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Front Page » May 11, 2006 » Local News » Census report ranks Utah last in per pupil spending,
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Census report ranks Utah last in per pupil spending,

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The United States Census Bureau recently released a detailed public education funding report.

After evaluating the data collected from all 50 states and the District of Columbia, the analysts concluded that Utah ranked 51st in per pupil spending and 27th in public education funding efforts in the nation.

In the early and mid-1990s, the state faced a stark public education funding paradox, pointed out Utah Foundation researchers reviewing the census report.

Utah's funding effort was high, registering fifth in the nation in 1995 and within the top 10 states for the majority of the decade.

From 1992 to 1995, Utah's public education funding effort remained steady at approximately $60 per $1,000 of personal income, pointed out the foundation analysts.

Individual Utahns and businesses paid taxes specifically earmarked for public education, with the related revenues equaling approximately 6 percent of all income earned in the state.

However, four major changes in tax and budget policy during the 1990s impacted Utah's education funding effort, indicated the independent organization's researchers.

In 1985, Utah lawmakers passed a truth in taxation act, placing pressure on local agencies to reduce rates when property values increase.

During the 1990s, property values started rising at a fast pace across Utah and demands for tax reform resulted in three significant adjustments affecting public school funding:

•Effective in fiscal year 1996, the Utah Legislature increased the tax exemption for primary residences to 45 percent of the value of the property.

The state raised the exemption several times during a five-year period from what represented a 20 percent "discount" in the 1980s, noted the independent public policy organization analysts.

•In 1996, Utah lawmakers reduced the state mandated property tax levy for schools from .004220 to .002640.

The basic rate was lowered to .002046 the following year.

•After 1996, the Utah Legislature started to float the statewide basic tax levy instead of keeping the rate steady for three to four years and allowing revenues to increase with rising property values.

When state lawmakers implemented the reforms, Utah was experiencing budget surpluses and rapidly increasing income tax revenues offset the property tax declines. As a result, Utah continued to maintain a high education funding effort, noted the foundation researchers.

•State legislators implemented a fourth major change in 1997, causing a reduction in the growth of income tax funds appropriated for kindergarten to 12th grade public education programs and leading to a significant decline in the state's funding effort.

In November 1996, voters approved a constitutional amendment to allow income tax revenues to be appropriated for higher education as well as for K-12 public school districts. Previously, the Utah Constitution required that only K-12 public education receive funds from the income tax.

In addition to the constitutional change in earmarking, the Legislature enacted reductions in income tax rates in 1996 and 1997. The transfer of income tax funds to higher education did not provide a significant increase in overall spending on higher education, but was largely matched by a reduction in general fund appropriations to higher education, allowing general funds to be spent on other programs, most notably health, human services, corrections and transportation infrastructure.

If the property tax reforms had been enacted without the change in income tax earmarking, perhaps the funding effort for public education would still be high compared to other states. But combining the reduction in property tax rates with a reduction in the growth of income tax appropriations has significantly reduced Utah's historically strong efforts to fund K-12 schools.

Utah has the lowest per-pupil spending rate in the U.S. But many may not realize that the gap between Utah's per-pupil spending and the nation has been widening.

In 2000, the difference between Utah's per-pupil spending ($4,331) and the national average ($6,836) was $2,505. In four years, that difference rose 31% to $3,279 in 2004. In 2000, the gap between Utah and Mississippi (the next lowest state) was $683. In 2004, Idaho fell to the second-to-last position but spent $1,020 more than Utah per pupil. Of all the states in that time period, only Nevada and Oregon had lower increases in per-pupil spending than Utah.

To explain the increasing spending gap, one prevailing assumption has been that high enrollment growth prevents Utah from making gains in this regard. Yet, from 2000 to 2004, Utah's increase in public school enrollment was relatively modest with a four-year growth total of 1.5 percent, which was below the national average of 2.2 percent. Utah ranked 19th in terms of enrollment growth during the period. Even states with higher enrollment growth increased per-pupil spending more than Utah, with the exception of Nevada.Nevada had the greatest enrollment growth rate at a staggering 18.4 percent ncrease, but also was third highest in increased education spending at 32.2 percent.

During that period, Utah's total current spending on K-12 education grew 17.3 percent, ranking Utah 42nd in overall spending growth.

Enrollment growth will be a challenge to Utah in the future. A wave of new students entering Utah schools surfaced in the latest U.S. Census Bureau report and the expansion continues to accelerate. Census rankings show Louisiana and South Dakota rising from the bottom 10 in per-pupil spending in the last four years and the two states were experiencing a significant decline in pupil populations. Conversely, tNevada and North Carolina joined the bottom 10 and experienced a large increase in pupil populations.

The majority of the states that improved their rankings in per-pupil spending did so because enrollment was declining. Similarly, most states that lost ground in the rankings saw increasing enrollments.

Utah also experienced relatively high growth in personal income from 1999-2003. Utah saw a 22.2 percent increase in personal income during this period, ranking 12th in the nation. When looking at the 18 states that had higher enrollment growth than Utah, 13 states had a higher percentage increase in education spending while having a lower percentage increase in personal income. Utah's funding effort has declined because education funding has grown slower than personal income nearly every year since 1996.

Finally, we should note that while this study has used education revenues per $1,000 of personal income to measure Utah's funding effort, the Census report also provides another measure: current spending per $1,000 of personal income. These numbers differ significantly, because the revenue figure includes taxes generated to pay for capital facilities and debt service, as well as adult education and other non K-12 programs. Current spending only counts the operating costs spent on K-12 education. In terms of current spending per $1,000 of personal income, Utah's rank for effort is even worse, at 36th in 2004. One reason the difference in the rankings is so large (the revenue-based rank was 27th) is that Utah spent about $983 per pupil on capital construction in 2004. As a growing state, Utah's capital spending should be expected to be somewhat high to provide new classrooms for the growing student population, although capital spending of $983 per pupil is right around the national average.

With Utah's large population of children, it is no surprise that the state's per-pupil funding for public education would be low. However, only ten years ago, Utahns could say that at least the low ranking was not for lack of trying. If Utah still exerted the funding effort that existed in 1995, when the state was the fifth highest in the nation, Utah would have had an additional $1,200 per pupil available in public education revenues in 2004. That would have been an increase of $600 million or 20% above the actual funding that year. This would have raised Utah's ranking from 51st to 47th in revenues per pupil.

On the other hand, keeping Utah's education funding effort that high would have meant $600 million less to spend on transportation projects, health and human service programs, prisons, or in taxpayer savings. A serious consideration of priorities for public resources needs to occur, and in the coming months, Utah Foundation will invite policymakers, the public, education officials, and interest groups toprovide ideas and comments on what should be done to improve education funding and if it is possible to bring our education funding effort closer to what it was ten years ago. To return to Utah's traditionally high funding effort would be difficult to do all at once. A $600 million tax increase would be economically unwise and politically foolish. But it would not have been as difficult to have maintained a higher funding effort over time, rather than a long and continuing series of reductions in property taxes and transfers of income tax to other programs. An effort to at least maintain, and perhaps increase, Utah's funding effort would allow growth to pay for growth - growth in the economy would naturally produce growth in education funding, and hopefully it would be enough to keep up with the baby boom "echo" that will be swelling Utah classrooms from now through the next decade.

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