Wisconsin school districts have been sidestepping property tax caps with mysterious ‘Fund 80’ levies

Sep 13, 2013 by

MADISON, Wis. – Wisconsin state law limits the amount of property taxes that school districts are allowed to charge local taxpayers every year.

Any local levies beyond those limits are supposed to be approved by voters.

But many school districts have found a way to levy extra taxes on local taxpayers without voter approval.

It’s called the Community Service Fund, or Fund 80.

It was originally established in the 1980s to help districts cover the extra costs of community-based programs that exist outside of the regular school day, like community education, family swimming nights in the school pool or community basketball leagues in the school gym.

But in recent years many schools have been charging local taxpayers millions of dollars worth of extra taxes through questionable uses of Fund 80.

At least a few districts – and possibly many more – have been using the fund to pay for regular K-12 costs or outside expenses that don’t meet the defined criteria for Fund 80, according to Donna Severson, a Village of Hobart trustee who has been tracking the issue for years.

State officials recently noticed this problem after many decades of suspected abuse. As a result the new state budget requires districts to cap the amount of money they charge local taxpayers for Fund 80 expenses.

But as Severson points out, the new regulations do not appear to come with any sort of enforcement mechanism, so if school districts choose to ignore them, there may be nothing anyone can do about it.

Even worse, the definitions for use of the fund remain vague. Some say the vagueness is an intentional effort on the part of the state to give school districts a license to overcharge taxpayers. Others say the regulations are loosely designed to give financially struggling schools wiggle room to keep up with rising costs.

Either way, Fund 80 language allows extra taxation for questionable purposes, and citizens have limited options to stop it.

Milton Thompson, superintendent of the Pulaski school district, said the trend toward using Fund 80 for some regular K-12 expenses started when the state capped local property taxes in the 1990s, and became more widespread when the economy tanked and state aid for schools was cut back.

“If a district was in financial difficulty, it was a way to be able to weather the storm a bit,” Thompson told EAGnews. “That’s what happened in a lot of places.”

Huge increases in unapproved taxes

Community Service taxThe Community Service Fund was established by the state in 1983 to help school districts pay the portions of community programs that user fees didn’t cover. The districts were allowed to use some of their local property tax revenue for this purpose.

But property owners were still shielded by the state tax cap. Schools could spend their local tax revenue any way they wanted to – for regular costs or Fund 80 costs – but the maximum amount they could raise through local taxes remained frozen.

That all changed in the 2001 state budget, after schools successfully lobbied the state to allow them to exempt Fund 80 expenses from the tax cap. This change was approved by the state legislature and former Democratic Gov. James Doyle.

Suddenly school districts had a license to tax property owners beyond their local tax cap, provided the extra taxes were applied to Fund 80 activities.

Many districts have taken full advantage of the change in the law.

Of Wisconsin’s 424 public school districts, 279 charge extra property taxes for Fund 80 use in 2012-13, according to statistics from the Wisconsin Department of Public Instruction. Ten districts levied more than $1 million in Fund 80 taxes while 115 levied at least $100,000.

The biggest taxers under Fund 80 last year were Milwaukee ($17 million), Madison ($11.8 million), West Allis ($3 million), Green Bay ($2.8 million), Eau Claire ($2.3 million), Kenosha ($2 million), Fond Du Lac ($1.5 million), Appleton ($1.4 million), Sheboygan ($1.3 million) and Shorewood ($1.1 million).

In 1999-2000, just before the law was changed, Wisconsin school districts used a combined $14.7 million of their allotted local taxes for Fund 80 expenses. By 2012-13, that amount had escalated to a whopping $81.4 million, with all of the money collected from local taxpayers above and beyond revenue limits.

That’s an increase of 553 percent in 13 years.

Improper use of Fund 80

Critics say the huge increase in Fund 80 taxation is because many schools started using the fund to pay for regular K-12 expenses that have nothing to do with community programming. As the Brown County Taxpayers Association put it in a power point presentation, “Today much of (Fund 80) spending is abusive – uncontrolled and outside the legislative intention of the law.”

A checklist from the Wisconsin Department of Public Instruction website is designed to guide school districts on the type of expenses they can and cannot charge to Fund 80.

“Is the program outside the usual instructional program? Is the program open to everyone in the community (age appropriate)? Is the program fee supported? Are program expenditures directly related to the activity included? If you can answer ‘yes’ to all those questions, the program may be appropriate for inclusion in Fund 80.”

The DPI website also said the following: “In general, if it involves an activity that provides instruction and supporting services to K-12 pupils, including extracurricular activities, it’s probably not appropriate for Fund 80.

“We recommend these activities and costs not be accounted for in Fund 80: District and building administration, facilities used primarily by the instructional program, expenditures for the welfare and safety of pupils and staff involved with K-12 instructional programs.

“We recommend these activities and costs not be accounted for in Fund 80: Custodial services, security services, utility costs.”

At least three school districts – and probably more – have clearly violated those guidelines, critics say.

Severson has taken it upon herself to track Fund 80 spending in her home school district of Pulaski. She said she has found numerous programs improperly charged to the fund between 2002 and 2012.

They include utilities and maintenance costs, the Pulaski News school newspaper, compensation for the district’s police liaison officers, operation of the district website, and compensation for the director of business services, a district accountant, three accounting employees and an accounts payable employee.

The Pulaski district spent $5,000 worth of local taxes on Fund 80 expenses in 1999-2000. That figure ballooned to $437,457 – all in extra taxes – in 2012-13.

Thompson, superintendent of the Pulaski district, said the school board recently removed some items from the Fund 80 budget and will review other items in the future. He said the process is difficult, due to overlap between community and school-related programs.

“In Pulaski there are so many programs that are community oriented but involve some employees or students that separating them can be difficult,” Thompson said. “The board has taken into account that this is something we have to keep looking at and making modifications to.”

Green Bay and Madison

The Brown County Taxpayers Association recently prepared a power point presentation for several state lawmakers, based on its findings regarding the use of Fund 80 in the Green Bay and Madison districts.

The Green Bay district has been using Fund 80 to pay for the entire middle school athletic program, 20 percent of all district social workers, all the district’s police liaison officers, the administration building receptionist, truant officers and video recordings of school board meetings, according to the taxpayer group.

In 1999-2000, the Green Bay school district spent no tax dollars on Fund 80 programs. By 2012-13 it was charging taxpayers an extra $2.8 million for Fund 80 expenses.

A spokesperson from the Green Bay district told EAGnews that social workers and truant officers have been removed from the Fund 80 budget and said compensation for the administration building receptionist was never included.

Green Bay district officials declined to comment further.

The Madison school district has been improperly using Fund 80 to provide grants for various “community organization programs,” like the Vera Court Neighborhood Center, the Urban League of Greater Madison, the Gay-Straight Alliance, the Lussier Community Education Center, the African-American Ethnic Academy and several others, according to the Brown County Taxpayers Association.

Logical questions would be whether all of these programs are run by the district, whether they are fee-based for users, and whether grants for various programs are appropriate under Fund 80.

In 1999-2000, the Madison district was spending $1.9 million in local tax dollars for Fund 80 programs. By 2012-13 it was charging local taxpayers an extra $11.8 million for these expenses.

Rachel Strauch-Nelson, a spokesperson for the Madison district, did not address that list of alleged expenses, but issued the following statement:

“The State of Wisconsin defines the use of the community services fund and DPI issues guidelines,” she wrote in an email message to EAGnews. “The district follows those guidelines to ensure appropriate use of the community services fund.

“While the community services fund is not subject to revenue limits, its use is publicly approved by the school board every year. That is an open, transparent process that allows taxpayers in our community to weigh in.

“The largest portion of the community services fund goes toward Madison School and Community Recreation (MSCR). MSCR provides after school programming for children and affordable recreation opportunities for children and the community. Those programs enjoy support from our local community and are also approved every year by our local elected school board through the budget process.”

Wishy-washy regulations

The vague, advisory nature of the Fund 80 guidelines has undoubtedly allowed many school districts to justify Fund 80 spending beyond its original intent.

Severson believes the language was designed to be murky to help school districts get around revenue limits and raise as much tax money as they want.

“The DPI indicating, for example, that proration of costs is ‘not recommended’ with respect to utilities, custodial and security costs is a very weak statement, and I believe purposely so, because the DPI knows it doesn’t have any enforcement capability regardless of what a school district decides to shove into Fund 80,” Severson said.

“Better defined guidelines for what is appropriate to include in Fund 80 would definitely help, but simply having better guidelines with no enforcement mechanism to ensure compliance accomplishes nothing.  This is why we have been proposing to our legislators that putting any Fund 80 expenditures not covered by user fees back under the school district’s revenue cap would be a no cost, self-policing way to ensure compliance.”

DPI officials have not responded to several detailed messages from EAGnews seeking comment about the legality of various uses of Fund 80.

Severson and officials from the Brown County Taxpayers Association lobbied several state lawmakers earlier this year to do something about Fund 80 abuse.

As a result, the new 2013-14 state budget addresses the situation, at least to some extent. According to a summary of the new regulations from the Davis & Kuelthau law firm, “a school district may not levy more for community service funds than was levied in the most recent year preceding 2013, in which community service funds were raised, unless a referendum approves exceeding this limit.”

But the budget says nothing about possible repercussions for schools that ignore this regulation, or maintain improper Fund 80 spending that’s been ongoing for several years.

As the Davis & Kuelthau summary put it, “the DPI has advised that it is not able to certify school district’s compliance with these requirements and encourages school districts to check with the school district’s legal counsel on the use of Fund 80, particularly if they plan to exceed the Fund 80 levy limit that has now been established by law.”

The DPI’s approach does not impress Severson.

“All they could muster is getting a cap put on it, and another reporting mechanism,” Severson said. “I told them these districts are already reporting – there’s no enforcement mechanism, so who cares? All it did was send a message to school districts that they should have grabbed some more money when they could.”

Wisconsin school districts have been sidestepping property tax caps with mysterious ‘Fund 80’ levies – EAGnews.org powered by Education Action Group Foundation, Inc..

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