Opinion ID: 2124044
Heading Depth: 1
Heading Rank: 3

Heading: The General System of Education in Minnesota

Text: In evaluating plaintiffs' claim of relative disparity, it is important to understand the basic state property tax system which generates funds for state education as well as other funding mechanisms which districts may use to supplement the level of basic revenue provided by the state. The following chart demonstrates how the state's funding has changed over the last decade: Total Dollar Amount of General Education Revenue by Category Selected Years (amounts in millions) Revenue Category FY 80 FY 84 FY 88 FY 90 Uniform Basic Revenue 1,070.2 1,202.1 1,663.6 2,303.1 Cost Differential Revenue: Pupil Unit Decline/Growth 65.6 67.4 5.1 00.0 Compensatory/AFDC 48.4 70.5 101.1 63.6 Teacher Retirement 131.7 178.6 238.7 00.0 Sparsity 1.7 2.3 5.3 5.0 Training & Experience 00.0 00.0 130.2 14.3 Low Fund Balance 00.0 30.8 000.0 00.0 Total Cost Differential 247.4 349.6 480.4 82.9 Grandfather/Supplemental 48.5 46.9 5.2 12.0 Referendum/Discretionary Revenue: Referendum 12.3 68.9 111.8 162.1 Discretionary 00.0 113.7 000.0 000.0 Total Referendum 12.3 182.6 111.8 162.1 Total Revenue $ Millions $1,378.4 $1,781.2 $2,261.0 $2,560.1 Percent of General Education Revenue by Category Selected Years Revenue Category FY 80 FY 84 FY 88 FY 90 Uniform Basic Revenue 77.6% 67.5% 73.6% 90.0% Cost Differential Revenue: Pupil Unit Decline/Growth 4.8% 3.8% 0.2% 0.0% Compensatory/AFDC 3.5% 4.0% 4.5% 2.5% Teacher Retirement 9.6% 10.0% 10.6% 0.0% Sparsity 0.1% 0.1% 0.2% 0.2% Training & Experience 0.0% 0.0% 5.8% 0.5% Low Fund Balance 0.0% 1.7% 0.0% 0.0% Total Cost Differential 18.0% 19.6% 21.3% 3.2% Grandfather/Supplemental 3.5% 2.6% 0.2% 0.5% Referendum/Discretionary Revenue: Referendum 0.9% 3.9% 4.9% 6.3% Discretionary 0.0% 6.4% 0.0% 0.0% Total Referendum 0.9% 10.3% 4.9% 6.3% Total General Education Revenue 100.0% 100.0% 100.0% 100.0% Total Revenue $ Millions $1,378.4 $1,781.2 $2,261.0 $2,560.1 Thus, as the above chart indicates, the legislature has equalized more of the state funding for education in recent years, with the percentage of uniform basic revenue rising from roughly 67.5% in 1984 to 90% by 1990. This shift occurred in large part as a result of the legislature's 1987 reform of the educational financing system. At that time, the legislature eliminated separate funding for many categorical education programs and folded that money into the foundation program, thereby increasing the basic allowance and permitting district choice regarding the proper programs to offer. Under this new formula, programs such as summer school or gifted and talented programs were no longer separately funded. Instead, each district received a lump sum and was given discretion as to how to distribute this money. [2] These reforms resulted in plaintiffs receiving 8.1% more revenue, compared to intervenors' 3.8% increase. In terms of generating the funding to meet the state's educational goals, the legislature has enacted various statutes in an effort to provide a general and uniform system of public education throughout the state. The state has accomplished this goal primarily by guaranteeing a certain amount of basic revenue (also known as foundation revenue) to all districts in the state. This basic revenue is distributed on a per pupil unit basis, a figure which is adjusted according to the relative costs of educating students at various grade levels. Under the current formula, kindergarten students account for .5 pupil units each, with elementary students at 1.0 pupil units and secondary students at 1.3 pupil units. See Minn.Stat. § 124.17, subd. 1 (1992) (defining pupil units at various grade levels). [3] The number of students at each level is then multiplied by the corresponding per pupil figure for that grade level, and the totals are added together to derive the total number of pupil units in a given district. At the time of trial, the level of basic revenue was statutorily set at $2,953 per pupil unit (ppu), a figure which increased to $3,050 ppu for 1992 and subsequent school years. See Minn.Stat. § 124A.22, subd. 2 (1992). To generate funds for this system, the state requires that all school districts impose a uniform property tax. Minn.Stat. § 124A.23 (1992). Property taxes are assessed as a percent of tax base, and at the time of trial in 1991, this rate was set at 26.3%. [4] See Minn.Stat. § 124A.23. The state makes up any difference between the revenues raised by this tax and the guaranteed minimum. Minn.Stat. § 124A.23, subd. 4 (1992). This process is called equalization. Once referred to as mills, the measure of property taxation is now calculated on the basis of tax capacity. In determining tax capacity, a percentage of the property's market value is placed in the tax base, which varies according to the type of property. The current percentages applied to various types of property are: Residential Homestead First $72,000 1.00% $72,000-$115,000 2.00% Over $115,000 2.50% (in 1991) 2.00% (in 1992) Residential Non-Homestead 3 or less units 2.80% 4 or more units 3.50% Commercial and Industrial First $100,000 3.30% Over $100,000 5.06% Minn.Stat. § 273.13 (1992). The net tax capacity for a school district is the sum of the amounts computed for each parcel of property in the district. Due to the increased percentages applied to commercial entities and apartment complexes, a district's net tax capacity may not correspond to the wealth of the citizens of a given school district but may instead reflect a greater percentage of commercial entities in that district. This weighted average system means that cities such as Minneapolis and St. Paul, which have the highest percentage of AFDC recipients, are also the school districts with the highest wealth under the state's net tax capacity system. [5]