A Look At Revenue Limit Trends

The topic of school funding has been getting some attention in the state’s largest newspaper. Basically, principals and superintendents in Wisconsin school districts say they need more of it. I fully admit, years ago I would have rolled my eyes at these letters. Of course those running schools and districts want more resources, why wouldn’t they? If so inclined, read Paul Peterson’s classic City Limits, and you’ll find a nice explanation of the resource maximization motivations of public organizations. However, I do not think this letter deserves an eye-roll. A quick look at revenue limit trends in Wisconsin shows that districts are indeed struggling.

Discussing the role of money in education is complicated. There is little convincing evidence that putting more money into public education will increase academic outcomes. But this does not mean schools and school districts do not need a certain level of funding to continue educating pupils. Teachers, utility bills, and a wide variety of other expenses still must be paid. Some scholars, mostly in education schools, have explored the idea of adequacy to determine what exactly it costs to provide a decent education to a public school pupil. Adequacy funding does not quite do it for me. While a formula for defining adequacy may objectively exist, I do not think that the public and elected officials will ever coalesce around a single method for defining adequacy, making the concept of minimal (in my opinion) practical value from the administrative side of things.

I think what can be agreed upon, at least here in Wisconsin, is that school districts are facing serious revenue constraints that are impacting their ability to provide a quality education product. As Alan Borsuk wrote a couple weeks ago, the source of the financial difficulties relates to revenue limits. Education finance is complex, and total expenditures and revenues, school aids, tax levies, productivity, etc. are all part of the puzzle. However, from a school district’s point of view, revenue limits are by far the most important factor. Revenue limits determine how much money school districts have to spend, regardless of the source.

Since 1993 Wisconsin schools have been subject to these limits, which are exactly what they sound like. Every year school districts are allowed to raise additional state and local revenues by a set capped dollar-amount per-pupil. For example, if a district raised $10,000 for a pupil in year 1, and the legislature increased revenue limits by $200, the district could raise up of $10,200 in year 2 (The LFB informational paper is a great resource for less-simplified information on this). It is important to note that districts can and do go to referendum to exceed revenue limits, but I’d argue the uncertain outcome of referenda make the step, rightly, an exceptional rather than regular occurrence.

So how is dollar amount increase determined? For a while (1999 to 2009), it was indexed to inflation, meaning in real dollars revenues to school districts were designed to be essentially flat. Since 2009, however, the number is an arbitrary dollar amount chosen by the state legislature. As can be seen in the chart below, the annual dollar increase has been down in recent years (including a cut in 2012).

The next chart shows the actual annual average per-pupil revenue limit by year in inflation adjusted 2015 dollars. After years of steady predictable increases, the actual dollars school districts had to work with decreased in 2012, and has yet to recover to 2004 levels. So what exactly does this mean? Should we get rid of revenue caps? I personally do not think so, but that is another story. Are our schools underfunded or overfunded? Again, that is a discussion for another day.

What this look at revenue limit trends does show is that school districts, even with the financial help of Act 10, are experiencing serious financial stress. However you feel philosophically about education funding, the difficulties faced by Wisconsin districts are real, and will likely begin to impact quality.