(Last of three articles)
Any competent discussion of property taxes in Kansas must, at some point, include the searing analyses of Judge Terry Bullock. His October 1991 ruling in Shawnee County District Court prompted the legislature’s historic reform of school finance six months later. And a decade after that, Bullock issued a 104-page “preliminary interim order” scolding the Legislature for treating state school finance as a “political auction” (page 53) and reproaching the State Board of Education (page 79) for failing to manage the school system.
He suggested that for ten years, the state had been so lax in funding that it might take as much as $1 billion to make the system whole as proscribed in the original reform law. Bullock’s historic opinions never assailed the school finance law of 1992. The trouble, he said, lay in the legislature’s chronic under-funding that had crippled the mission and promise in local education.
Central in this controversy were two items: property taxes, and the cost of rural schools. Since the early 1990s, when the state first began to provide significant, long-term aid to local schools, it was clear that property taxes could not pay the entire cost. Income and sales tax revenues would be added to the sources for state aid, with allotments determined by the wealth (or lack of it) of each school district.
This meant that income and sales taxes collected in cities and suburbs would help fund aid to small schools in sparsely settled communities. The reform law called it “low-enrollment aid.”
Among the early and persistent critics of low-enrollment aid was the Senate Minority Leader, the late Jack Steineger, of Kansas City. Steineger’s district included urban neighborhoods with crowded and under-funded schools. Aid for tiny country schools and their few students, scattered about the vast open plains, was a waste of precious resources, he said. Urban and suburban legislators began to join Steineger’s chorus in the late 1980s and early ‘90s.
Low-enrollment aid was written into the school finance reforms of 1992 to secure the support of rural legislators. Without this aid, scores of sparsely populated districts would be forced to close or merge, with devastating economic and social impact on their communities. Of the state’s 286 school districts, 70 percent (more than 200) have enrollments of 1,000 or less.
The struggle for funding in an urban-dominant legislature, even now with aid for “high-enrollment” districts, provokes a simmering resentment of rural schools and calls for consolidation in one or more of its many forms.
But two factors have slowed the urban passion for rural consolidation. First, it has happened anyway. The continued withering of rural economies and populations (and tax bases) coerced consolidation of 18 school districts in central and western Kansas from 2002 through 2011. This happened with no nudging from legislators.
Second, the power of the Legislature’s urban and suburban districts has grown sharply in the past dozen years. Six of the state’s 105 counties – Johnson, Shawnee, Wyandotte, Douglas, Leavenworth and Sedgwick – now elect about two-thirds of the 40-member Senate and 125-member House of Representatives.
Property taxes and state school finance are solidly connected, critical in the balance of funding the state’s operating budget.
For one example, the legislature has expanded property tax exemptions for big business, including broader machinery and equipment exemptions for large commercial properties. The first exemptions, granted in 2006, have cost local government millions in tax revenues and local taxpayers millions in rate increases.
This happened at a time of increasing farmland values, although farm taxes have remained relatively unchanged. A constitutional amendment, approved by Kansas voters in 1986, protects farmland assessments through use-value property appraisal; taxes are determined by the income derived from the land, not by its market value. The amendment was to prevent owners from being forced to sell land simply to pay their taxes.
But the governor and urban legislators, searching for ways to resolve massive budget deficits caused by dramatic income tax cuts, and new ways to pay for local schools, now consider farmland a kind of low-hanging fruit – for a couple of reasons: First, farmland is relatively low-taxed, given its value in proportion to current tax rates and the tax breaks and government subsidies secured over the years by the farm lobby; Second, rural Kansas no longer has the legislative power to prevent raids on their assets.
Urban and suburban legislators, with the governor’s blessing, have the votes and the muscle to repeal the Constitution’s use-value protection for farmland. Constituents and school patrons in five or six counties alone comprise nearly the majority needed to approve it at the polls.
Urbanites may see farmland as a new source of revenue for their schools and tax relief for their CEOs, their office parks, subdivisions, and their schools. The issue tells us that Kansas may be headed for a two-tier economy – the haves, and the have-mores.
– JOHN MARSHALL