and poor communities. More flexible controls to reduce this expenditure imbalance are still required in many states. Better funded categorical programs for the exceptional educational needs of disadvantaged in urban and rural areas are still urgently needed in some states. More sophisticated aid formulas that consider income poverty and excessive non-educational tax burdens also would help hard-pressed urban areas.

States also could continue to improve the fiscal equity of their school aid policies by repealing those aid provisions which provide minimum aid to all districts regardless of their wealth. These policies still compromise the fiscal equity of many state aid plans. Finally, states need to exercise considerable supervision of their aid systems to insure that aid is directed to communities that need it most. To that end, many states will have to encourage poorer communities to take the maximum fiscal advantage of new aid reform laws. While most new reform laws have not diminished local control of education, states still must face up to the responsibility of helping poorer districts attain the maximum benefits of their state aid laws.

School Property Tax Reduction. Reduction of school property tax burdens has been the most dramatic and visible achievement of new finance reform laws. At least five states with new funding legislation-Colorado, Kansas, Minnesota, North Dakota, and Wisconsin-have been experiencing absolute reductions in local school revenue collections (almost wholly property taxes) at a time when the collections in many non-reform states have been going up several percentage points a year. Wisconsin, for example, took steps which brought $92 million in local school property tax relief between 1973 and 1974. Minnesota, as Table 1 shows, embraced legislation which allowed a typical household to reduce its combined state income and local property tax bill by about 4 percent between 4971 and 1973. Similarly, Arizona adopted new school funding legislation which permitted property taxes on a $20,000 house in Phoenix to fall by 16.3 percent between 1974 and 1975.

Property tax burdens not only have been reduced in some reform states, but also have been made much more equitable. Prior to the new laws, taxpayers in poor com

munities often paid well-above-average tax rates for wellbelow-average quality school services. Today this condition is less prevalent. Consider, for example, the case of Wisconsin. In the year before its reform law went into effect, the state's 37 most property-poor K-12 school districts were able to have current expenditures of $54.61 per pupil for every mill of operating tax effort. The 37 most property-rich K-12 school districts, in contrast, were able to have current expenditures of $63.34 per pupil for the same tax effort (see Appendix Tables W-1 through W-7 for definitions). But in the year Wisconsin's new law went into effect, the ability of the richest and poorest school districts to spend for education was almost completely equalized. In 1974, one mill of operating tax effort allowed the wealthiest 37 school districts to have current expenditures of $84.40 per pupil. And in the 37 poorest school districts, one mill of operating tax effort permitted current expenditures of $85.01 per pupil.

The story is equally graphic in Michigan. In 1972-73, the year before reform, a 25 mill tax rate in the state's richest and poorest communities would have yielded about a $239 per pupil difference in their revenues. When Michigan's new law went into effect in 1973-74, that disparity was reduced to $134 per pupil as Table 2 indicates. Michigan's tax relief of 1973-74, however, was not without considerable precedent. Michigan had taken significant steps to reduce property tax disparities ever since the late 1960's, most notably its "municipal overburden" property tax relief program first instituted in 1964 and expanded ever since. Under this program, Michigan school districts are entitled to special state assistance to the degree its non-educational property taxes exceed the state average by greater than 125 percent.

Not just in Michigan but in several other states, cities have been among the prime beneficiaries of property tax relief provided through school finance reform. Between 1973 and 1974, Kansas City and Topeka were able to cut their educational property tax rates by an average of 11 percent, while Kansas school districts statewide were able to achieve, as Table 3 shows, only about a 1 percent rate reduction (see Appendix A, Table K-1 through K-7 for definitions). Similarly, almost all Colorado cities except Den

Source. Dr James L. Phelps, "New Equity in Michigan School Finance: Second Year Results Unpublished manuscript. Office of the Governor, 1975.

ver and Colorado Springs have experienced reductions in school tax rates well in excess of the state average. Between 1973 and 1974, for example, the school tax rate statewide fell by about 2 percent, but dropped more than 9 percent in Boulder, by more than 18 percent in Greeley, and by over 23 percent un Grand Junction. Reform in Illinois brought an increase in most urban tax rates, but by a substantially smaller degree than statewide. From 1973 to 1974, the average school tax rate statewide went up by 15 percent, but the rates in Peoria and Springfield, for example, increased by no more than 7 percent (see Appendix A, Tables 1-1 through 1-8 for definitions).

It should be noted, however, that the significance of many recent tax rate changes is clouded considerably by the very rapid shifts that have been taking place in real estate values, and which may or may not be reflected in local assessments. As Table 4 shows, for example, reported property values in Wisconsin increased greatly between 1973 and 1974, the same time that the state was implementing its new school finance law. In contrast, reported values in Illinois grew hardly at all even though the state's substantial agricultural lands were inflating in value at an unprecedented rate.

As states have taken steps to reduce school property taxes, they also have instituted measures to keep them stabilized in the future. With a handful of notable exceptions, most school finance reform states of the 1970's have made tax and/or expenditure limitations on local school districts an integral part of their new legislation. Tax ceilings are now in place, for example, in Florida, New Mexico, North Dakota and Minnesota. Related measures which discourage high local tax effort are in effect in Maine, Utah and Wisconsin. And expenditure lids are in operation in Colorado, Iowa, Kansas and several other states.

The new tax and expenditure controls on local school districts differ substantially in their stringency. In New Mexico, for example, the tax rate limitation is absolute; no exceptions are allowed. In some states, Colorado and Wisconsin, for example, outlays can be increased over prescribed levels by appeal to state school budget review committees. In other states, such as California and Minnesota, budgets can be altered by appeal to local voters through the referendum process, while several states incorporate multiple escape routes.

Local success in overcoming the new budget controls has varied substantially. Budget overrides tied to referenda have been the hardest to achieve, but not invariably so lowa, for example, has experienced only one successful budget override election in five years. But California has witnessed so many that the referendum escape clause proved a major factor in the so-called "second Serrano" case which declared the state's response to the first Serrano decision unconstitutional. And just as much variability is evident in the case of other types of budget limitations. Colorado and Wisconsin school districts, for example, have been fairly successful in their appeals to their respective state budget review committees. lowa school districts, however, seem to have found appeals somewhat more difficult, often gaining very little additional budgetary leeway for their effort.

The Need For More Flexible Expenditure Control. Unfor

tunately, state tax and expenditure limits on local school districts appear to be constraining the ability of poor communities to catch up to the expenditure levels of wealthy communities. These fiscal constraints have been adopted in order to insure that new state aid would bring about loschool property tax relief and that new aid programs would not result in massive and unmanageable jumps in school expenditures. While the intent of these controls is understandable and acceptable to the general public, they may reduce the equality of educational opportunity that is offered by some new state finance plans. As a result, the same districts that exhibited very low educational expenditures before reform continue to spend at fairly low levels after reform.

Indeed, the specific structure of expenditure controls in states such as California, Kansas, Wisconsin, and Colorado may prevent poor local districts from ever catching up to the spending levels of wealthier units. Table 5 shows, for example, per student expenditures in Kansas' lowest-wealth school districts exhibited less growth than the per student expenditures in its highest-wealth communities. Moreover, initial state experience with fiscal controls reveals that rich rather than poor districts are more apt to seek exemptions from such fiscal restraints. Rich districts in California have been more successful in their override elections than poorer units. They also have been able to raise expenditures at these elections to a greater extent than poorer jurisdictions. Wealthier districts in Wisconsin have been more apt to seek and be granted cost control exemptions than poorer units though the average cost override for all districts was usually only $2500 per request. While these expenditure and cost controls have enjoyed considerable public popularity, state lawmakers must see to it that they do not curtail the ability of poorer districts to substantially raise the level of their educational offerings.

Greater Educational Equity. Notwithstanding tax and expenditure limitations, the state school finance reforms of the 1970's have equalized educational opportunity to a greater extent than in years past. As Table 6 suggests, however, the course of change has been uneven (see Appendix A for greater detail). Some states-like Florida, lowa, and Michigan-have adopted legislation which has substantially narrowed the expenditure gap between rich and poor communities. A decade ago, for example, lowa had one of the most disparity-ridden school finance systems in the nation. This year there is no more than a 20 percent variation in the per student general fund expenditures in 90 percent of its school districts. And Michigan shows signs of following a similar pattern. Between 1973 and 1974, its 52 lowest spending school districts experienced an $89 per student increase while its 52 highestspending districts had no growth.

Reforms adopted by some states will reduce expenditure disparities over a longer period. Minnesota's revisions of 1971, for example, will not begin to narrow the range between the highest and lowest spending districts until the present year, having first emphasized equalization among the bulk of districts rather than its spending "outliers." Similarly, Illinois' new law has had little consequence for expenditure disparities in general, allowing expenditures in the states' poorest school districts actually to rise