Equalization of school funding in Montana

Abstract

In 1988 the First Judicial Court of Lewis and Clark County ruled that because of disparities in spending among districts and a heavy reliance on local property taxes, the school funding system in Montana did not provide an equal opportunity for education. The Montana State Legislature responded by passing House Bills 28 and 667 in attempts to reduce the reliance on local property taxes and to bring the expenditures among districts closer together. This thesis examines school budgets for a representative sample of 301 elementary districts and 118 high school districts for fiscal years 1989, 1991 and 1995. Districts are ranked by their general fund budget per pupil in each year. High spending districts (95th percentile) are then compared to low spending districts (5th percentile). The results indicate that spending disparities have diminished among both elementary and high school districts, and among most size groups as well. High spending districts, however, still commonly spend twice as much as low spending districts, far exceeding the 1.25 ratio which is the target of both federal regulations and the state's own program. Changes in state policy over this period first reduced and then increased district dependence on local property tax levies. When HB 28 was first implemented, the state picked up a larger share of budgets in most districts. Although much of the state's contribution was itself financed by property taxes, districts did not need to rely so much on their local levies. Between 1991 and 1995, however, state funding failed to keep pace with inflation and enrollment growth. The state also changed the rules governing district finances so that voter approval is often necessary. The result of these policies has been a growing reliance since 1991 on local mill levies, 'and increasing numbers of public votes on budget issues. These trends may run counter to the goal of equalization, while restraining overall spending.