With just over a week left in the regular 2015 legislative session, lawmakers are scrambling to address the elephant in the room when it comes to funding for basic education: the fact that there is an over-reliance on local property tax levies. Any plan to address this issue should eliminate the arbitrary 1 percent growth cap on property taxes that limits school funding. And it should also make the property tax more equitable by implementing a “circuit breaker” system that would reduce taxes for people with low and moderate incomes.

Let’s unpack this a bit, because it’s a complicated issue.

Local levies – property taxes approved by voters for a specified school district – have become increasingly used to fill gaps left by inadequate state resources. Although local levies are intended to fund “enrichment programs” like extracurricular clubs and after-school programs, the funding from them currently supports a multitude of school’s basic needs. Things like teacher salaries and textbooks.

When the State Supreme Court ruled in its 2012 McCleary case that the state had failed to meet its constitutional obligation to fully fund basic education, it asserted that this model doesn’t work. The court noted that the state’s reliance on local property taxes to support basic education – instead of broader, statewide taxes – fails to provide the ample funding required by the Constitution.

Heavy reliance on local resources has resulted in an uneven education system, in which wealthier localities are able to raise more money than poorer areas of the state (see graph). To fix this structural problem and safeguard access to basic education for all kids, adequate state funding is needed.

Lawmakers from both chambers have put forth proposals to reform school levies. There are currently three proposals under consideration in the state Legislature to reform the state and local property tax levy system.

Leaders in the State House of Representatives introduced HB 2239, a bill that would create a task force to develop recommendations to reform the state and local levy system. The task force would be required to submit its recommendations to the Legislature by December 1. The Legislature would be required to implement those recommendations by 2019.

In the meantime, there are two competing levy reform proposals in the state Senate. Senate Bill 6109 is being proposed by the Republicans and Senate Bill 6103 is being proposed by the Democrats. Here’s what both bills would do, and how they differ:

• Reduce local school property tax levies: The key difference between the bills is that SB 6109 would set a slightly higher limit on the maximum local property tax levy for schools.
• Take the important step of increasing state resources for teacher salaries: Bill 6109 would do that by increasing the state property tax rate to the maximum rate allowed under current law (to $3.60 per $1,000 of assessed value) by 2020. Bill 6103 would not increase the state property tax levies to make up for the loss of revenue from local levies. Rather, it would raise additional resources for teacher compensation through a new 7 percent tax on capital gains.
• Leave the damaging 1 percent growth cap in place: The current law limits growth in property tax resources for schools to either 1 percent per year or the rate of inflation, whichever is lower. However, the costs of educating our children rise considerably faster than 1 percent per year. As a result, this law, which was first approved by voters in 2000, has greatly reduced funding for public schools.
• Fail to enact a circuit breaker credit for homeowners and renters with lower and moderate incomes: The circuit breaker credit would shut off property tax payments once they exceed 5 percent of a household’s annual income. This is an important protection for low-income households.

SB 6103 would likely make our overall state and local tax system less costly for lower-and middle-income households than SB 6109. That’s because it would replace local property tax revenues –  which take a disproportionately large bite out of the family budget of households with lower incomes – with a capital gains tax that would be paid primarily by millionaires.

However, without lifting the arbitrary 1 percent cap, neither proposal raises enough revenue to adequately fulfill the requirements for McCleary. Further, steps still need to be taken to safeguard access to basic education for all kids. As lawmakers consider how to move forward in tackling this particular funding problem, the issue of equity must be considered. The opportunity gap will only continue to widen in our state if the kids in school districts with less money don’t get as much government investment in their education as kids in wealthy districts.

Stay tuned for more in-depth analysis on these proposals.