Montana Viewpoint


Increasing the state share of funding for education can lower most local property taxes

September 13, 2003

As the state share of spending for K-12 education become less and less, the local share becomes more and more. This is not good news for homeowners or main street businesses, because it raises their taxes. How we got here is a long story, but the most recent chapter goes back to 1986, when the “Underfunded Schools” lawsuit against the state began.

Prior to 1989, schools within a single county were funded by the state General Fund, local school district mill levies, and a 55 mill countywide County School levy which was distributed to schools within that county. This last was an attempt at “equalizing” educational support. What that means is because there are huge differences in property values from one school district to another some school districts can’t raise enough in mill levies to give kids anything more than a bare bones education and sports program, while other schools just wallowed in property tax money. Much of this disparity still exists.

In short, they don’t have equal amounts of taxable property among the school districts. That means that property tax levies have to be higher in poor districts than in rich ones. Take Frenchtown with the pulp mill, Colstrip with four power plants, or Noxon with the biggest dam in the state; then compare their taxable value with almost any rural school in Montana. So divvying up the County School Mills according to need was a way of mitigating the differences, but not a very good one. While it helped equalize within the county, there were still a big difference from county to county.

Equalization is important for schools, but it’s also important that taxpayers be “equalized.” Property owners in poor school districts often have to pay more property taxes than those in wealthy districts. A tax mill in Hot Springs, for instance, brings in one heckuva lot less than one in Colstrip. In general, the more money the state gives to schools, the more equalized the taxpayer is, because the cost is shared by all Montanans. It’s sort of like an insurance pool: the risk — in this case the cost — is spread out all across the state, and school districts with a high value of taxable property subsidize those who don’t.

Into this scenario came the 1986 Underfunded Schools lawsuit against the state. Some 60 school districts claimed that the way the state paid for education violated Article 10, section 1 of the Montana Constitution, which says “Equality of educational opportunity is guaranteed to each person of the state.” The District Court found that it did violate the Constitution, the state appealed, and in 1989 the Supreme Court upheld the decision unanimously, but left it up to the legislature to do something about it.

The legislature met in Special Session the summer of 1989, rewrote the school funding formula, and imposed a new statewide 40 mill levy to support schools. The overall result on the taxpayer was to raise taxes in some school districts, but to lower them in most others because they no longer needed to float their own local mill levies. By 1992 both the 55 mill county levy and the statewide 40 mill levy went to the General Fund, and the legislature distributed it according to need, which was determined by a complex formula.

Another part of the Constitution says, “The legislature shall provide a basic system of free quality public…schools.” Some legislators have felt that if we removed the word “quality” from that sentence we could get by with a cheaper educational system and not violate the Constitution. In one of the more piercing comments ever made on the floor of the House, Representative Red Menahan, florid of face and rotund of body, rose to object: “Taking ‘quality’ out of education is like taking ‘not’ out of the Ten Commandments!”

Now there is another lawsuit being brought by school districts challenging the adequacy of the stateÕs share of public school funding. In 1992 the state share was 71%, today it is 61%. The difference is paid for by your local taxpayer. Schools, they claim, are hurting, and have to rely on local taxpayers more than they should. Lest you think this is just teachers trying to get a raise, remember that the decision to sue is made by the neighbors we elect to the local school board, not exactly a radical bunch of folks.

Soon there will be, I suppose, another method of funding schools. I hope it won’t be as confusing and complex as our current system, but remember this: if it’s simple it’s not fair, and if it’s fair it’s not simple.


Jim Elliott
Phone: 406-444-1556
Mail: State Senate Helena, MT 59620