Who should pay for public education? Districts are turning to local tax payers more often to pay the bills

ROCHESTER — Who's supposed to bear the cost of K-12 education? Local taxpayers? The state? The federal government? Some combination thereof?

Although state funding is still the overall foundation of public education in Minnesota, individual communities are being asked to shoulder more and more of what it costs to operate a school district.

That's become more apparent in recent years as school districts ask voters to approve operating levies to supplement their revenue, helping them keep their lights on and their teachers paid. This year, there are multiple districts hoping they'll be able to persuade their residents of the need.

When talking about the referendum Rochester Public Schools is hosting this November, school board member Jean Marvin described the need in bleak terms.

"The tragedy is that virtually every school district in the state sooner or later, and sometimes often, has to run referendums," Marvin said. "The funding that our kids need, that our families expect, just isn't there from the (state) government."

So, whether it's the best system or not, voters will go to the polls on Nov. 5 to determine how much funding their schools will have to work with. Whether that's a trend that will continue into the future is yet to be seen.

In addition to state funding, school districts collect a base amount of property taxes from local communities. However, state law limits how much those districts can collect each year on their own accord.

In spite of that, the state also allows school districts to ask voters to approve funding above and beyond the base amount through a referendum process. That additional funding — known as an operating levy — is what districts are trying to convince voters that they need.

During a debate between Rochester School Board candidates on Tuesday, Sept. 25, John Whelan indicated that there were many reasons to vote "no" in Rochester Public Schools' referendum.

Instead of relying on local property owners, he said the district needs to lobby the state government for more funding, underscoring a central issue that school districts have been emphasizing for years.

Whelan then explained how he thinks the unequal property tax bases in the state make things unfair. He described how metro communities have "many, many Fortune 500 companies with their large campuses paying enormous property taxes."

"We don't have the same thing here in Rochester," Whelan said. "I think the state Legislature has to step up to the plate and look at how they're funding the schools."

In response, school board candidate Karen MacLaughlin emphasized that in 2023, the Minnesota Legislature made "historic" investments in education funding, but it just wasn't enough to make up for years of stagnant funding.

"It was historic funding," MacLaughlin said. "But it still wasn't enough, and that's why we're here with a referendum in Rochester."

The need for local operating levies has increased over the past 20 to 30 years. School leaders often attribute that reality to inflation, explaining that state funding hasn't kept up with the cost of operating a district.

Cheryl Youakim, chair of the education finance committee in the Minnesota House of Representatives, said school levies used to be considered the icing on the cake of education funding. They were supposed to pay for the extras, the enrichment, the above-and-beyond that local voters could vote on.

When asked, she gave a similar answer to MacLaughlin's: Restoring a robust level of education funding is not something that can be accomplished in one budget cycle.

"I would like to work toward that goal where levies are the icing again," Youakim said. "But we have a ways to get there. Twenty years of underfunding – four of those years being a zero percent increase – is really hard to turn around overnight."

The largest request on any local ballot this year is the one for Rochester Public Schools. With more than 17,000 students, it's asking voters to increase its per-pupil funding from $943 per student to $2,076 per student, an increase of $1,133. Based on the district's current enrollment, that will amount to $19.4 million, although it would be allowed to increase in step with inflation.

But Rochester isn't the only area district making a request of its residents. Byron, Dover-Eyota and Lewiston-Altura are all doing the same.

But those are just the districts that are returning to voters this year. Others already have operating levies in place. According to the association Schools For Equity in Education, which lobbies for 52 school districts in Minnesota, "over 70% of districts have voter-approved operating levies."

Byron's request would bring in $1.9 million per year, providing some relief from a series of financial struggles the district has been dealing with over the last year. Dover-Eyota's would bring in roughly $1 million per year. Lewiston-Altura's would bring in $449,000 per year.

Although public schools are relying more on local taxpayers, a majority of their funding still comes from the state. In 2023-24, Rochester Public Schools had a revenue budget of $389 million. Of that total, 57% came from the state of Minnesota, and 4% came from the federal government.

Meanwhile, 20%, or $76.49 million, of the district's budget came from local taxes, 3% came from the one-time $10 million donation that the Mayo Clinic made following the district's announcement that it would have to close schools, and 16%, or $62 million, came from "other local" sources of revenue.

Between all the sources, 36% of the district's revenue came from some form of local funding in 2023-24.

Despite the call for more funding from the state, Minnesota provides a fairly high amount of state funding compared with other states.

According to the National Center for Education Statistics, Minnesota is seventh highest in terms of the percentage of the cost of education it provides, at 64%. The highest is Hawaii, which contributes 88% of the cost of public education. On the opposite end of the spectrum is Missouri, which contributes 30% of the cost of public education.

The national average for state-issued education funding is 46%.

Even though local leaders often place the blame for insufficient funding at the feet of the state, there once was a time when local communities shouldered a much higher percentage of the cost than they do today.

In 1890, when education was vastly different from today, local sources paid for 84% of public education, compared to 16% from the state. At the time, there was no input from the federal government.

Local revenue remained the dominant source of education funding for roughly 90 years. That changed between 1970 and 1980 when the percentage of local revenue shrank and state funding increased.

By 2003, the share of state funding for public education in Minnesota was the highest it ever had been, at 75%. That same year, the local revenue share was 19% – nearly the opposite of the late 1890s.

However, the concept of school is entirely different than it was 130 years ago. It's much more expensive. It's much more inclusive.

According to a history by the Minnesota Department of Education , the state implemented its first compulsory attendance law in 1885, but "children from families too poor to provide school clothes, children with disabilities, and children living more than 2 miles from school were exempted."

Today, huge amounts of funding are dedicated specifically to students needing special education, and in Rochester alone an elaborate network of school buses crisscrosses more than 200 square miles to get students to and from their classrooms.

The percentage of education funding from the state shrank from 75% in 2003 to 67% in 2020, according to the Minnesota Department of Education. The percentage of local funds for education grew from 19% in 2003 to 28% in 2020.

What happened from 2003 to 2020?

If there's one villain everyone likes to point their finger at in the complicated saga of school funding, it's inflation.

And, more often than not, that finger is pointing directly at a chart that has become the visible manifestation of the phenomenon, showing a growing divide between where the state funding actually is and where school leaders say it should be, in order for the state to maintain its former 75% share.

If state funding had kept pace with inflation over the past 20 years, RPS would receive $1,356 more per student from the state of Minnesota than it currently does. With its district-wide student body of 17,342, RPS would be getting $23.5 million per year more than it does now in state funding.

That estimation was calculated by the company Ehlers Public Finance Advisors, which works with a number of school districts, including Rochester's.

Although it arrived at slightly different numbers, the association Schools For Equity in Education, came up with a similar result. According to their calculation, the state spends $1,737 less per student than it would if the funding formula was adjusted for inflation.

Schools For Equity in Education argues that since local communities have to rely on levies to make up the gap in state funding, it creates an unfair system in which some communities are willing and able to spend more per student than others.

Byron Public Schools is an example of that. Although it's asking voters to approve a referendum this year, it currently doesn't have one. Others, like Rochester, have had an operating levy for years and are asking voters to increase it.

"The disparity in operating levies can range from $0 to over $2,500 per pupil, leaving many students without the educational opportunities they need and deserve," the association's website reads.

So, why has state funding lagged over the last two decades?

Youakim said naming a single reason for the change would be pure speculation. The economy may have been a factor. A divided Legislature may have been another.

What she was confident about was the amount of funding that the state poured into education in 2023.

"I can tell you that in 2023-24 we had a DFL Governor, House, and Senate that valued making a large investment in our public schools," Youakim said.

Whatever the reason, it's become a frustration for local school leaders who have to convince voters to pay more taxes rather than just being able to rely on sufficient resources from the state.

Dover-Eyota Public Schools Superintendent Jeremy Frie said the reality of having to ask voters to approve operating levies places school districts at a "crossroads where the two paths are dramatically different."

Lewiston-Altura Superintendent Gwen Carman said it's difficult to build and maintain trust with the community when school districts have to ask voters to approve operating levies while they're already paying taxes for schools.

And like the position of Schools for Equity in Education, Carman said it's also difficult when there is so much variation from one district to the next.

"What voters don't see is the inequities across the state for school districts with voter-approved operating levies," Carman said, explaining that the state average for local levies in rural Minnesota is $850 per student. "We are asking voters to consider an increase that would result in a $760/pupil operating levy – still well below the state average."

During a forum on Oct. 3 about the district's referendum, RPS Superintendent Kent Pekel was asked whether the state has been "short-changing" districts by not adjusting state aid in accordance with inflation.

Pekel shied away from the characterization of the question, but nonetheless went on to describe the difficulty of operating a school district without sufficient funding. He described how the state controls most of the parameters by which a district has to operate: the curriculum, the hours of education in a year, on and on and on.

The implication of his statement was that the state mandates a standard for what has to take place in a school but doesn't necessarily give schools sufficient resources they need.

He said one thing the state has never actually done is define what adequate funding actually means. Pekel described inflation as a "relevant" but "unsatisfying barometer." There's no objective standard, he said, to indicate whether the state funding is too little.

"You need to say, 'based on what we see in the data, this is what it costs to get kids to state standards,'" Pekel said. "Even if the Legislature doesn't fund it, you can say 'we're not funding schools adequately.'"

Last year, the Minnesota Legislature made changes both to the amount of state funding districts receive and to the way districts are able to handle local operating levies.

For local funding, school boards now have the authority to circumvent their voters by renewing an existing operating referendum one time.

It was a change RPS advocated for at the Legislature, and one the district's school board has already taken advantage of when the board renewed a 2015 operating levy that generates $17 million a year.

That means that if voters approve RPS' referendum this fall, the school district will essentially have two operating referendums : the 2015 referendum that the district's school board just renewed, and the 2024 referendum.

That authority from the Legislature has become a point of contention among those debating whether to support local levies in the first place. During a school board candidate forum on Sept. 25, Whelan indicated that was a reason to avoid voting "yes" to approve the second levy in Rochester's referendum.

For state funding, the Minnesota Legislature increased its education investment by $2.26 billion, or 10.8% over base, in 2023. According to Minnesota Public Radio, that would increase "the per-pupil funding formula by 4% in 2024 and 2% in 2025 with increases tied to inflation at a maximum of 3% in following years."

As much of a shot in the arm as that additional funding was, many education leaders say it was just the beginning of fixing the fact that schools have been underfunded from the state over the past 20 to 30 years.

Youakim said it's hard to reverse a decades-long trend like that in one budget cycle. Pekel noted that as well during his presentation at a forum with the Rochester Area Chamber of Commerce.

"People describe the increase that happened in 2023 as 'historic,' meaning it was larger than in the past, which it was mathematically," Pekel said. "I worried from the very moment I heard that that 'historic' was taken to mean 'adequate.'"