howardnlby Howard Stephenson
A recent study by the Utah Taxpayers Association sheds light on expected impacts of tuition tax credits and charter schools on Utah’s traditional public schools

Utah’s urban school districts with declining enrollmenst enjoy lower pupil-teacher ratios, lower property tax rates, higher per student spending, and higher teacher salaries than urban districts with growing enrollments, according to a recent study by the Utah Taxpayers Association.

Ironically, declining enrollment districts are able to achieve this while receiving slightly less state income tax dollars per student than districts with growing enrollments. When enrollments decline, the local property tax base remains intact. This allows declining enrollment school districts to collect nearly twice as much property tax per student for operation expenses than fast growing districts. The five fast-growing districts and percent of growth between 1996 and 2003 are: Tooele 34%, Nebo 23%, Wasatch 16%, Alpine 15%, and Washington 13%. The five slow-growing districts and their percentage growth over the eight years included Jordan 3%, Ogden 3%, Weber 1%, Davis 1%, and Logan 0.6%. The four declining districts and their percentage decline between 1996 and 2003 are Provo 2%, Salt Lake 4%, Murray 7% and Granite 9%.

This analysis refutes the widespread belief that urban districts cannot adequately cope with declining enrollments due to fixed costs, a concern that was recently reiterated by a PriceWaterhouse Coopers (PWC) study regarding tuition tax credits, which was funded by the Utah School Boards Association. According to the Utah Taxpayers Association analysis, not only have declining enrollment districts been able to adapt to declining enrollments, they are actually in better financial shape than growing districts.

The analysis also shows that growing districts require more state financial support on a per student basis than declining enrollment districts.

Opponents of tuition tax credits (TTC) have portrayed tax credits as “draining” money from public schools, especially public school districts with declining enrollments. What TTC opponents have not admitted is that, in a similar fashion, growing school districts “drain” funds from non-growing districts. TTC opponents have never complained about this “drain” of resources by growing school districts, and frankly, they shouldn’t because non-growing districts are by all significant financial measures better off than the growing school districts and have not been harmed financially, demonstrating that enrollment growth is a more serious challenge than declining enrollment.

Pupil-Teacher Ratios

Declining enrollment districts enjoy lower pupil-teacher ratios than growing districts, and the gap has widened in the past seven years. Class size reduction has been a high funding priority, probably the highest public education priority, for all fifty states in recent decades. In the last twenty years, pupil-teacher ratios have declined roughly 20%, even in Utah, which still has the nation’s highest pupil-teacher ratio.

In 1996, pupil-teacher ratios were 5.5% higher in fast growing districts than in declining enrollment districts. By 2003, the difference had increased to 11.8%.

Property Tax Rates

Comparing school district property tax rates is problematic since rates are dependent upon average property values. Salt Lake City School District, for example, can generate a significant amount of property tax revenue with a low tax rate since downtown property valuations are very high.

However, these valuation differences are not an issue when comparing changes in property tax rates since property tax bases generally change very slowly. (Washington and Wasatch school districts are notable exceptions). When comparing property tax rates or tax rate changes, the state-wide basic levy must be subtracted from the district total levy because school districts receive one less state income tax dollar for each dollar generated by the statewide basic levy.

Property tax rates grew dramatically from 1996 to 2003 in fast growing districts while property tax rates in declining enrollment districts experienced a comparatively modest increase.

Declining enrollment districts receive significantly more property tax dollars per student for operational purposes. As enrollment declines, the local property tax base stabilizes or continues to grow thereby increasing property tax revenues per student as enrollment decreases. Additionally, declining districts are able to dedicate a larger share of property tax revenues to cover day-to-day operation costs since declining districts’ capital needs are much lower than those of fast growing districts.

Percent of Property Taxes Used for Operations

Fast growing school districts have higher property tax rates but have a smaller portion of their taxes available for operations, including classroom instruction. Fast growing districts have very high capital requirements, and these capital needs consume a large percent of the districts’ tax rate. Declining districts have lower capital needs, typically restricted periodic renovations, and are therefore able to dedicate a larger portion of property tax revenue to cover operational costs. In recent years, declining enrollment districts have temporarily increased the percent of property taxes used for capital in order to address cyclical renovation needs.

Assessed Valuation per Student

Declining enrollment districts enjoy a significant advantage over growing districts with regards to assessed valuation per student. Since 1996, assessed valuation per student has increased slightly faster in fast growing districts than in declining districts, but assessed valuations per student are still much higher (52%) in declining enrollment districts than in fast growing districts.

Teacher Salaries

Teacher compensation in declining districts was 6.8% higher than compensation in fast growing districts in 2003. From 1996 to 2003, teacher compensation in declining districts grew slightly faster than compensation in growing districts.

Declining districts generally have higher teacher compensation because teachers in these districts typically have more experience. Growing districts, on the other hand, are constantly hiring recently graduated teachers who earn less. Nevertheless, the critical issue is that declining districts can afford to pay their teachers more than growing districts can.

Spending per Student

Declining enrollment districts spend more per student than growing districts while receiving slightly less state income tax funding per student

In 2003, fast growing districts received 5.4% more state funding per student than declining districts, slightly lower than 5.9% in 1997. The most significant funding difference is the $734 per student local funding in fast growing districts and the $1,355 per student local funding in declining districts. This disparity has not changed significantly in the past seven years.

Summary of Findings

Declining enrollment districts and slow growing school districts are financially better positioned than fast growing districts by every significant measure including pupil-teacher ratios, property tax rates, assessed valuation per student, percent of property taxes dedicated to cover operational costs, and total spending per student. As declining enrollment districts continue to lose enrollment to growing districts, their financial advantage over growing districts continues to increase.

These findings suggest that as more students leave traditional schools for charter schools and private schools through tuition tax credits, traditional schools will experience the benefits described here.