School Choice Expansion: The Power of a Fiscal Note

Mike Ford:

At the start my public policy career I had the good fortune to work with someone who fully understood the power of the Legislative Fiscal Bureau (LFB) in influencing Wisconsin policy debates. To paraphrase my colleague, legislators want answers, and LFB is the respected authority that provides them. It follows that the content of LFB fiscal notes are often the catalyst, or death knell, for major potential policy changes.

It will bear watching how yesterday's LFB memo on the fiscal impact of the Governor's proposed school voucher expansion to nine different communities plays out. The note, available here, is, like just about all LFB work, well done.

First the note points out the obvious. When a student switches from a public school to private school via the theoretical choice program the district loses revenue. Why? Each student attending a public school district generates somewhere around $10,000 in state aid and local revenue (this is an estimate for ease of understanding, the actual amount varies by district). When a student leaves for any reason, the district will eventually lose the $10,000 per-kid. If you look at Table 4 on page 5 the first column shows the eventual estimated impact on participating district revenue limits.

School districts will naturally get worked up about this; they want the market-share and the revenue that comes with it. However, it is hard to justify that districts should be receiving funds for students they are no longer educating.

The more problematic part of the note for school choice advocates is the next three columns. The first column shows the aid reduction to public school districts to pay for 38.4% of the new choice program. Districts don't lose this money, they offset it with the property tax levy. In most cases, the local per-pupil cost for a choice program is less than the local per-pupil cost for a public school student, so on the surface it appears taxpayers are getting a bargain. However, the next column is where things get more complicated.

That column, labeled "Aid Formula Reduction," reflects two things. First, the loss of state aid that would have been generated by each pupil that leaves the district. Second, the change in distribution of state and local aid caused by having fewer students in the per-member property value calculation. In English (or something closer to it), when a student leaves a district the district's per-member property value increases, which lowers the portion of their revenue that comes from state aid and increases the portion that comes from the local property tax.

That is why, against all logic, that last column shows a levy increase despite the lower cost of the choice program. To put in even simpler, when a student leaves for any reason it does impact the state aid/property tax split for students the district is still educating.

Posted by Jim Zellmer at April 17, 2013 2:00 AM
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