Report: Utah Students Shorted $1.2 Billion Annually

edu fundingTwo decades of declining investment in Utah’s K-12 education has lead to a $1.2 billion reduction in available funds, according to a new report released Monday by the Utah Foundation – a non-partisan, Salt Lake City-based think tank.

The report, entitled “Getting By with Less: Two Decades of K-12 Education Revenue and Spending,” reaffirms the fact that the Beehive State has the lowest per-pupil spending in the nation due in part to Utah’s young population. More than 22 percent of Utahns are between the ages of 5 and 17; the national average is just over 17 percent. In 2014, Utah spent $6,500 per student compared to the U.S. average of $11,009, a 41 percent difference. In 1995, Utah spent $3,471 per student, while the national average was $5,494, a 37 percent difference.

But demographics are far from being the only reason for the lack of funding parity. In the past 20 years, Utah’s national ranking for its public education spending effort — K-12 education spending per $1,000 of personal income — has dropped from 7th to 37th. Due to decreasing state taxes, Utah’s tax burden for education spending is the lowest in years, reaching a two-decade low in 2012: $110.91 per $1,000 of personal income. The rate experienced a slight uptick in 2013 (the most recent year where data is available) to $111.36 per $1,000 of personal income earned.

[pullquote]Utah revenue towards education ranking has dropped from 7th in 1994 to 37th in 2014. Similarly, our spending per student has dropped from 11th in 1992 to 37th in 2014.[/pullquote]K-12 education in Utah is primarily funded by both income and property taxes. While revenue for K-12 education has increased, these increases haven’t kept up the pace with income growth. According to the report, Utah’s education funding per $1,000 in personal income has fallen even more than the decrease in taxation and mandatory fees. Utah’s tax burden has dropped nearly $10 per $1,000 since 1995, while funding for K-12 education has slipped by nearly $12 per $1,000.

The Utah Foundation pointed to a number of policies that have impacted K-12 education funding, including the birth of the Truth in Taxation process and a 1996 amendment (Proposition 6) to the Utah Constitution that made it possible for income tax revenue to be diverted from K-12 to higher education, as well as the 2007 tax cuts removing income tax brackets and replacing them with a flat income tax rate of 5 percent.

“Legislation that increased or decreased revenues in the Education Fund by more than $1 million from 1995-2016 resulted in a total decrease of nearly $350 million dollars. That is, the Education Fund currently has approximately $350 million less revenue each year in inflation-adjusted dollars,” the report said.

Lawmakers have claimed that $1.8 billion has been put into education during the past five years. While that is true, nearly half went toward higher education. A significant portion of the rest was in “one-time” allotments for K-12 education. The increase in state funding is equal to $549 million, an annual average of $110 million or 4.3 percent.

On the surface that may seem significant, but recent appropriations have been largely eaten up by student population growth and inflation.

Utah has the highest K-12 enrollment growth in the nation, with about 10,000 new students per year. Taking this growth into account, the $110 million annual revenue increase from 2011-2016 falls to $46 million. There is a silver lining here, though. Enrollment growth in Utah is expected to slow in the coming years due to declining birth rates, which will help K-12 education funding per student.

[pullquote]Legislative claims that $1.8 billion have been spent on education are misleading. These big numbers evaporate when growth in the system are taken into account.[/pullquote]Accounting for inflation, the annual revenue increase is further reduced by $41 million. Inflation is an important thing to consider, the report says, because it affects the costs of running schools. Together, student growth and modest inflation cost about $88 million per year between 2011 and 2016, leaving just under $22 million per year in new money for schools.

Additional funding for K-12 education should become available thanks to the newly passed Amendment B, a ballot initiative which amended the Utah Constitution to “increase and stabilize the distribution from the permanent State School Fund.” For the past two decades, the fund has been paying out state trust land revenues at around 2 percent each year – $45.7 million in 2015. SB 109 – School and Institutional Trust Lands Amendments, which was sponsored during the 2016 General Session by Senator Ann Millner (Republican – Ogden), crafted a new formula to cap distribution at 4 percent, allowing it to as much as double.

Meanwhile, the question of whether to raise taxes to help with K-12 education funding continues. During the 2016 General Session, Senator Jim Dabakis (Democrat – Salt Lake City) proposed raising the state income tax on the richest 1.5 percent of Utahns. SB 104 – Amendments to Income Tax called for increasing the rate to 6 percent for taxable incomes between $250,000 and $1 million. Those who make more than $1 million would see their rates go up to 7 percent. It was projected to raise an additional $178.8 million a year for education, according to the fiscal note. The bill died when members of the Senate Revenue and Taxation Committee, after speaking against it, voted to adjourn without taking action.

Tax increase proposals in the name of education continue to face stiff opposition from Republican lawmakers and Governor Gary Herbert. At a gubernatorial debate in October, the governor said that he was against a proposal to hike Utah’s income tax by 7/8 of 1 percent due to concerns about tarnishing the Beehive State’s business-friendly image. “You don’t want to, in fact, kill the goose that lays the golden egg,” Herbert said. He feels that a better way to get additional education funding is by growing the economy. The governor has also confirmed that his 2017-2018 budget proposal, which is set to be released in early December, will not include a tax increase for education.

The measure, which was raised by Education First Utah and the Salt Lake Chamber of Commerce/Prosperity 2020, would generate an additional $518.5 million for education each year. Education First and Prosperity 2020 are advocacy groups that have brought together a vast coalition of civic, business, and government leaders. It was announced Tuesday that the Our Schools Now initiative will begin gathering signatures next summer to get the question of raising income tax by 7/8 of 1 percent for education placed on the ballot in 2018. The group says the proposed change would bring in approximately $750 million per year in new money for Utah’s schools.

A UtahPolicy.com poll, which was conducted in October by Dan Jones & Associates, found that 67 percent of Utahns “strongly” or “somewhat” approve of increasing personal income tax rates from 5 percent to 5 7/8th percent to help public schools. 29 percent oppose such a change and 4 percent don’t know.

“Ultimately, Utahns will need to decide whether current outcomes at current levels of spending is sufficient for their children. Alternatively, if Utahns want to provide greater assurances that all children have opportunities for success in K-12 and to continue on to higher education, they many need to walk back some of the tax and policy changes over the past 20 years that have removed more than $1 billion annually from public school budgets,” the Utah Foundation concluded.

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