Rural Schools

Public policy that pressures small schools into consolidation through underfunding and incentives is counter-productive. As schools get larger, educational results generally worsen. The academic, social and communal advantages of smaller schools are lost. It makes little sense for the best interest of communities and society to adopt public policy that worsens the achievement of outcomes of our schools and students.

Rural Schools Public Policy

• State Policy should be guided by the principle that equal educational opportunity for Nebraska children is a right guaranteed by the Nebraska Constitution under the Equal Protection Clause.
• State education policy should support schools that are community-based and small in scale, and that achieve local, as well as state goals and standards of quality education.
• State educational financing should recognize cost differences that reflect local circumstances and needs ("fund them as you find them"), promote resource stability and predictability, and utilize an aid distribution formula that is based on the actual cost of "doing business" and local capacity to pay.
• Schools are a crucial part of any rural community and its development, and public policy should recognize the importance and need for schools in rural communities.

Fund Them as You Find Them
Imagine a place in the world where there were no roads, electricity, or running water. That's easy. Now imagine this place to be your neighborhood. These services are essential and are available when and where we need them. There are many services that are provided simply because there are people using the service. Is education an essential service? According to the Nebraska State Constitution it is.

Education is an essential service that can not be funded only where the formula fits. Current policy underfunds schools that are close enough to be consolidated. This is not done to other essential services. Why should the future of our communities, state, and nation be denied? These students and residents should not be forced to close down their school to meet the formula's need. It is not our intention that a school should be built for one person, but where there are students needing education, there should be education for them to have, equal and adequate to the rest of the state.

The Center for Rural Affairs believes that state educational financing should recognize cost differences that reflect local circumstances and needs, promote resource stability and predictability, and utilize an aid distribution formula that is based on actual cost of "doing business" and local capacity to pay.

The Case for Small Schools (PDF) indicates that small schools often have higher graduation rates, better participation of students in a variety of activities and higher achievement than their larger counterparts. And yet some people still ponder, "Why do we need small schools? They should be eliminated because they are inefficient and take away too many resources (i.e., public aid to education) from the more deserving larger and efficient schools."

However, it is abundantly clear that for most children, smaller schools are better. We are advocates for small, rural schools, but primarily we are advocates for all children. Many urban and suburban areas are realizing the advantages of small schools, and are changing their structure.

Graduation Rates
Nearly every study of educational attainment finds that small schools, whether measuring graduation or dropout rates, have a significant greater ability to graduate students than do large schools.





Participation and Belonging
Research studies have found that extracurricular participation rates are higher and more varied in small schools than in large schools, and that alienation from the school environment is lower in smaller schools. Why is participation so important? Research shows that participation in extracurricular activities is a significant indicator of academic success; those involved in activities tend to be better students. Participation is often a determinant of attendance and dropouts rates; involved students go to and stay in school. Participation generates a sense of belonging. Alienation from the school environment is a bad outcome itself and is connected with other undesirable outcomes - lack of confidence, self-esteem, and responsibility for self-direction.

Consolidation and the Community
If consolidation is sold as a long-term, statewide cost cutting measure, it is incumbent for policy makers to consider the other side of the equation. Research has identified three specific consequences of school consolidation and its effects on the community: Economic, Social, and Political. Each is negatively impacted by the consolidation of schools.

Achievement
Measuring achievement is difficult and often subjective. The conventional wisdom is that larger schools have better achievement rates, due to technology, resources, and curriculums that provide a deeper and broader education. This assumption about the superiority of large schools melts away when considered by educators. A survey of school administrators found that children who attended small schools are better prepared for further education than a vast number of those children schooled at large elementary schools. We reviewed 22 major studies examining achievement by school size, and not one finds large schools superior to small schools.

The report Small Schools, Big Results (PDF) found that high school completion rates in Nebraska were best for small schools. An analysis of the data used for that report finds that from school years 1991-1992 to 1994-1995, the median high school completion rate for these 90 systems was 97 percent (compared to the state average of 85 percent). In the 19997-1998 school year, these 90 systems had an average drop out rate of nearly 2 percent; 50 of these systems had no dropouts.

Big Trouble for Small Schools I (PDF) Amounts of state aid to schools for each school system in Nebraska as certified by the Nebraska Department of Education were compared for school years 1997-1998 and 1999-2000. The 1997-1998 school year is the "base year" for current school finance in Nebraska; LB 806, which set the current school formula (with minor modifications since), was adopted by the Nebraska Legislature in its 1997 session. Therefore, the state aid received by schools in 1997-1998 was the last under the pre-LB 806 state aid formula. The Legislature adopted LB 1114, which caps local property tax levies, in 1996. The combined effects of these two laws determine the amount of local and state resources received by individual school systems. Ninety schools that are highlighted in this study lost 10 percent or more of their state aid during the time period in question. These school systems represent 23,000 children, 9% of Nebraska's total public school enrollment. Combined, these systems have lost nearly $15 million in state aid. This amount has either been shifted to property taxes or cut from budgets, leaving districts struggling to make their ends meet and threatening the quality of education they can offer. Almost 70 % of these schools are in Eastern Nebraska, the most densely populated area of the state.

Big Trouble for Small Schools II (PDF) indicates that small schools are being penalized by a school finance formula that puts these efficient, well-performing rural schools in jeopardy. The 2000/2001 school year marks the third year of the "new" school finance formula. As with years past, the small schools seem to be hit the hardest. In the school year 1998-1999, 111 systems had 90% or less of the state aid the system received during school year 1997-1998. That is an increase from 64 systems (1998/1999) to 90 systems (1999/2000).

Unfortunately, LB 806 continues to hurt rural schools. There are 38 systems in the state that lost at least 10% of their state aid every year since the passage of LB 806. Those schools represent, 8,400 students and more than $9 million in lost state aid. These schools have much in common: rural, well-performing, and efficient. With a mean enrollment of 220 and an average class size of 17, it is these systems that are in the "biggest trouble".

Big Trouble for Small Schools III (PDF) shows that as state aid losses increase each year so do the number of students affected, with the exception of the year 2001-02. This can be attributed to 14 of 19 Big Trouble Schools unifying or consolidating within the last year. Even with the consolidation, 27 school systems in Nebraska have lost at least 10 percent of their state aid for four consecutive years. The state of Nebraska is clearly pursuing a policy that small, rural schools can be reduced through consolidation and that their educational advantages are not a priority.

Shortchanging Small Schools: Nebraska School Finance Policy (PDF) concludes that despite legislative promises, small schools still must depend disproportionately on property taxes while larger schools can depend on state aid.

The current Nebraska school funding and property tax laws have shifted state aid away from small, rural schools while providing more property tax relief to larger, urban school systems. For much of rural Nebraska, the current law has not delivered on the promises of property tax relief and increased state aid for schools.

The study takes a deep look at LB 806 (distribution of state aid formula). Since 1997, small schools (those with less than 70 high school students) have seen their revenues decline, while overall statewide revenues have increased. As a result of LB 806, total state aid to schools has increased 28 percent while state aid to small schools decreased 20 percent. Larger school systems are becoming more dependent on state aid, while the smallest schools, generally in lower income areas of the state, are becoming more dependent on property taxes.

The study also looks at the effects of LB 1114 (property tax levy limits) since it was passed in 1997. Taxpayers in school systems other than those with small schools have had 700 percent greater property tax relief than those taxpayers in school systems with small schools.

The study notes that Nebraska's school finance system can be made to provide an adequate and equitable education through two essential objectives: base state aid to education on actual costs of operating school programs and continue to reduce the property tax burden for support of public education.

Digging Deeper into Shallow Pockets (PDF) shows that the heaviest property tax burden falls on those in rural, agricultural counties that also have the lowest per capita incomes. In terms of per capita income, Nebraska is home to the nation's three poorest counties and 7 of the poorest 21 counties. These counties are experiencing the highest property tax burdens. Our findings demonstrate the regressive nature of the property tax and the extreme hardship faced by many rural Nebraskans in paying educational property taxes.

In its past several sessions, the Nebraska Legislature has attempted to reduce property tax burdens for all Nebraska property owners. Beginning with LB 1114, which mandated local and school property tax levy limits, and culminating with efforts to reduce property taxes by increasing state aid for K-12 education and community colleges, the issue of property taxes has been at the forefront of legislative activity. However, as the data presented in this report shows, many rural residents continue to shoulder an extraordinary burden in property tax obligations.

Recent efforts at property tax relief have not addressed a fundamental characteristic of property taxation - it is a regressive tax assessed against property but paid by income, the effect of which distributes the burden of the tax disproportionately. Recent attempts at property tax relief have allocated any relief provided in a way that is unrelated to a household's property tax obligation relative to its income, thus delivering much less relief to those who are truly overburdened by property taxes. The amount of property tax relief provided by these efforts may also vary by location given the dependence of K-12 education on property taxes in general and the varying dependence by school system and given the local conditions that affect property valuations.

Given the cyclical economic status of agriculture and the current status of the rural economy in Nebraska, efforts at property tax relief that make property tax obligations and household income unrelated are unsatisfactory. They will likely result in continued high property tax burdens in rural areas of the state. Therefore, we recommend that the Nebraska Legislature adopt property tax relief that is targeted at those property owners, both rural and urban, who are truly burdened by property taxes. See our 2004 Issue Brief on property tax burdens in Nebraska.

In other states, this has taken the form of a property tax "circuit breaker." Several states have enacted "circuit breaker" status that allows for income tax credits or property tax rebates when property taxes reach a certain percentage of household income.

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Contact Kim Preston, kimp@cfra.org for more information.