Passing the Education Buck

Everybody's behind the Minneapolis schools referendum this year--including local business interests that opposed it last time. Why? Because their taxes will go down, while those of most homeowners will go up.

          Not surprisingly, that principle has long been a thorn in the side of business lobbyists. They didn't get anywhere for a long time, what with state politics dominated by DFLers who knew that "buildings don't vote, but people do." But then Gov. Arne Carlson was elected along with a growing numbers of legislators from suburban districts full of industrial parks and high-valued homes. At almost every legislative session since, property-tax reform has been a top priority. And while the rhetoric focused on relief for middle-income families, the changes lawmakers passed almost exclusively helped business properties and mansions.

          One of those changes came in 1993, in response to corporate Minnesota's complaint that voters could happily pass referenda knowing that commercial properties would pick up most of the tab. By 2001, lawmakers determined, all referendum taxes in the state would have to be levied at the same "market-value" rate.

          This was no mere bookkeeping shift. Under the old rules, businesses in Minneapolis have been picking up about 57 percent of the district's excess levy. With the new system, their share is expected to drop to one-third. By 2001, that system will slash the referendum tax bill for a $250,000 commercial building almost in half, while $85,000 homeowners will pay at least double what they would under the old rules.

          One more detail: Though it required that all referendum levies go to market rate by 2001, the Legislature left it up to districts when exactly to make the switch. Some districts have chosen to stick by the old rules as long as possible, making businesses pay more and hoping the Legislature will change the system before homeowners get walloped. Minneapolis could have done the same thing. Whether it would became a key question when, earlier this year, school officials began feeling out the Chamber of Commerce.

          According to chamber lobbyist John Bergford, Minneapolis Superintendent Peter Hutchinson approached the group back in January. Business and the schools had pretty much the same agenda, he told them--turning kids into qualified workers and citizens. It was time that they worked together.

          The chamber, however, would not play easy to get. Two conditions would have to be met before it could support the referendum: First, the property-tax shift would have to be instituted in a satisfactory manner. And second, the district would have to prove that the referendum money could get results, preferably in the form of rising test scores. In fact, maybe the extra dollars should be withheld each year until "performance goals" were met.

          After six months of negotiations, the two sides had an agreement. Minneapolis would phase in the shift to market value evenly over five years, meaning that businesses would get a tax cut right away. And, though the district wouldn't actually guarantee higher test scores, it would set a goal of raising them at least 10 percent each year. A few other items, such as "increased administrative flexibility" also made their way into the deal. On August 15, the Chamber formally endorsed the referendum.

          School officials are vague when asked whether other groups were courted as aggressively as the Chamber was. Mark Fermanich, the district's intergovernmental relations manager, says a number of people were involved--parents, the teachers' union, various advocacy groups. Not all of them, he acknowledges, had as much input as the Chamber. But, adds Hutchinson, "We didn't really give the Chamber anything we weren't going to do anyway."

          Minneapolis isn't the only place where the relationship between business and the schools has changed--though it is, probably, the place where the change is farthest advanced. For several years now, business groups have taken an increasingly vocal position on public education. They've called for performance incentives such as merit pay for teachers; "results orientation," which generally means doing whatever it takes to raise test scores; and increased "competition," which usually means some manner of private-school voucher initiative. They've also demanded a fundamental restructuring of the way schools are financed--in particular, a drastic shift away from property taxes as the main resource.

          On each of these points except vouchers, Hutchinson and his firm, Public Strategies Group, have provided a much-watched model. To this day, Minneapolis is the only district in the country managed entirely by a private company. The super, a former vice president of public relations at Dayton Hudson, has brought corporate mantras like "reengineering" and "quality" to the schools. His interviews and proclamations brim with words like "achievement" and "performance," the latter showing up no fewer than 15 times on one page of a memo.

          The results so far are mixed. Surveys commissioned by the district show that parents and students have been feeling better about the schools. The union has agreed to help boost teacher performance. A new math curriculum has been developed. Test scores have improved.

          Yet those same scores show that the gap between white students and Native American and African-American students is getting wider. Desegregation has been given the boot as the district started a move back toward neighborhood schools. And though Minneapolis spends more money per pupil unit than any other district in the metro area, it remains starved for resources to deal with an increasingly needy population. For years now, the district has been considering suing the state over inadequate funding.

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