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Utah's education funding effort declining

By Stephen Kroes
In the Salt Lake Tribune, Sunday April 30, 2006

A recent federal report showed Utah last in the nation in per-pupil funding for public education. No surprise there, since the state's large student population has made it difficult to be anything but last in the nation for many years. But a deeper look at the report revealed how hard we are trying to fund Utah's education system.

    When measuring public education revenues in proportion to our incomes, Utah is not last in the nation, but ranked 27th. Perhaps we could take some comfort in knowing that at least we're trying about as hard as the average state in taxing ourselves for public education. But before we pat our collective back, we should realize that Utah's "funding effort" (as measured by education revenues per $1,000 of personal income) has historically been much, much higher than the national average.

    In the past, Utah tried harder than almost any other state to provide adequate funding for public education. But despite the effort, we still had the lowest per-pupil funding in the nation because the funding was divided by so many kids. Utah Foundation has written about this disparity between effort and funding levels, calling it "Utah's education paradox."

    In the early and mid-1990s, the paradox was quite stark - Utah's funding effort was very high, even fifth highest in the nation in 1995 and within the top 10 states for most of the decade. When Utahns complained about low per-pupil resources back then, at least we could say that it wasn't for lack of trying.

    After 1995, however, a series of changes in state policy began to reduce Utah's education funding effort. Utah first fell out of the top 10 states for effort in 1999, and the effort has continued to slide until the latest data showed Utah at 27th, falling below the national average for the first time in memory.

    Utah's extraordinary funding effort was reduced through four major tax and budget reforms in the 1990s: 1) the homeowners' exemption for property tax was more than doubled, 2) the statewide basic property tax levy for schools was cut in half, 3) the basic property tax levy was allowed to "float," leading to rate decreases nearly every year since, and 4) the constitution was changed to allow higher education to receive some of the income tax, which had been dedicated entirely to public education.

    The property tax reforms capped more than a decade of attempts to quell legitimate discontent about rising property taxes. School budgets absorbed the loss of property taxes fairly well, because income tax revenues were growing so fast that the Legislature was able to make up for the lost revenue to schools. At the time, Utah's constitution guaranteed that all income tax revenues were spent on public education. But in 1996, voters approved a constitutional amendment to allow income taxes to also fund colleges and universities.

    This sounded reasonable. Why not let the colleges share in the state's income tax growth when the economy was growing rapidly? But once the Legislature began transferring some of the income tax to higher education, there wasn't enough left to make up for reduced school property taxes, and Utah's funding effort for public education began to decline immediately.

    In reality, most of the income tax funding transferred to higher education was offset by a reduction in state general fund money, so the colleges really didn't gain much from the change. However, this transfer allowed programs for health, human services, prisons, and transportation projects to grow with the newly released general fund dollars.

   Utah Foundation calculates that if the funding effort for public education had been maintained at the 1995 level, Utah schools would have had $600 million more in 2004. With that $600 million, schools would have received $1,200 per pupil more in revenue, and Utah's national ranking would have been 47th, instead of last in the nation.

    We need to discuss priorities - with a wave of new student growth hitting Utah schools now, it is time to stop the decline in Utah's education funding effort.
  
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   Stephen Kroes is executive director of Utah Foundation, a public policy research group.