Utah Takes on Revenue Issues to Address Low Spending

Last Updated: November 26, 2010

This article appeared in the November 2010 Rural Policy Matters.

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An interesting debate over school funding is shaping up in Utah, the state with the lowest per-pupil spending in the nation. Utah’s per pupil spending averages $5,765; the national average is $10,259.

Adding spice to the debate is the fact that Utah is also one of the most “equitable” of states in its school funding, that is, there is less difference in spending between the richest and poorest schools than is the case in most states. A recent report by the Education Law Center ranked Utah as the most “fair” state in terms of providing proportionally more state funding to districts with high rates of student poverty. Yet it is the difference in per pupil spending between high and low wealth districts that has fueled part of the drive to address funding.

Folded into the mix of issues is Utah’s lagging performance on the National Assessment of Educational Progress (NAEP), a standardized test given to a sample of students in all 50 states and sometimes referred to as “the nation’s report card.”

Legislators, the State Board of Education, a former governor, and several advocacy groups have weighed in with various responses. And, despite anti-tax trends in many parts of the country, discussion in Utah is broaching the issue of revenue: that is, the need for new sources of funding for schools.

Lagging NAEP Scores

Spurring consideration of the state’s school finance system is the state’s lagging NAEP performance. Utah has relatively low rates of student poverty, high parental education levels, and little diversity among students — all conditions associated with higher scores on standardized tests

Accordingly, Utah students have scored well in terms of raw scores and the state’s education system has been considered high-performing.

But Utah’s national ranking on NAEP has fallen in recent years, in part because other states have improved more rapidly. In addition, a report from the Utah Foundation comparing Utah scores with those in states with similar demographics finds that Utah consistently ranks low, often charting the lowest scores on some NAEP tests among peer states.

This more fine-grained attention to Utah’s performance disrupts the long-held confidence that the state’s students are performing well despite low school funding levels.

Eye to the Finance System

Currently, the Utah legislature equalizes and distributes about 70% of total funding for schools, a relatively high percentage compared to other states. Most of that revenue comes from the state’s income tax. Districts supplement state funding with local revenues, mostly from property taxes. But as is true across the country, some districts have much more property wealth than others. As a result, some districts have fairly high tax rates that produce little revenue for schools, while other districts with high-value properties can produce quite a bit of revenue with low tax rates.

Proposals for how to address the situation run the gamut, and most involve changing the tax structure of the state in some way to generate more revenue. For example, the State Board of Education supports the ability of locales to set tax rates, and it proposes that a portion of new revenue generated locally be redistributed to other districts as a way to address local wealth differences.

A series of reports by the advocacy group, Utahns for Public Schools, trace tax and other public policy changes in recent years. The reports claim that as much as $1 billion in revenues for schools could be reclaimed if some of these policy changes were reversed.

The group Citizens for Educational Excellence, headed by former Governor Olene Walker, is calling for more investment in education in order to move the state out of its last-place ranking on spending and to raise its performance. The group stops short of calling for tax increases, however.

Yet another proposal by a state legislator would reduce property taxes and raise sales tax on food.

It is likely that the next legislative session will address one or more of these proposals.

Utah is one of only five states that have never had a school finance lawsuit. Why Rural Matters 2009 notes that Utah has a very rural household mobility rate and very low levels of per pupil instructional expenditures in rural districts.

Read more:

Coverage of various policy proposals:

Coverage of the Utah Foundation/Citizens for Educational Excellence report:

Read the policy reports here:

State Board of Education minutes:

  • http://www.schools.utah.gov/board/meetings/minutes/2010/10-01-10.pdf
Why Rural Matters analysis of Utah:

Read more from the November 2010 Rural Policy Matters.