Budget ’25: Public Instruction Analysis

No one knows how much money public schools need to provide Wisconsin students with a basic level of education. Public school advocates refuse to put a number on it. The answer is always simply “more.” And public officials throughout Wisconsin, regardless of political party or ideology, have demonstrated their commitment to always give them more. Seemingly every budget includes “an historic investment in education,” and yet, as far as public school advocates are concerned, it is never enough.

The Department of Public Instruction (DPI) is ultimately responsible for the quality of public education in Wisconsin. It is responsible for distributing state aid to individual school districts, which accounts for the bulk of its funding. DPI is also in charge of Wisconsin’s public library system.

The current state budget appropriated $17.5 billion (all funds) to DPI, which includes $15.5 billion in GPR. DPI wants to increase that significantly to $22.2 billion (all funds), $20.1 billion (GPR). Gov. Evers wants to increase that to $21.2 billion (all funds), $19.1 (GPR).

Revenue limits are key to understanding public education finance in Wisconsin. School districts were once free to increase local property taxes on their own authority. However, ever growing union contracts resulted in a property tax revolt, and the state instituted revenue limits on school districts in 1993 to keep the situation under control.

Since then, school districts have had a maximum limit on how much revenue they can collect from a combination of property taxes and general school aids (equalization aid, etc.) from the state. When state aid goes up, property taxes come down and vice versa. Student enrollment is an important component in the formula, and the revenue limits are expressed in terms of dollars “per pupil.” The average revenue limit in Wisconsin is currently $12,506 per pupil.

The topic of “Two-Thirds” funding inevitably comes up when discussing revenue limits. Originally, the state made a commitment to provide enough general school aid to cover two-thirds of the statewide total revenue limit. Democrats repealed that requirement in 2003. However, state support still hovers around that benchmark. In fact, the state has exceeded the two-thirds threshold for the past four years, according to the Legislative Fiscal Bureau. Gov. Evers' proposal would push it above 70%.

The state also provides districts with categorical aids (per pupil aid, etc.). These aids are not subject to revenue limits, which means extra money to school districts. It’s the same deal with federal aid. There are 33 separate categorical aid programs currently in effect. The average categorical aid amount is currently about $1,900 per pupil.

In addition to revenue limits, the state has three property tax credit programs to offer additional relief to homeowners. These programs are: the School Levy Tax Credit, the First Dollar Tax Credit, and the Lottery and Gaming Tax Credit. DPI does not handle these funds. Instead, they go through the Department of Revenue. That means they are not reflected in DPI’s budget. However, they still contribute to the state’s support of public education by offsetting the local tax burden that directly benefits schools.

It's likely the topic of declining student enrollment will arise during the budget debate. Every year the number of K12 students in Wisconsin drops, while total school funding increases. Right now, there are about 800,000 students in public schools in Wisconsin, down from 871,000 twenty years ago.

The Wisconsin State Constitution guarantees a free public education to every child in the state, and it “shall be as nearly uniform as practical.” It is generally accepted that “uniform” means “equitable,” but no one really knows what “equitable” means, and the issue has never been settled in court. That’s why the per pupil revenue limit in Norris School District is $168,629 per pupil while it’s only $10,734 per pupil in the Sparta Area School District. How much it costs to educate a child is an open question, and the only answer you’ll ever get from a public school advocate is “more.”

When it comes to how general state aid (equalization aid) is distributed, the purpose is the “equalization of tax bases, not rates.” The basic idea is that every student in the state should have the same amount of local property value per student. If community A has $1 million of property value for every student, and community B only has $100,000, then the state should provide enough aid to community B to make appear on paper that it has $1 million of property value per pupil.

In practice, no one really understands how the formula works and everyone thinks they’re getting less state aid than they should. The result is every school district feels it is in fierce competition with its neighboring districts for more students, they feel bitter resentment towards the state for not giving them what the believe they deserve, and they’re forever cajoling local taxpayers to increase revenue by raising property taxes. Nobody, regardless of their feelings about public education, likes the funding formulas.

The MacIver Institute, additionally, believes that the funding formula creates a sense of disconnection between taxpayers and their local school districts. Taxpayers see a direct relationship between their property taxes and the local school district. They do not necessarily see a relationship between their income taxes that is turned into state aid and given to their local school districts. Therefore, they are less likely to be engaged in how their local district is run. This undermines our system of self-governance. Ideally, state aid to school districts should be minimized, and school districts should be empowered to raise the revenue they need from local sources. Local community members will then be forced to take a more active role in the decisions affecting the quality and quantity of services provided by their own local schools. Nothing will ever improve so long as they can pass the buck back to the state government.

During the budget debate, the legislature voted to increase the per pupil revenue limit by $325 in FY24 and again in FY25. Gov. Evers made headlines when he used his line-item veto to manipulate the dates to transform that two-year increase into a 402-year increase. The state supreme court has agreed to hear a lawsuit about that situation. It would make sense for JFC to not address DPI’s portion of the budget until that case is decided. Evers’ veto has not yet impacted education funding because the legislature had already agreed to the two-year increase. They did not agree to the increase for next school year and beyond.

DPI requested $4.4 billion increase in overall funding for the biennium. It also wanted the per pupil revenue limit increased by $425 next year and tied to inflation every year after that, which would not be reflected in the state’s financial information but would impact local property tax levels.

Evers proposed a $3.4 billion increase in overall spending. He also wants to tie the annual per-pupil increase to inflation. That would increase the $325 per pupil annual increase into a $334 increase next year and $345 the year after that.