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.

          Janet Kujak is a born classroom performer. A tall woman with a shock of brown hair and a splash of bright red on her cheeks, she soothes, commands, and entertains her 5-year-old charges. There are about 24 in her class. And that's an improvement from the beginning of the year.

          Like most other city schools of its kind, Northstar Elementary was recently designated a "community school," and a spot was guaranteed for each kid in its attendance area. In a poor neighborhood full of young families, that guaranteed overload. Though Minneapolis kindergarten classes are supposed to have no more than 19 kids on average, Kujak and her colleagues started the year herding 28 5-year-olds each.

          "A lot of them come straight from home," she says. "They've never been in daycare. They've never been in any big group before. So we need to think of every detail ahead of time. What you do with your table, where you put your garbage. How you stand in a line, where your hands go, how you eat, how you handle conflict. And there's always someone walking off somewhere, or someone getting bumped and crying."

          Kujak and her colleagues got a little relief. Some reshuffling reduced class sizes, and the school won a state grant to test an all-day kindergarten program. "That's made a huge difference," says Kujak. "I'm old enough to remember how, before 1990, we had 33 kids in each class, and two classes every day. That's 66 kids a day; 66 families to get to know, 66 individual learning plans to put together. There were just a lot of things you couldn't do. Activities, like cooking, games--a lot of my teaching is done through games. But when you have that many kids, a lot of your time is spent just keeping the lid on. It's hard with 25, but it can be done."

          This is the easy part of the referendum Minneapolis voters will find on their ballots November 5. First approved in 1990, it's given the schools $25 million a year so they could reduce class sizes to a tolerable level. If it's not renewed, close to 10 percent of the district's general-fund revenue will be lost. Sitting in Kujak's classroom, the conclusion seems logical: These kids obviously deserve every penny.

          A look at the politics behind the referendum is educational--not for what it says about this particular levy, but for what it reveals about how public education will be paid for (or not paid for) in the future.

          On the surface, the campaign is a love fest. The school district, obviously, supports the levy. So does the teachers' union, many of whose members are paid directly from referendum funds. The Star Tribune, which editorialized against the measure in 1990, is now in favor. Even the Chamber of Commerce has gotten on board.

          So, you might ask, what's different this time? A few things--a new superintendent, a good PR effort, a decent record spending referendum money. More than anything, though, the change is a matter of who will be paying the tab. Businesses and rich homeowners bore most of the referendum burden over the last six years. Now, as a result of legislative changes and a Faustian pact the district struck with business interests, homeowners will have to shell out. And that's the part referendum proponents don't like to talk about.

          Take what they told Beth Popalisky. A teacher in the Anoka-Hennepin School District, she was an easy sell to start with: She has 33 students in her classroom and appreciated the benefits of Minneapolis's lower numbers. But she just bought a house in the city, and she'd heard that the referendum could cost her as much as $120 a year. So she called the Better Schools/Better Communities referendum hotline. It was a relief to hear that at the most, her school property tax bill would rise by $21 next year if the levy was approved.

          What the hotline people didn't tell Popalisky was that the price won't stay that low. For one, the actual referendum tax increase for an $85,000 home, roughly the Minneapolis average, is $68 in 1997. The bill looks lower only because other school taxes have gone down as a result of rising downtown property values.

          What's more, the referendum's tax bite will go up each year for five years, finally reaching $183 for the same $85,000 house in 2001. That's still a defensible amount--it works out to about 50 cents a day--but it does represent an almost fourfold increase.

          But if you own a business or your house is worth more than $200,000, it's a very different story. Assuming that the referendum passes and current projections hold, people in the most expensive dwellings and owners of business property will get a tax cut. For a $250,000 house, total school taxes are estimated to drop $9 in 1997. For an office building valued at $5 million, education taxes should fall more than $7,000.

          The reason for the imbalance is buried amid some little-noticed recent changes in the way property taxes are figured. Politicians don't like to explain them in detail, claiming the system is so complicated mere mortals won't understand. But the basics are actually quite simple.

          Unlike most places, Minnesota has a moderately progressive property-tax system. Land and buildings are taxed at varying rates depending on what they're used for and what they're worth. Farms generally get the best deal, followed by owner-occupied homes; commercial and industrial properties pay the most. The owner of a brand-new office tower may pay property taxes at as much as five times the rate of a couple in an aging bungalow.

          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.

          All of which raises the stakes for Hutchinson and PSG when it comes to this referendum. By any account, the firm's national prominence rests almost exclusively on the interest generated by its Minneapolis contract. School officials deny that that contract rides on the levy campaign's success, but it's obvious that if it fails--and if, as Hutchinson ceaselessly warns, the district has to close 10 or 15 schools and fire hundreds of teachers--Minneapolis's vaunted experiment will look a lot less attractive.

          If, on the other hand, the referendum succeeds, it will almost certainly increase the pressure toward more changes in education--changes that, at least to some extent, will follow the road set out by the business groups. Hutchinson's promise of increased test scores is nothing new, but it does cement a trend toward assessing kids' progress by an ever more sophisticated set of numbers. And the growing homeowner tax bills brought on by the market value shift are bound to increase resentment against property taxes--which, in turn, could lead to either education cuts or a drastic reform in school finance.

          Considering the magnitude of the issues involved, the oddest thing about the referendum campaign is how little they're being talked about. The reason, basically, is that proponents are marching in lockstep, and critics either can't be heard or don't want to be.

          Perhaps the only clear antireferendum position by a major political body comes from the Republican party. Its city committee calls the levy a "Band-Aid for a system that needs a tourniquet." But, says First Ward GOP Chair Cynthia Aldrich, they haven't been able to mount much of a campaign because "no one was willing to help fund us. Peter did a really good job at going in the front door and getting everyone to close ranks." So far, the referendum campaign has raised and spent in the neighborhood of $200,000, with a good number of the contributions coming from business interests. Yet, Aldrich and other opponents say, word of mouth shows that many voters are lukewarm to downright cool about the referendum.

          Which, in turn, is what's keeping a lot of other people quiet. As Dennis Schapiro, veteran school observer and publisher of the Jola Education Monthly newsletter, puts it, "It really would be a bad situation for the schools if this fails. And no one wants to give people a reason to vote no." In other words: Even those who might speak candidly--in a city where frank discussion of the schools is hard to come by anyway--are quiet because they're desperate. It's an understandable dilemma, and a perfect setup for a campaign as vacuous as any in recent history. "Vote Yes For Kids," read the lemon-yellow lawn signs and leaf bags of the Better Schools/Better Communities committee. They don't say a thing about what exactly people are being asked to do.

          Judging from the numbers, the referendum faces rough sailing. Eighty-five percent of Minneapolis kids go to public school, but fewer than 20 percent of households have school-age children. That's part of the reason why a lot of people thought it would have been a good idea to put the referendum on the ballot last year, when the only election in Minneapolis was for school board. Hutchinson himself suggested that in the summer of '95, and board members voted to pop the question to voters that fall. But within days, the super called them to say his staff couldn't get the campaign together in time.

          Hutchinson says district officials simply were too busy with other things, including the move to community schools. He also hints that "there was some confusion because there was a school board election going on at the same time." (Generally, board members don't like to have to run and defend a tax increase at the same time.) Other observers say Hutchinson and PSG simply dropped the ball.

          Whatever the reason, the fact that the referendum is up this year forces it to compete with a presidential election (such as it is) and a tight Senate race. School officials privately wonder whether all voters will even flip the ballot to find the referendum on its back side; if they do, it will say right there that "by voting yes on this question you may be voting for a property tax increase." It's not that often that people get to rebuke one of those.

          Publicly, school officials claim not to be worried. This, Hutchinson insists, "is a city where people support public education." Just to make sure, however, referendum proponents also make a none-too-subtle pitch to the pocketbook. "If we start going into disaster scenarios," says Minnesota PTA president and campaign co-chairwoman Sue Eyestone, "the impact if it fails would be pretty dramatic. If we have to close schools and start moving thousands of kids around, you got a whole bunch of middle-class families who say 'okay, you want to move me, I'm moving to Eden Prairie.' Then you get property values dropping and neighborhoods sliding."

          So far, it looks as if neither apple pie nor property-values panic have really grabbed voters by the gut. Internal district polls indicate a slight majority in favor of the referendum, but it's a close call.

          And it's not just the no-new-taxes crowd that is skeptical. An increasing number of people, acknowledges School Board Chairman Bill Green, "especially in the African-American community," are growing resentful of a system they see as failing the kids. It's not a view championed by most of officialdom. But it's there nonetheless.

          "Looking at it objectively, kids aren't any better off today than they were before the referendum," says Earl Cooley, who retired earlier this year as a Minneapolis school counselor. "We're dealing with two serious extremes in the public schools. There's a high top and a very low bottom. And the people at the high end [Minneapolis's National Merit scholars and so on] are making those at the bottom look fairly decent. But the truth is, a lot of Johnnys still can't read. I question how much of the changes in schools have been promotional gimmicks.

          Then you have a consortium that's running the schools, that's making almost half a million a year. And so you seriously wonder whether this referendum is really about kids."

          Janet Kujak has been asking her own questions about the referendum. She knows it won't get her a raise, new books, or money for pumpkins, toys, pictures, treats. The money is dedicated strictly to class-size reduction, the only issue district officials believe they can sell to a skeptical public. They even gave up on a proposal for a "technology referendum" to put computers in the schools.

          So even if the levy passes, Kujak will continue to buy pretty much everything in her classroom except the tables, chairs, and official curriculum materials. Northstar can't count on PTA members opening their wallets and peddling cookie dough in the office. Ninety percent of the students here are on free or reduced-price lunches, the second-highest percentage of any city school. If the school is lucky, it will get to keep the health clinic just opened this year, and to spruce up its forbidding exterior. If property-tax collections fall again, the state doesn't pony up, or the feds make good on promises to cut back federal education spending--then who knows?

          Kujak looks at her watch and claps. Lunchtime. She turns to me as I'm leaving. "You know how they've got it set up now so that the taxes are being moved away from business," she says in a low voice. "That's hard. It's just going to make it more difficult for working families. People make those decisions, and no one does anything about it." (For the record, no one from the Minneapolis school district lobbied against the shift to market value.)

          The janitor comes with a cart full of egg rolls. "I just hope that people go and vote for this anyway," Kujak says.

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