The Minnesota Miracle Abandoned Changes in Minnesota School Funding, 20012007

1
The Minnesota Miracle Abandoned?Changes in
Minnesota School Funding, 2001-2007

• Gregory R Thorson
• Jessica L. Anderson
• University of Minnesota at Morris

2
Constitution of the State of Minnesota, Article
13, Section 1.

• The stability of a republican form of government
  depending mainly upon the intelligence of the
  people, it is the duty of the legislature to
  establish a general and uniform system of public
  schools. The legislature shall make such
  provisions by taxation or otherwise as will
  secure a thorough and efficient system of public
  schools throughout the state.

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Brief History of Minnesota Education Finance

• Prior to 1956, education funding in Minnesota
  came primarily through local property taxes.
• Foundation aid emerged in 1957, which for the
  first time shifted the majority of school funding
  from local taxes to the state. Initially, the
  base per-pupil formula allowance covered the
  majority (84) of per-pupil maintenance costs,
  but unfortunately it did not grow fast enough to
  keep up with inflation and increasing costs. As
  a result, within 13 years the percentage of costs
  covered by the state through this allowance
  formula had fallen back below half (43) of
  districts total costs.

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Brief History of Minnesota Education Finance

• In October of 1971, a federal district court
  judge ruled in the case of Van Dusartz v.
  Hatfield that the Minnesota school finance system
  was unconstitutional. Relying heavily upon a
  California case from earlier that year, the judge
  found that the level of spending for a child's
  education may not be a function of wealth other
  than the wealth of the state as a whole (Van
  Dusartz v. Hatfield).

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Brief History of Minnesota Education Finance

• Shortly after the Van Dusartz ruling, the
  Minnesota legislature in 1971 passed a new
  omnibus tax bill which came to be known as the
  Minnesota Miracle. The bill shifted the main
  source of education funding in the state from
  local taxes to statewide income and sales taxes.
• Prior to the Minnesota Miracle, the state formula
  allowance had covered only 55 of districts
  median maintenance costs it now paid for 93 of
  these costs. The exact percentages have since
  varied over time, but the state has remained
  responsible for the largest share of school
  funding since 1971.

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Brief History of Minnesota Education Finance

• In 1991, the State greatly expanded referendum
  equalization, whereby if a school district would
  pass a local referendum, the amount levied
  locally would be matched by the state in
  proportion to the districts wealth. As the
  states funding failed to keep up with
  educational expenditures, more and more school
  districts returned to passing local levies to pay
  for education.

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The 2001 Reforms The Next Minnesota Miracle?

• Primary Goal To fund the general education costs
  of school districts at the state level.
• Two components
• 1) 415 per pupil roll-in of local referendums
  into state funded aid
• 2) General education levy eliminated from
  property taxes

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It Seems Like a Lot of

• Table 1. Basic General Education Formulas,
  2001-03.

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It is a Lot of Money!

• Table 2. Education State Aid Entitlement,
  2001-2003

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Where did all that money go?

• For the 415 roll-in, the local levy was lowered
  by that amount in each school district in the
  state. Of course, where that amount was
  previously equalized, less went back to
  taxpayers. In wealthy districts that were not
  eligible for equalization, more went back to the
  taxpayers.
• The elimination of the general education levy was
  very expensive for the state. In 2002, that
  state levy was 0.3241. The state paid the
  difference between the amount collected an the
  general education formula allowance. The cost to
  the state of eliminating the general education
  levy totaled 1.33 billion for the 2003 fiscal
  year alone.

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Where did all that money go?
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Where did all that money go?

• Table 3. District Wealth in Minnesota School
  Districts, by Enrollment Quintile, 2003

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Where did all the money go?

• Table 4. Additional State Revenue Per Pupil Paid
  to Districts in FY 2003 Due to Elimination of
  Basic Levy, by Wealth Quintile

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Where did all the money go?

• Table 5. Percentage Change in Total State Aid to
  Minnesota School Districts, 2002-03 (by Wealth
  Quintile)

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The well goes dry

• Table 6. Basic General Education Formulas,
  2002-2006

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Compounding the Problem

• Table 7. Change in Enrollment in Minnesota School
  Districts, 2001-05

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The Smallest Struggle the Most

• Table 8. Change in Enrollment by Quintile,
  2001-2005

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The Only Way Out Referendums and Equalization

• Table 9. Levy Amounts Subject to Equalization,
  2001-2007

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Taking the Bait Increasing Number of Local
School Referendums
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The Results Many Districts Now Levy More Locally
than They Did in 2001
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Summary of State Government Investment in
Education, 1996-2007
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Wrap-up

• Governor Ventura referred to the Minnesota
  education reforms of 2001 as historic and bold
  to the very last detail. It appeared to many
  that the state was making significant gains
  towards fully funding Minnesota schools at the
  state level, thus offering to potentially realize
  the 1971 Minnesota Miracle.
• The actual impact of the reforms was to cut the
  taxes of the wealthiest residents living in the
  wealthiest school districts. Very little of this
  money actually went to Minnesota schools.

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Wrap-up

• The results were catastrophic for Minnesotas
  school districts. When the state encountered a
  difficult budgetary environment, it put a hard
  freeze on educational expenditures for two years.
  At the same time, a large number of schools were
  facing declining enrollments. Districts were
  forced to ask their local residents to pass
  referendums in order to sustain their schools.
• The lasting legacy of the 2001 reforms and their
  aftermath has been that MORE school districts are
  relying on sustaining their schools through local
  referendums.

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Has Minnesota Abandoned the Minnesota Miracle?