Where does one begin, when you have 20 pages of notes and over 200 pages of handouts, spreadsheets and powerpoint presentations in a binder? I’m referring to the Kirwan education funding meetings that I have been attending this summer in Annapolis and will continue through September.
If you haven’t heard what this is all about, Kirwan refers to the “Commission on Innovation and Excellence in Education,” named for the Chairman, Dr. Brit Kirwan, which over the last two years has examined the best public schools in the world, and then tried to recommend changes in five policy areas that might improve education in Maryland. We are talking about overhauling the way we do education in Maryland and how much it will cost.
Currently, $13 billion is spent on education per year, split evenly between the state and the counties. This new Kirwan funding commission is working to make recommendations to the legislature on a formula that can be used to split the additional $3.8 billion cost for the policy changes between the state and local governments. The legislature is expected to take up the package of recommendations in the 2020 session.
The first couple weeks, most of the time was spent with the 13-member group listening to presentations from the Department of Legislative Services and from APA Consulting. Some of the presentations included: “Adequacy of Education Funding Since 2002”, “Review of 2016 Adequacy Study,” “Local Wealth and Enrollment Issues and Overview of Maintenance of Effort,” “Comparable Wage Index,” “School Funding Fairness,” “Geographic Cost of Education Index (GCEI),” “Overview of Local Tax Rates,” “Local Effort,” and “Wealth Calculations,” to name just some of the presentations over the past three meetings.
The cost breakdowns in the five policy areas are as follows after full implementation:
1. Early childhood education – $814 million
2. High-quality teachers and leaders – $2.8 billion
3. College and career readiness pathways – $150 million
4. More resources for at-risk students in poverty – $2.2 billion
5. Governance and accountability – $2 million
This adds up to closer to $6 billion, but the group believes that due to overlap, there will be some $2 billion in savings, resulting in an overall cost over 10 years of $3.8 billion per year. This will be split between the state and the 24 local jurisdictions.
There are two major factors in the “wealth” formula that are currently being used. The Assessable Property Tax Base and Net Taxable Income. Both of these numbers are divided by the number of students in each school system to come up with a “wealth factor”. There is no consideration given to other factors in the jurisdiction, such as the age makeup of the citizens or “median” household income, for example. So, if you are in a county with a smaller number of children and/or declining enrollment, such as Kent County, the wealth can appear inflated. This is one area where the formula is flawed.
Using Talbot County as an example, we have a higher “net taxable income.” Literally just a couple percent of our people pay over 30% of our income tax. However, the “median” household income ($65,595) is nearly 20% below the state average ($78,916).
I have sat through hours and hours of presentations and discussion and I keep hearing the phrases about certain jurisdictions being able to afford the costs. Again, there is no weight in the formula given to the other expenditures in government, most notably public safety, that must be paid for. So, using Talbot again as an example, we have the highest number of retirees in the state, which does two things. One, there is more pressure on our Emergency Services department, due to a high number of ambulance calls. Two, retirees have a few circumstances that may pertain to the validity of the formula.
For example, many retirees are on a fixed income, and no longer pay much, if any income tax. Or it’s possible they are second homeowners and live elsewhere 6 months and a day and therefore don’t pay any income tax here. They may be wealthy, but we don’t capture any of that income. This places the income tax burden on the working class, who make significantly below the state average. Yet Talbot is considered one of the “wealthiest” counties in the state for education funding purposes. I am using Talbot as an example, not because I think the formula will change much, but just to show that there is no one formula that will be equitable to all counties.
Despite spending outpacing future revenues and with shifting from other areas, the State may believe that through growth in revenues over the next 10 years, they can pay for their share of the $2 billion. They also have the ability to raise new revenue, which the counties do not. For example, currently, Casino revenues are dedicated to education and the probability of new revenues from the sale of recreational marijuana passing in the next couple years. Expect to see it on the ballot in 2020.
It is highly unlikely that any county can pay for this massive increase without a significant increase in the local (property and income) taxes. The education legislation will be passed in the upcoming session by the State and all signs are pointing to a 50/50 split between the State and the Local Governments, which means almost $2 billion to the counties.
A quick glance at the tax rates for all counties shows that half are already maxed out at 3.2% in the income tax and a total of 19 are 3% or above. On property tax, again half are at $1.00 or higher and a total of 19 are above 90 cents per $100 of assessed value. With a price tag of about $2 billion for local share and current spending of $6.5 billion, that is a 30% increase in overall costs. One could reasonably expect that taxes would increase a similar amount. Through which tax, property or income will be a decision of each jurisdiction, but one can see that most counties are already at a relatively high rate.
This is not a debate on whether education is important, but on the affordability and the ability to pay for all the other things, like emergency services, police, roads, health departments and other necessary functions of government. If one area (education) gets this large mandated increase, without massive increases in taxes, other county services are going to have to take huge cuts. There really needs to be a balance between all areas and it will take attention and input from the citizens to get that message to Annapolis.
Laura Price, a member of the Talbot County Council, serves on the executive board of directors for the Maryland Association of Counties (MACo). She is chairman of MACo’s Budget & Tax Committee and also serves on MACo’s Legislative Initiatives Committee.