Voters in the Oshkosh Area School District (OASD) are getting ready to vote on a spending referendum. Being an OASD parent, Oshkosh taxpayer, and academic with an interest in education finance, I decided to take a closer look at OASD fiscal trends. But first, what exactly is OASD asking voters to approve?
Specifically, OASD is asking to exceed state revenue limits to the tune of $4 million over each of the next seven years (you can read the specifics here). The key concept to understand here is revenue limits. First imposed in 1994, revenue limits cap the annual amount of revenue per-pupil school districts can raise from state and local sources. Increases (or decreases) to the allowable per-pupil revenue limit are determined in each state budget. For example, if a district has a per-pupil revenue limit of $10,000 in year one and the state budget call for a per-pupil increase of $200, that district’s per-pupil revenue limit is $10,200 in year two (I wrote a bit more about this here). The actual distribution of state aid vs. property tax is determined by the school aid formula, which is designed to equalize the tax base. In English, poorer districts get more state aid and less property tax revenue, while richer district get less state aid and more property tax revenue. Because of revenue limits, the OASD board cannot just decide to raise taxes and then do it, the district has to go to referendum and ask the voters for permission to exceed state imposed caps.
So that brings up the second and more important question, does OASD need more revenue? As I’ve pointed out in the past, school district budgets in general are pretty stressed in Wisconsin because of revenue limit restrictions and cuts in state aid. In OASD specifically, as can be seen below, inflation adjusted per-pupil revenue limits are down from 2009, meaning OASD has less ability to raise revenue today than it did six years ago. That problem is magnified by a 4.9% reduction in enrollment since 2008. Less revenue per-pupil + fewer pupils = fewer resources.
The second figure (below) tells more of the story using numbers from the Department of Public Instruction. The chart shows the inflation adjusted state, property tax, and federal revenue per-pupil between 2008 and 2014. As you can see, actual revenues per-pupil received by the district have decreased since 2008.
Now, one could reasonably wonder if per-pupil numbers are the right way to look at the issue. The graph below tracks inflation adjusted total revenue numbers obtained from the Department of Public Instruction. Property tax revenue, the red line, is up 13.13% between 2008 and 2014. The reason? State support is down 18.26% over the same time period. If you recall how revenue limits work, this is not surprising, less state support generally means more property tax. Overall, combined state and local support is down 3.9%. To put it another way, the difference in state and local support between 2008 and 2014 is about $8.2 million.
But this is not the whole story. The time period in question included the passage of Act 10, which freed up additional revenue for school districts because of the required increased employee contributions to health insurance and retirement costs. As is evident in the chart below, the Act 10 changes did reduce OASD’s annual health and pension costs.
The key question, however, is whether the newly available revenue resulting from Act 10 offset the revenue limit reduction in 2011. The answer is no. The district experienced a $8.4 million reduction in state and property tax support between 2011 and 2012. The Act 10 savings, when implemented, were $5.9 million, leaving a gap of about $2.5 million.
What does this all mean? I think there are several key takeaways:
- OASD needs to exceed revenue limits or significantly cut programming because of reductions in state and local support. A close look at the numbers shows that OASD is not crying wolf.
- The savings from Act 10, though substantial, are not enough to offset the reductions in state and local support.
- The $4 million dollar annual increase seems reasonable given the size of the gap between the reductions in state and local support and Act 10 savings, the fact that the impact of cuts compounds over time, and the reality of fixed costs in a time of declining enrollment.