Executive Memo

Executive Memo

Blood from a turnip

By Bill Scott
KSBA Executive Director

The vise on Kentucky school districts has been cranked to its limit. That is the message of a new coalition of K-12 education organizations that advocates restoring state education funding to 2007-08 levels. When adjusted for inflation, it would cost an estimated $323 million to fill this gap, including state SEEK base funding, preschool, family resource and youth services centers, extended school services, safe schools, professional development and textbooks. Local districts and federal dollars simply can no longer compensate for this decline in state support.

Role of Property Taxes

Over the period from 2008 to 2012, local funding, largely provided by property taxes, has helped offset some of the reduction in state funding. According to the Office of Property Valuation within the Department of Revenue, Kentucky’s local property values had been increasing, on average, at an annual rate of 4 percent to 6 percent prior to last year. For boards who chose to exceed the compensating rate*, these higher property values provided their districts with additional local revenue without significant increases in property tax rates.

However, our current economic challenges seem to be causing a change in this trend. According to the Office of Property Valuation, in the state Department of Revenue in 2010-11 local property values on average increased only 1 percent and so far property values in 2011-12 appear to be on a similar course. If property values continue to remain flat, boards that want to generate additional local revenue will have no choice but to raise the local property tax rates. Given the current economic conditions, this action could impose a hardship on many of their fellow citizens.

Between 2008 and 2012, while many boards took advantage of higher property values to generate more local revenue, state SEEK funding remained flat or even declined. The statewide result was a 4 percentage point increase in districts’ local funding and a corresponding 4 percentage point decline in the state’s share of SEEK. (See chart below.) Put another way, when adjusted for inflation, the local SEEK share of per pupil funding has risen from $2,996 to $3,130, while the state’s share of per pupil funding has declined from $4,522 to $4,032.

It’s obvious that we can no longer rely on increases in local revenue to help us keep up with the rising costs of public education. The uncertain future of local funding combined with the anticipated reduction in federal funding is creating an unprecedented financial crisis for Kentucky’s public schools.

KSBA, along with the other six education organizations that make up the new Kentucky Education Action Team, have concluded that the only viable option to compensate for these conditions is a restoration of state funding for K-12 education to at least the 2007-08 levels. We hope you will join us in getting this message out to the governor and members of the General Assembly.

*Compensating rate is the property tax rate that will produce an amount of revenue approximately equal to that produced from property tax in the preceding year.

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