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Education Funding Reform

Overview of Treasurer James L. McIntire’s Education Finance Reform Plan

K-12 education expenditures account for over 45% of the State General Fund Budget. Significant reforms are needed to properly organize financing for the K-12 education our voters and the Legislature passed into law, the constitution requires, and the state Supreme Court insists upon:

  • New sources of revenue are required – it is mathematically impossible to sustain an adequate education system with our state’s shrinking tax base; and
  • Fully resolving the McCleary case will also require property tax levy reforms so that the state picks up more of the cost of basic education that is now unconstitutionally paid from local school levies.

Relying on the current tax system would weigh heavily on low income households and our businesses, and in a few years would cause us to fall short once again. Instead, we should adopt the comprehensive, constitutional education finance reforms in SJR8207 (a constitutional amendment) and HB6114 (accompanying legislation) to:

  • Eliminate the state property tax, lower regular tax limits, and limit excess local school levies;
  • Set the B&O rate at 1.0 percent for business services and at Boeing’s 0.29% for all others;
  • Cut the state sales tax to 5.5%;
  • Create a constitutional 5 percent flat rate income tax dedicated to education (with a $50,000 deduction for a typical family of four); and
  • Protect taxpayers by requiring a 3/5 vote of the legislature to make any changes to the income, sales or B&O rates.

Adopting this new education finance system would lower taxes for most low and moderate income households, increase fairness across all households, and reduce the business tax burden for every business in the state. This new system would:

  • Be more stable over time;
  • Produce revenue that grows in step with the economy; and
  • Create certainty and stability for the public by putting this fairer, stronger system in the constitution – which requires a 2/3 vote of the legislature and a majority vote of the public.