Stopping the Housing Decline from Squeezing School Budgets

School funding, which is traditionally based on property tax revenue, has taken a hit as the housing industry has declined.

A big hit. Nearly half of all property tax revenue is used for public elementary and secondary education, according to the Lincoln Institute of Land Policy.

Decreased residential building and increased mortgage loan defaults have meant less money for schools than they might have hoped this year. Take, for example, Lee County in Florida. Recent numbers indicate school impact fee collections fell by more than $23 million this year–which won’t be easy to replace.

Foreclosures, which have hit a high in the U.S., haven’t helped; and while a foreclosure doesn’t mean a property’s taxes will never be paid, it does mean they will be paid later, most likely when the property is sold.

Schools, then, will get their money later than they had budgeted for it, which, in the world of annual academic planning, can result in reduced or eliminated programs and services for this year and possibly next year as well.

The schools still need the money. So if our homes can’t fund them, what will?

In many cases, states will need to step up. Utah’s House Republicans said this week that they want to give public school teachers a $2,500 raise next year. They also would like to award a $15 million property tax cut in 2008 for the general public, the Deseret Morning News reports.

Seems contradictory–but the state says it will assume some expenses, like the school district’s paycheck for a $30 million early reading program.

In Ohio–a state whose Supreme Court decided years ago was relying too heavily on property taxes to fund schools–Sen. Kirk Schuring Schuring has a new idea.

Schuring proposed lessening the property tax burden by funding schools by juggling around current taxes–allotting 59.6 percent of income taxes, 71.2 percent of sales- and use-tax receipts, 70 percent of the commercial activity tax and 25.4 percent of the kilowatt-hour tax be given to education.

Yet not all agree. A report released today by the Lincoln Institute of Land Policy suggests reducing property tax’s contributions on school funding may not work; the institute also feels increasing state aid to pay for education won’t solve the problem.

Instead, the Property Tax–School Funding Dilemma policy report says states should focus on distributing state aid for public education to the most in-need school districts, schools and students–not on establishing a set percentage for the state’s share of K-12 funding.

Lincoln also suggests giving taxpayers help by using circuit breakers–a program that can adjust property tax bills for homeowners who are paying taxes too high for their income–meaning residents who don’t make much would essentially get a rebate.

Does tackling funding for the most financially challenged school districts first leave other districts out in the cold? Should new taxes be added to make up for any declines in property tax value? Or is there another way to help fund schools in the wake of the housing crisis? Tell us what you think.