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Posted Oct. 14, 2013
Faculty Q&A

Mildred Robinson Offers Tax Solutions to Stabilize K-12 Education Funding

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Mildred Robinson

UVA Law Professor Mildred Robinson has authored "It Takes a Federalist Village: A Revitalized Property Tax as the Linchpin for Stable, Effective K-12 Public Education Funding," which will appear in a forthcoming edition of the University of Richmond Journal of Law and Public Interest.

In order to stabilize funding for K-12 education after several years of budget cuts, policymakers at all levels of government need to take a fresh approach to generating revenue for schools, University of Virginia law professor Mildred W. Robinson argues in a new paper.

Contact: Brian McNeill

Robinson, the Henry L. and Grace Doherty Charitable Foundation Professor of Law at UVA Law, is an expert in tax law and policy. Her new paper, "It Takes a Federalist Village: A Revitalized Property Tax as the Linchpin for Stable, Effective K-12 Public Education Funding," will appear in a forthcoming edition of the University of Richmond Journal of Law and Public Interest.

How would you summarize the central argument of your paper? 

My main point is quite straightforward. In our country, education is critically important both individually and collectively; it is indispensable to individual economic well-being and essential for effective democratic governance. The vast majority of the American populace experiences public education at some point. As such, if these ends are to be well-served, public education needs and deserves ongoing financial support that is stable and efficient. This has not been the case in recent years as state after state has announced cuts in funding for public K-12 education. I believe strongly that the trend towards declining support much be arrested and reversed.

Do you see the way that public education is currently funded — primarily via local property taxes — as problematic? Why?

Local governments — school districts (school districts being essentially special local government districts) — have historically relied upon the property tax for funding public education, levying against the fair market value of real property within its jurisdiction. The aggregate value of taxable property can and does vary significantly from district to district. Consequently, property values inevitably affect the level of possible support for local schools. Problems ensue when, despite levying against that property to the extent permitted by applicable state law, poorer school districts are unable to approach the levels of expenditure of school districts that are more property-rich.  In short, significant cross-district differences in education spending can result.

Though disparities are undeniable, in 1973 the United States Supreme Court held in San Antonio v. Rodriguez that such differences do not constitute a violation of the federal constitution. Further, extensive litigation under state constitutions from 1973 forward challenging reliance on the property tax as a principal source of funding have had mixed results. Some state supreme courts have found that reliance to be unconstitutional and others have found no constitutional violation. Whatever the outcome, the property tax has remained an important source of funding for public schools in every state but one (Hawaii, where the state has assumed the total funding burden).  Funding disparities, therefore, persist in most states.

In your paper, what are some of the reforms that you support?

A bit of background to put that question in context will be helpful. Though public education is a service provided through local governments, the obligation to do so springs from state constitutions which respectively provide for public education as a matter of right. In practice, all three levels of government — local, state and federal — are implicated in this effort to educate — not surprising given the sheer magnitude of the task. At present, approximately 90 percent of the nation’s schoolchildren attend public schools. On the numbers, in the fall of 2011, more than 55.5 million K-12 students were expected to enroll in the nation’s public schools at a total cost of almost $600 billion. The simple fact is that the required financial outlay exceeds the fiscal capacity of any single level of government.

In fact, many states have moved to provide additional funding to public schools without regard to the outcomes in the litigation described above. For some school districts, state supplements are critical to program funding. 

States rely primarily upon retail sales taxes and individual income taxes for revenue. Therefore, state funding for public education as a matter of necessity has been drawn primarily from those sources. The 2008 recession significantly disrupted state revenue expectations. Revenue shortfalls were a common experience and led to reductions in state spending as public officials struggled to keep state budgets balanced. Public education was not spared the pain of those cuts. To date, many states have remained unable to reinstate spending at pre-recession levels, a situation that must be reversed. 

I think that several steps can to be taken in order to restore and stabilize funding. To do this, states must address both local and state fiscal practices. 

First, on the local level and with regard to the property tax, since states control local funding in terms of both policy and practice, states could take steps to increase the amount of revenue generated through this tax by and for the use of local governments. For example, states could legislatively redirect to school districts property tax revenue streams that have been diverted or waived incident to state-enabled or instituted economic initiatives. Doing so would not compel states to abandon efforts to provide incentives for economic development. Rather, I think that moving in this direction would better balance incentives for economic development with the ongoing need for a well-educated pool of potential employees.

Further, locally administered revenue options are limited; the property is the primary source of revenue for local government. Thus, even in revitalized form the property tax will almost certainly remain inadequate to the task of closing the financial gap between poorer and richer school districts. Inter-district disparities in property tax rolls will remain, making state financial intervention necessary in order to close the persisting gap between poorer and richer school districts. I submit that in order to close that gap, states must treat the funding of public K-12 education as a matter of the highest priority and must do so by allocating general funds. Earmarked special funds such as state-controlled funds generated from oversight of gaming activity for example should be, at most, supplemental to general source funding. Funding primarily from general source revenue should remain the preferred practice.

Do you foresee opposition to these ideas? On what grounds?

Opposition to these suggestions is almost certainly inevitable. The suggested changes may be deemed to constitute "new" taxes. I submit that neither recapturing property tax revenues foregone nor redirecting increments in property tax liability flowing from increasing property values constitute new taxes. Rather, in each case, the liability should or already exists. As such, in neither case is there a new tax. There may also be opposition to reallocations that adversely affect previously favored interests. That effect is undeniable and would have to be addressed and resolved as a part of the process of rethinking some of these challenges.

What role do you think the federal government should play in public education funding?

In light of the financial pressures presently facing the federal government, I am pessimistic about the possibility of increased direct federal support for public schools. I argue, however, that additional funding for public education might be indirectly provided through the Internal Revenue Code.  

I believe that Congress through the code could signal a strong preference for sub-federal reliance on property tax as a funding source for public education that would prove stable and productive over time. As such, I suggest in the paper that Congress do this by providing an income tax credit available to all taxpayers for property tax liability borne up to some pre-determined amount. With regard to itemizing taxpayers, the credit would appropriately reduce and replace the deduction presently available for all property taxes paid. It would be nonrefundable. In short, treated as a credit, the property tax levy would reduce what would otherwise be federal tax liability dollar-for-dollar up to the pre-set cap. The cost to the federal treasury would be real; the credit offsets dollars that would otherwise be a part of the liability for federal taxes. It is also possible, however, that the credit’s availability would facilitate local and state governments’ ability to generate increased funding for public schools.

What led you to study this topic?

In the interest of full disclosure, I was educated through high school in public schools and my parents were public school teachers. My personal interest in public education overall is thus both deep and abiding. That said, at least three factors contributed to my research interest in this particular project. First, as an ongoing matter, I am always intrigued by public finance matters generally — particularly how public financing decisions benefit as well as burden taxpayers. Second, I am concerned by the national trend toward lessening support for public education. I sought to learn more about the financial factors contributing to what I personally believe to be an undesirable and ultimately deeply damaging diminution in support for this enterprise. Finally, I hope that in sharing what I have learned, I might enrich and usefully contribute to the ongoing debate swirling around public education funding questions.

What will you work on next?

I have not yet settled on my next topic. It will, however, almost certainly be some variant on the theme to which I often return: How can our systems of public finance best and most fairly serve all taxpayers?

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