It’s long and doesn’t cover everything I wanted to say, but hopefully this is enough to help with the discussions that will undoubtedly be had on the topic. This proposal touches A LOT of moving parts in the education funding system and
TL:DR; Legislators should sign on to this and get it on the floors of both Chambers for debate. We need change and discussion on how to go about it. The rest of us need to be seriously talking about this idea. Seriously.
- Brings us closer (slightly) to the 21st century in terms of school funding (see PA and MD property taxes)
- Does not shift financial burden from the State to the local property tax payers (despite what Representative Kowalko has stated publicly, and I generally support everything he does but he’s just wrong on this matter). The operating tax is already something property tax payers pay for 100%. Nothing about this proposal changes the revenue source, it only changes when and how the rate may be changed.
- Opens the door for further funding reform so we can seriously talk about the elephant in the room: Property reassessments. Have you read about the Vice Chancellor’s opinion on the Red Clay referendum lawsuit? You should.
- Should spark a bit more interest in School Board elections.
- Should decrease the frequency and asking amounts for Operating Referenda.
- Confers additional taxing authority on school boards during the middle of many members’ terms. Raises similar ethical concerns as Governor Carney’s Match Tax proposal.
- Doesn’t fully remediate the need for the medieval torture device called The Operating Referendum.
- State and District salary schedules seem to hamper the proposed function of this bill.
- This idea has been raised before and poo-pooed away by the General Assembly. It’s back again as a rushed maneuver (it seems) to apply yet another band-aid to the compound-fracture our education funding system sustained long ago (34-year-old property assessments and frozen funding formulas).
Let’s look at Representative Earl Jaques and Senator Dave Sokola’s bill proposal to modify the taxing authority of local school boards of education relating to the operating tax rate (also known as current expense tax rate).
In Delaware, public education is funded jointly by the State government and local school district property owners. On average, the State provides approximately 60% of the revenue to Districts with the remaining 40% generated by local property owners within the District. Delaware’s education funding split is unlike most States in the US in that the primary source of revenue is the State. In most states, the local county or district property taxes generate majority of the revenue needed for public education with the State chipping in a minority share.
The operating tax rate is one of four components that make up a property owner’s school tax bill. It is the only tax rate of the four that cannot be modified by a local school board of education, it requires a special election to be held in the local school district and a majority vote of those district residents voting to increase or decrease. The operating tax rate’s purpose is to generate revenue from property owners to pay for school costs, specifically the salaries of all school based personnel as well as district and school operations, hence the name “Operating Tax”.
In each traditional public school district, employees are paid based on salary scales, indices, and steps that are written into Title 14, chapter 13 of Delaware Code. This chapter defines the State’s obligations to pay portions of the salaries of education employees. In general, as mentioned above, any given school employee’s compensation is approximately 60% state, 40% local funds. Most of the local 40% portion is generated by the Operating Tax Rate in each district which I remind you, may only be adjusted by calling a special election and receiving a majority vote from residents of the school district.
You can see by looking at the salary schedules for teachers, nurses, principals, superintendents, and other administrative and supervisory employees, Title 14, Chapter 13, Section 1305, Paragraph a, that an increase occurs whenever an employee passes certain professional development milestones (obtaining a higher degree, for example) and for each additional year of experience earned. In evaluating the proposed bill from Rep. Jaques and Sen. Sokola and the Operating Tax Referendum process this annual step increase is of primary concern.
Within each category of professional achievement (No Degree, Bachelor’s Degree, Master’s Degree, etc.) the annual State step increase, moving vertically down the schedule, for years of service does not exceed 3% with the exception of the 8th year of service for employees with Masters’ degrees or higher. On average however, from year 1 to year 25, the State affords a ~3% increase with each year of service across all categories of professional achievement.
Recognize, though, that as the State awards step increases for their portion of salary, so must local School Districts. Whereas the State’s salaries and increases are standardized for education employees, Districts’ increases are not. We all recognize the differences in cost of living depending on where in the State (or country for that matter) you live. Salaries for the same jobs vary in the same way. District salary tables reflect this.
The proposed legislation would authorize local school boards to raise their Operating Tax the greater of 3% or the percent change in the CPI-W every two years without a referendum. Any increases beyond that still require referendum. Initially this seems a reasonable proposal given that our neighboring states have long since granted similar authority to Boards of Education, but a problem shows itself when this language is reconciled with State and District salary tables. Take a look at Brandywine School District’s distribution of Teachers by education level:
Now look at Brandywine teachers’ years of experience:
75% of Brandywine’s teachers have at least a master’s degree. 87% of their teachers have been teaching for at least 5 years.
When we look at Brandywine’s salary table for teachers with a Master’s degree, we can see very clearly that as years of experience are earned the percentage increase of district salary can range anywhere from 0.9% to 6.7%, averaging 4.7% per year of experience. Recalling that the State salary increase averages ~3% for each year of experience we can begin to see that over time, the district’s share of a teacher’s total salary grows and the state’s shrinks.
Additionally, once a teacher enters their 16th year of teaching, the State no longer provides salary index increases for additional years of experience at the Master’s degree level. Brandywine (and other districts) award 3 more step increases, one at year 16, one at year 20, and a final one at year 25, further increasing Brandywine’s share of the total salary.
Since the operating tax rate generates most of the revenue for District salary, a 3% increase every two years alone will not be enough to sustain most districts current salary schedules, nor will a CPI-W increase (which currently hovers around 1-1.5%) without changes to District salary tables, which means: operating referenda are here to stay even if this became a bill and was signed into law by Governor Carney. However, I believe they would be needed less frequently and/or would require smaller rate increases each time.
Paragraph (C) allows for Boards of education to elect a one-time increase in the operating tax to ensure districts retain an adequate cash balance to meet state requirements of 1 month’s worth of payroll for October, this is tied to the fact that property taxes are not received by districts until November and Districts balances are at their lowest heading into October. They need enough funds to be able meet October payroll until the first chunk of tax revenue is received in early November. I’m thinking this is here to try and help Districts adjust to a new “cycle” of referenda they would be put on should this bill proposal become law. I need further analysis on that to tell one way or the other for sure.
Now the question becomes, is the situation this proposal creates better, worse, or the same as the current situation Districts and Boards of Education find themselves in for the operating tax rate which is: beg the public for approval to make any change to the rate?
I’m not a finance chief for a district nor am I a legislator, but as a guy who looks at this stuff for “fun”, a taxpayer, and a parent of school-aged children who’s been involved in 3 operating referenda, I would say this is something our legislators should seriously consider passing. Not only does it slowly advance us to 21st century education funding, but it lays the groundwork for future discussions and decisions on education funding reform (i.e., property reassessment, weighted/needs-based funding for low income students and ELL, K-3 basic special ed, etc.).
It does not remove the need for districts to run an Operating Referendum though it may change how often they are run and for how much is asked each time. Taxpayers still will have a chokehold on the Operating Tax rate even with this bill proposal becoming law, though it may now be one-handed instead of two. It is clear though, with 35-45 year old property assessments, frozen and broken funding formulas, change is needed. This is a (small) piece of that change.