Surplus showdown: How the details of school funding are making all the difference in Evers-GOP talks

MILWAUKEE (CBS 58) -- Whether Democratic Gov. Tony Evers and GOP lawmakers strike a deal on how to use the state's projected $2.5 billion surplus will come down to whether there's compromise on the type and amount of school funding included in the agreement.

Evers has signaled he won't sign a surplus spending bill unless there's a significant increase in funding for Wisconsin's general equalization aid formula, which is the primary source of state dollars for K-12 school districts.

In the plan they've presented, GOP leaders would not put any additional dollars toward equalization aid. 

Alan Borsuk, a senior fellow at the Marquette University Law School with a focus on education policy, said the equalization formula is incredibly complex. It's tied to the amount districts can levy in property taxes, and the funding varies from one district to another based on a wide variety of factors.

"Poverty is one of the factors," Borsuk said. "For that matter, lack of poverty is one of the factors for another part of it."

The formula provides additional aid to lower-income districts like Milwaukee and Beloit, while more affluent districts get less.

Assembly Speaker Robin Vos (R-Rochester) told reporters after Evers' State of the State address Republicans didn't want to boost a funding source that favored some districts over others.

"The way that we did it guarantees that everybody in Wisconsin gets some property tax relief," Vos said. "Under [Evers'] plan, only a few people get property tax relief. So, we think a wide-ranging one is certainly better, but we're always open to hearing his argument."

Under the complex formula, increases in equalization aid do not actually mean more money for schools unless the state also raises property tax levy limits. Such was the case in the 2021-22 budget.

Up until 2009, the state automatically raised those property tax limits, tying those increases to the rate of inflation.

To address what he considered to be chronic underfunding of schools, Evers used his partial veto powers in the 2023-24 budget to turn a one-time $325 per student tax limit increase into a 400-year increase at that amount.

Last winter, property tax increases led to widespread anger from residents across the state. Those increases could be traced back to combination of Evers' 400-year veto, as well as a record-high number of school district referendums passing in recent years.

Republicans' proposal calls $500 million to go toward the School Levy Tax Credit. In a previous letter to GOP leaders, Evers said he'd be willing to put $550 million toward that funding source, as long as the $450 million in equalization aid was also included.

"Here's the truth: Funding our schools is a responsibility that the state and local partners share," Evers said in Tuesday's speech. "Local property taxes go up when the state fails to its part to meet its obligation."

Borsuk noted the School Levy Tax Credit is money that never passes to school districts. Instead, it goes from the state to homeowners' property tax bills, offering a discount of sorts.

"It doesn't pay for a single pencil or a teacher or a lunch," Borsuk said. "The money does not go to the schools; it goes to people."

Both Evers and the GOP have agreed to increase special education reimbursements by $200 million in the current two-year budget. That would allow schools to have 42% and 45% of their special education costs covered in the 2025-26 and 2026-27 school years.

Those amounts were agreed upon in the budget process last summer, but higher-than-expected costs have led school leaders to say state funding was falling well short of that target.

The other key difference in the plans is over income tax rebate checks. Republicans want to send out $1.5 billion worth of checks; individual taxpayers would get up to $500 each or $1,000 in the case of joint filers.

A source in the governor's office said Evers is not a fan of the rebate idea because it's a one-time use of money that'd exhaust most of the surplus.

It all amounts to a familiar fight: Evers and Republicans divided over how much money schools should receive versus how much should go toward tax relief.

"That's the heart of it - do schools need more money? Or do we need more money for property tax relief?" Borsuk said. "In a normal world, there might be some sense of trying to find a compromise."

Recent history suggests that compromise might actually be likely.

In 2023, the two sides reached a deal on increasing state aid for local governments. Last summer, Evers and GOP leaders struck a last-minute deal on the current state budget.

Vos said the Assembly plans to wrap up its legislative work for the year this week and hopes to have a deal by Friday. 

"Deadlines matter," Vos told reporters Tuesday. "And we know the longer the deadline goes, the less likely it is to get a result. We're here. We're working this entire week."

Evers has said there's no reason to rush negotiations and called on lawmakers to stay in Madison for as long as it takes to find a compromise on this projected surplus.

"I know the Legislature would rather hit the road and take the rest of the year off," Evers said Tuesday night. "But I'm going to ask lawmakers to stick around until our work here is finished."