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The Condition of Education 2011: Public School Revenues and Property Taxes

August 2, 2011

The National Center for Education Statistics (NCES) and American Institutes for Research (AIR) published The Condition of Education 2011 in May, a broad report covering many sectors and indicators in U.S. Education – not just student achievement, but enrollment, demographic shifts, finance, and a broad range of other topics of interest.  We will be commenting on sections in the report on an ongoing (though irregular) basis.

Indicator 35, Public School Revenue Sources (p 100) notes that): “From 1989–90 through 2007–08, total elementary and secondary public school revenues increased from $356 billion to $599 billion, a 68 percent increase” in 2010 dollars.  Of federal, state, and local sources, federal money increased 125 percent, far outpacing the jump in revenue from other sources, though federal money still only comprises about 8 percent of elementary and secondary school revenue.  Of Midwestern states, only in Minnesota did more than 60 percent of total school revenues come from state sources; in other Midwestern states, state money makes up as little as 33.1 percent (Nebraska), and up.

Of local revenue sources, the majority comes from property taxes, making up as much as 50 percent of total revenue, as in Illinois.  Previously mentioned Minnesota lies on the other end of the spectrum, with property taxes comprising only 16 percent of school revenue (an important fact in light of the recent state shutdown, the effects of which are still emerging).

These numbers are only as recent as 2008, of course, and therefore do not reflect the brunt of the real estate crisis.  Many localities are reeling from declining property values and, therefore, declining property tax rates, and school districts are no exception.  CNN Money reports that property tax revenue dropped 1.7% in the second quarter, making two straight quarters of decline.    Though many Midwestern states were insulated from the real estate crash, metro areas and isolated rural areas are feeling the pinch, and by all estimates will continue to feel it for several years.  Districts that are insulated from fluctuations in property values will find more stability in their budgets.  Districts and agencies with high reliance on property taxes should explore alternate funding streams such as fundraising, fees, and school-business partnerships.

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