North Dakota bucks school finance trends, and reshapes how its K-12 schools are funded

Over the past six years, most U.S. states have cut per-pupil funding for education, with double-digit reductions not uncommon. And then there is the case of North Dakota. Lawmakers there have taken advantage of the state’s remarkable economic ascent to completely remake how K-12 education is funded. In doing so, the legislature has accomplished what policymakers in many other states have tried but failed to do — take the burden of paying for schools off the backs of local property taxpayers.

Less than a decade ago, North Dakota’s funding formula looked like that of many other states: Schools were heavily reliant on property taxes as a revenue source, with as little as 40 percent of K-12 school funding coming from the state. Like other states, too, North Dakota faced lawsuits from property-poor districts that alleged the K-12 finance system was inadequate and unfair.
But even before the state’s oil boom, North Dakota political leaders (led by now-Gov. Jack Dalrymple) pledged to change the system and reach a goal of having the state fund 70 percent of the costs of K-12 education.
The state is now in position to greatly exceed that funding goal. As the result of legislation passed this year, more than 80 percent of K-12 funding will now come from the state, with per-pupil spending reaching $9,092 by the end of the biennium, says Rep. Mike Nathe, chair of the House Education Committee and majority caucus leader..
The result is tax relief for property owners across the state and greater funding equity among North Dakota’s 181 school districts.
Considering recent fiscal conditions in other states, North Dakota’s reforms stand out even more. 
A recent report by the Center on Budget and Policy Priorities shows that when adjusted for inflation, per-pupil education funding has been cut in 34 states, including at least six in the Midwest (see map). 
The report’s authors say these nationwide cuts in state funding have “serious consequences” for cash-strapped schools: larger class sizes, fewer options for summer school or other extended learning times, and difficulty in recruiting or retaining high-quality staff.
In contrast, state funding in North Dakota has risen by 27.2 percent, by far the highest rate in the nation. (Iowa ranks second, at 11.2 percent.)
Nathe and North Dakota lawmakers are working this interim to make sure the new aid is spent wisely — for example, by determining the exact components of the “core education” that school districts should provide for the $9,092 they get per student.
One lingering question for legislative leaders is whether the state’s new funding commitment to education can be sustained over the long run. What happens, for example, when the state’s economic growth tapers off?
“That is something we are talking about all of the time,” Nathe says, adding that some plans have been made for future downturns. He cites the accrued interest in the Common Schools Trust Fund and the recently created Legacy Fund as money that the legislature could tap into if state revenues fall off.


November 2013 ~ Stateline Midwest1.73 MB