Taxing for Schools, Investing in the Future

The governor of New Jersey--pressed by a lawsuit in the state’s highest court--has introduced legislation to reform property tax financing for education in an attempt to give poorer, urban school districts something approaching the quality of schools in richer suburban districts.

In Texas, the state Supreme Court has ordered the Legislature to make school funding more equitable, and the Kentucky Supreme Court ruled last year that the education system violated the state constitution. So Kentucky has totally reformed its system from curriculum to standards to financing--putting in a half-cent sales tax to help equalize funding between rich districts and poor.

The trend is powerful and spreading. Fresh lawsuits alleging discrimination because of unequal funding based on property taxes are pending in eight states (Kansas, Michigan, Minnesota, Missouri, North Dakota, Oregon, Massachusetts and Alabama), and suits may be filed in four more (Illinois, Pennsylvania, Ohio and Virginia).

Meanwhile, 10 states have overturned their school finance system in the last decade and others, such as Colorado, have moved voluntarily to make funding more equitable.

The concept is simple: “that the quality of education should not depend on the wealth of the local district but of the state as a whole,” as the Texas constitution puts it.

The controversy, as argued in many lawsuits through the years--beginning with a 1971 case in California--is that property tax financing leads inevitably to inequalities of education because some districts have higher property values, and hence more money for schools, than others.

The U.S. Supreme Court, ruling that the U.S. Constitution says nothing about education, has left the issue to individual state courts. And those courts lately have been saying with increasing vigor that the way we finance education must be changed--now. In Texas, where Gov. William C. Clements vetoed sales taxes earmarked for education reform, the court has appointed its own director of schools who says he will take a “Robin Hood” approach and shift state aid from wealthier districts to poorer ones.

If there is a trend for the ‘90s, this is it. The pattern of court decisions amounts to nothing less than an expression of the national will that educational opportunity be equitable--and also that educational quality be improved.

That’s not a painless sentiment. Taxes are normally required to offset the gap between rich and poor. Kentucky’s half-cent sales tax raises $500 million a year; Texas’ proposed tax would raise even more. Property taxes could go up in some areas if state governments cut back on aid to better-off schools to shift money to poorer ones.

It’s not social engineering, says Texas Lt. Gov. William Hobby: “The aim is not to make each district equal--wealthier districts can spend more on their schools if they wish--but that children in poor districts should have a fighting chance.”

Nor is it a do-gooder cause. What is galvanizing the courts as much as anything is recognition by business people of two problems: One is that funding schools in their own neighborhoods, while opposing taxes and bond issues to finance general education, is shortsighted. The undereducated students in other neighborhoods are business’ future employees.

Two, a related problem is the quality of education everywhere; a labor force that is 25% illiterate is not merely unfortunate, but counterproductive. Scholarly studies, such as a recent one from RAND Corp., blame poor basic education for stagnant U.S. productivity and the lack of investment in “human capital”--meaning that the schools leave many people almost incapable of being trained for today’s high-tech world.

A little perspective: We have always had high school dropouts. In fact, in 1920, only 21% of the students finished high school--a 79% dropout rate, compared to today’s 40% or so in some areas. But in 1920, the skills needed for work in industry and agriculture were lower than what is demanded today, where every job demands knowledge and judgment--and a country whose students score lower than every other nation in math and science tests is at a disadvantage.

We’re already spending money--federal, state and local expenditure on primary and secondary education totals $185 billion a year. So, clearly, redistributing state aid must be accompanied by other reforms; the Kentucky Supreme Court probably had the right idea in ordering a redo of the system from the ground up.

Nobody argues that money is the whole solution, says Mary Fulton, a director of the Education Commission of the States, a Denver research organization. “However, money can buy textbooks and science labs, and it can maintain facilities and pay teacher salaries.”

Note the shift in emphasis: In the 1980s, it was fashionable to say we can’t solve problems by throwing money at them; in the ‘90s, the courts say that’s no reason to give up.

The result could be the start of improvement in U.S. education or, even more important, recovery of the sense of American equality in our public schools. It could make all our other problems more manageable.