a student in Kearney Public Schools receives $1,800, and students in Minden or Adams Central districts receive $0.
Given the dramatic disparities, it seems common sense to restructure the funding formula to reflect current economic reality. Funding under TEEOSA is determined by statute. Thus, the total dollar amount of TEEOSA aid and its distribution is not set by legislators. Formula metrics would have to be changed in statute to change the total dollars or their distribution. The existing scheme creates “winners” among those who receive significant reduction in their local property tax bills and “losers” among those taxpayers who must pay the full cost of public education in their district. Hence, one side opposes reform (the senators and special interests who represent urban school districts that receive most of the TEEOSA aid) while the other (the senators who represent rural school districts funded by ag land property taxes) lacks the number of votes to restore equity in the system.
Historical precedent demonstrates that providing more state aid to schools without restricting their budget growth does not fix a structurally broken formula. Upon implementation of TEEOSA in 1990, $311 million in state equalization aid was sent to schools, and schools decreased property taxes collected statewide by about $37 million. Three years later, despite increases in state funding of TEEOSA of 23%, property tax spending by school districts exceeded all prior years by $50 million dollars. Property tax relief via increased state education spending had evaporated and property taxes were at an all time high.
Again in 1998 and 1999, the state appropriated additional General Fund TEEOSA aid of $125 million (27% increase) and saw property tax spending go down by only $700,000. The very next year property tax spending by school districts grew by over $25 million. That is $150 million in spending growth between 1999 and 2001.
An education funding system that is equitable and fair to taxpayers across the state is essential to providing education to Nebraska’s children. A long term view of reform that accommodates demographic and economic changes over time must remain a top legislative priority.