Growing Property Tax Revenue Changing K-12 Funding
This week the Center on Budget and Policy Priorities released a report on the state of K-12 funding since the Great Recession. The main takeaway from the report was that most states are providing less support per student for K-12 now than before the recession, and that some states are still cutting K-12 funding, eight years after the recession. The report surveys budget documents in all 50 states, when data were available.
While pre-recession data for West Virginia weren't available, the report did show that West Virginia had the biggest cut in per-student state K-12 education in the past year, with state formula funding per student falling by 3.3% from 2015 to 2016.
The report notes that the main reasons for state cuts to K-12 after the recession include weak revenues from a slowly growing economy, falling federal aid, and in some states, tax cuts. Cuts to state funding usually create problems for local districts trying to make up the difference. In most states, property values fell sharply after the recession hit, making it difficult for local school districts to raise revenue to offset state spending cuts, and forcing many school districts to scale back services.
However, that's not the case in West Virginia. While West Virginia had the biggest cut in state funding in the past year, it was because school districts have had rapidly growing property tax revenues. To explain why that happened, here's a quick lesson in K-12 funding in West Virginia:
West Virginia's school aid formula determines a base level of funding for each school district, based on factors like enrollment and population density. Once the base level is calculated, the local share is calculated. The local share is determined by school district property tax revenue, with the school current expenses levy applied to all taxable property in each county. A portion of the property tax raised by school districts, the local share, is subtracted from the base level of funding. The difference between the base level and the local share is the amount the state provides to the school districts.
In recent years, property tax revenue in West Virginia has seen substantial growth, due in large part to natural gas drilling activity in the Marcellus Shale. This growth in property tax revenue has affected the school aid formula, increasing the local share, and reducing the state's share, in effect making it appear the state is providing less funding.
For example, in FY15, the school aid formula set the base level of total funding for K-12 at $1.620 billion, with the local share set at $432.6 million and the state's share set at $1.19 billion. For FY16, the base level of funding didn't change much, falling to $1.605 billion, $14.7 million or 0.9% lower than FY15, as enrollment decreased and a number of experienced teachers retired. But the the state and local shares did change. The state's share fell by $40 million or 3.4%, while the local share increased by $23 million or 5.3%. But as mentioned above, the local share calculation is dependent on property tax revenue. And school property tax revenue grew by $52 million in 2015, an increase of 5.0%, after growing by 1.2% the year before.
So unlike in other states, West Virginia hasn't been cutting K-12 funding because of budgetary pressures (it HAS been cutting higher education funding), instead the state's share of K-12 funding through the school aid formula has fallen due to natural-gas-fueled property tax growth.