School Finance: another option

One of the drivers behind the move to a system-level fiscal capacity formula for determining levels of state education funding is the phenomenon of shared vs. unshared revenue. In short, counties must share all locally-derived education funds between all school systems in the county, where cities with municipal school systems may augment that funding from additional property or sales taxes, without sharing with the county.

Of course, this means that city residents are paying higher taxes in order to support funding their schools better; it also means that counties have no way to close the gap in per-pupil spending, since any increase on behalf of the county generates a proportional increase to any municipal system within the county as well.

SB888/HB1263 (McNally/Winningham) would provide a remedy to that problem, but one that is completely at the county commission’s discretion, by enabling counties to increase property taxes in areas outside municipal school districts, with the proceeds going only to the county school system. In short, it would give counties a source of unshared revenue just like cities have, enabling them to narrow or close the gap in local per-pupil funding.

Passage of this legislation would remove the purported justification for the mistreatment of municipal school systems in TACIR’s proposed system-level fiscal capacity formula, where higher taxes paid for education by city residents are counted as a measure of wealth (reducing state funding) rather than effort (which should increase state funding, but does not).

It would not fix the core problem, which is the State’s chronic underfunding of education generally. It would, however, provide local governments with a way to address the problem of disparity between city and county school funding at the local level. It would also cause TACIR to re-evaluate the formula for determining fiscal capacity, and eliminate the factors that penalize cities for doing what they should be doing — and what the State should encourage rather than punish.

It survived the Senate committee process last year, but never made it to a vote in the full Senate (although it’s still active, being the second year of a two-year session); this year, the House companion has been deferred twice in the State & Local Government Committee, now scheduled for a committee vote on April 4. Stay tuned.

Since it’s entirely permissive rather than mandatory, there’s no reason to oppose it.

2 thoughts on “School Finance: another option

  1. I would assume that those commissioners representing Oak Ridge and only Oak Ridge or those in a split precinct wouldn’t be allowed to vote or would they? How would this work for those that represent both county and city like the two commissioners in the second district that represent both Clinton and the county?

  2. The bill does not specify that any commissioners would be excluded from voting, and it is the job of all county commissioners to approve expenditures and budgets, even when those items benefit only some residents.

    As written, all commissioners would vote on taxation and appropriations… but I would expect that commissioners would evaluate the question as fairly as they do any other.

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