A group tasked by the governor with reworking Missouri’s formula for funding public schools narrowed in on property tax revenue Monday, discussing how the 20-year-old formula creates inequities with an outdated assumption of local aid.
In the second meeting of the Missouri School Funding Modernization Task Force, education officials led a conversation on property taxes.
The problem stems from a figure frozen in time, said Kari Monsees, deputy commissioner of the Missouri Department of Elementary and Secondary Education. The formula subtracts assumed local aid based on 2005 property values and applies the same tax rate statewide even though districts vary widely on levies.
“The longer we go on, the further we get from the actual values on our assumptions and the more problematic it is for what we’re trying to do here,” Monsees said.
Since the creation of the current formula in 2005, property values have fluctuated with variation across districts.
“There’s been a lot of changes in property values since 2005,” said David Wood, a former state representative and policy analyst for the Missouri State Tax Commission. “If you try to jump to current numbers… it’s going to be extremely expensive.”
But increasing the cost to the state’s general revenue is not an option.
Gov. Mike Kehoe’s executive order, which convened the work group, calls for funding outcomes “at a level consistent with what is provided for in the State Fiscal Year 2025 budget.” This amount is $300 million under the current budget passed by state lawmakers and awaiting the governor’s signature.
Missouri is seventh in the nation for reliance on property tax revenue for funding public schools, with 47% of funds coming from local taxes, according to the National Center for Education Statistics. Missouri has the lowest portion of state aid in its public-school funding, at 30% of school revenues.
The state’s reliance on local funding combined with its outdated figures for property taxes has created a system of winners and losers, with communities with growing property values and higher levies accumulating more funds on a per-pupil basis than their counterparts.
If the assessments 20 years ago were accurate and change was uniform across districts, there would be “less of a concern,” Monsees said.
“But that’s not the reality,” he said. “The reality is those reassessment rates and value changes have been significantly different across the state.”
The median home value in districts varies wildly, ranging from $44,500 to $613,300, according to a 2019 review Monsees presented.
The formula assumes a local levy of $3.43 per $100 of assessed value, dubbed the “performance levy.” But districts’ levies vary from $2.75 to almost $6.50 per $100.
He shared examples of districts in the 90th and 10th percentiles, showing some districts have double the operating funds on a per-pupil basis.
Worsening the gaps between districts is a “hold-harmless provision” in the foundation formula, which keeps funding levels stable for districts that would’ve seen a dip in revenue when the formula was established. There are 200 hold-harmless districts, with districts under 350 students keeping total state aid flat and those over 350 getting the same amount per student.
Missouri has had hold-harmless provisions through multiple iterations of the school funding formula, and Monsees said there’s a reason for that. The formula has to be approved by the state legislature, and lawmakers whose districts are losing funds are likely to vote against any changes.
A study of the formula commissioned by education nonprofit Aligned estimates that hold-harmless provisions cost the state $150 million annually. The study recommends that any new formula institute a “temporary hold-harmless provision with a five-year phase out.”
The study is one of three being reviewed by task force members. All three recommended changes in multiple areas to the formula, such as increasing multipliers used to increase funding for special education and measuring student count by enrollment rather than attendance.
The work group is anticipated to meet over the next year and deliver plans to the governor by December 2026.
