Experts explain funding, property taxes for education

By spending about $1.4 billion, or a third of the state budget, on public education, Delaware lawmakers have signaled their priorities.

But politics and very specific funding rules can complicate Delaware’s role in educating 139,000 public-school students in kindergarten through 12th grade.

Before the public can fix the system, they were invited to better understand it, at a forum titled “The Funding of Public Education in Delaware, Part 1,” hosted by the League of Women Voters of Sussex County (LWVSC) and the American Association of University Women (AAUW).

The nonpartisan groups both encourage informed participation in democracy and topics of public importance. In Part 1, an expert panel of educators and public officials explained the roles of Delaware tax dollars, local funds and school referendums. Part 2 will be scheduled in the future, to discuss potential solutions.

The State of Delaware spends an average of $15,153 per student on education, but some children only require half that amount, while those with special needs require twice as much, said Delaware Secretary of Education Susan Bunting, a former Indian River School District superintendent.

Public schools receive local, state and federal funds, but recent questions about inequities in fair funding are causing people to look particularly closely at county property tax assessments.

“There are debates going on right now about school funding, school finance. Some would argue the system is broken,” said Kevin Carson, longtime school administrator and a senior fellow at the University of Delaware’s Institute for Public Administration. “I’m not of that opinion. I think our system is entrenched. I think we’ve had failure to adapt as time has gone on, and as funding challenges and student needs have changed.”

Delaware has come to a fork in the road. A Chancery Court judge sees merit in the 2018 lawsuit that the NAACP of Delaware and Delawareans for Educational Opportunity have filed, alleging that the State has not allocated resources fairly, resulting in disadvantaged students not receiving the services they need.

In particular, a dated funding system means that schools don’t get additional resources for disadvantaged students, including low-income, minority, English language learners and students with disabilities.

Reassessment of property values is a big issue.

“He all but admonished the state legislature for not having taken the action that it needs to take, and the suggestion is that if the state legislature doesn’t do something, the court probably will,” said state Rep. Ruth Briggs King (R-37th), who serves on the Delaware House Education Committee, which she said has been “meeting frantically” to develop legislative solutions.

Although she wouldn’t commit to supporting any legislation before reading it, Briggs King said that Delaware is overdue to discuss fair funding: “Your ZIP code should not determine the quality of your education. … We’ve been kicking this can down the road for 40 years.”

But “It all comes down to political will,” she had previously said of all education law and funding.

So, “That may be the answer people are looking for: for a judge to make a decision,” Carson had opinioned.

“There’s no doubt we’re going to come back in January, and we’re going to be facing some tough decisions about what we’re going to do about the reassessment issue,” Briggs King said of the Delaware General Assembly, which is approaching the start of the second year of the two-year session.

Sussex County government does not pay for education. It merely serves as a funding collection point for districts. As people pay their property tax bills, Sussex County forwards the correct share to the county’s eight public school districts.

Residents of Indian River School District pay a lower tax rate than anywhere else in Sussex County. That’s because the IRSD school tax is only 3.035 percent of the assessed property values.

Because Delaware taxes are based on decades-old property assessments, many people pay either more or less than their fair share of property taxes. Assessed values have not changed in decades, so they are dramatically less than real estate values, which have soared away with the modern real estate market.

Most property assessments are based on the value of property in 1987 (Kent County), 1983 (New Castle County) and 1974 (Sussex County). Two entire batches of students could have grown up and graduated high school since Sussex property values were last reassessed.

“It would be difficult for someone to argue that the fair market value of property today is equal to what it was in 1974 in Sussex County,” said Briggs King.

While done regularly in other states, property reassessment is expensive, and no politician wants to lead the charge.

But if the state or counties won’t reassess property values, then the districts have to keep requesting a tax rate increase, via referendum, to manage inflation and other rising costs.

“Funding is cyclical,” so without automatic reassessment, districts typically need a current expense referendum every five years to keep up with inflation.

Autonomy (and deflection) by the school boards

Schools are run by their local school boards, so the state school board and leadership at the state department of education cannot dictate most of their policies. However, local districts must still abide by state law and regulations. The DOE has regulatory oversight — and under the current administration, their focus is to support, assist and advocate for districts.

“One size does not fit all in some of these decisions … and so we try very much to stay out of some of those local decisions,” said Briggs King.

Local money can be spent at the school board’s discretion, although they’re still subject to responsible-spending laws to educate students.

But school boards’ desired autonomy seems to stop at taxation. They often reject the state’s offers to allow them more flexibility in taxing themselves.

“The local boards don’t want to be the ones to raise the taxes. They want the legislature to do it,” said Briggs King.

Besides the fact that no one wants to be the bad guy who controls/raises taxes, local school boards really don’t want to be politicized. It can be hard enough to entice volunteers without politicizing the process any more than it is.

Officially, a major capital referendum is the school district’s way of asking public permission to borrow money (“issue bonds”) for its share (only 20 to 40 percent) of a construction project. The school board must responsibly adjust the property tax rates each year to pay off the loans.

In a current-expense referendum, the district directly requests a change in tax rates to fund everyday expenses (salaries, textbooks, extracurricular, maintenance and so forth).

“To me, it’s a kind of test of a school district’s relationship with the community,” said Carson, who has both won and lost referendum votes. “I think it’s as close to a political campaign as you can get into. … You’re asking people to voluntarily go out and increase their taxes. It’s an important question.”

For instance, the Indian River School District has attempted several public referendums in the past few years. The 2016/2017 current-expense referendum was eventually successful (a permanent increase in operating funds), while the 2019 major capital referendum (which would have incurred a temporary tax increase to build a school that alleviates overcrowding) was twice voted down, taking the district’s funding effort back to the drawing board.

People are moving to Delaware in droves, partly because the taxes are so low. But for the IRSD, new students are coming way faster than the tax dollars.

Rules for each dollar

Delaware is one of the top investors in education in the United States,” said Briggs King, a former educator.

Most of that goes toward staff. Delaware pays 70 percent of teacher salaries, and districts must contribute at least 30 percent. Delaware doesn’t automatically allocate an equal number of dollars per student. Instead, the unit count formula is based on the student population as of Sept. 30 each year. Depending on the intensity of all children’s needs, the state would fund one “unit” (one teacher or two paraeducators) for every 20 traditional students, for every 12.8 preschool students or per 2.6 complex special-education students.

Districts can certainly hire more staff than that, but it would all have to come from local dollars, with no additional state support. Units also generate other positions, such as secretaries, principals and even district administrators.

Charter schools are considered public schools, but independent ones. They cannot levy taxes, and they don’t get public money for their buildings, but “in exchange, they get a lot of autonomy,” said Chuck Longfellow, DOE associate secretary in operations support.

When students opt for school choice outside their assigned school zone, tax dollars follow the student. So every time a student chooses to attend any public school instead of his or her home district, the regular district must pass the related money to that other district or charter school.

For vocational-technical school districts (which generally cover the entire county), property taxes are changed by the General Assembly, not public referendum.

Because land values can vary so widely, the state also provides “equalization” funds to land-poor districts. That system is floundering because the formula has been frozen for 10 years, and it’s also based on those ancient assessment values.

Briggs King noted that she takes exception to the IRSD ever being called a “rich district,” because it may have some beach real estate, but it also has significant numbers of low-income and ELL students just a few miles away from the coast. Those traits impact education and the resources needed to teach them.

Other money comes from the federal government (with strict rules), plus grants, PTOs and booster organizations.

Panelists also bemoaned the state’s insufficient building maintenance funds (“minor capital fund”), which could help prevent more expensive major capital projects down the road.

Audience members discussed everything from test results to school choice’s potential impact on segregation and funding inequities.

The public’s role

Besides actually receiving an education, the public’s role in the education system is to pay taxes; choose to donate to the district or individual student causes (such as boosters); vote in referendums; vote in school board elections; attend finance and other district committee meetings; and present ideas or concerns to school board members.

“I implore you to get involved with those committees,” Carson said. “If you’re genuinely concerned about the finances of the school district that you reside in, you have an opportunity to provide input, have examination of the budget and talk to the people who address these issues every day.”

School finances are public information. People can find budgets and spending reports on district websites, or submit Freedom of Information Act (FOIA) requests for specific documents.

The state also posts detailed statistics about students, educators and schools online:

• The Department of Education “Report Card” (https://reportcard.doe.k12.de.us) can be searched by individual school or district.

• The Delaware Open Data portal (https://data.delaware.gov) carries information from all kinds of agencies and projects.

Presentation slides have been posted online from the event’s speakers https://my.lwv.org/delaware/sussex-county-delaware).

All Sussex County tax rates can be viewed online (https://sussexcountyde.gov/sussex-county-annual-rates).

By Laura Walter
Staff Reporter