Part 1: Who Pays for Wisconsin’s Schools? A Democratic Trifecta Could Rewrite the Funding Equation
AI assisted in researching this article.
For years, school districts across Wisconsin have faced a difficult financial choice: reduce educational services, cut staff, or ask local taxpayers for more money.
Increasingly, that last option has become a familiar feature of school district budgets. Operational referendums, once viewed by many communities as an occasional tool for addressing extraordinary financial needs, have become an important part of the debate over how Wisconsin pays for public education.
The underlying question is straightforward but politically complicated: Should local property taxpayers continue carrying a substantial share of the burden for maintaining public schools, or should the state assume more responsibility?
A hypothetical Democratic takeover of the governor’s office and both chambers of the Wisconsin Legislature could put that question at the center of state budget negotiations. With a Democratic governor, Democratic majorities in the Senate and Assembly, and a liberal-leaning Wisconsin Supreme Court, the political environment would differ considerably from one in which opposing parties control the governor’s office and legislative leadership.
Such a shift would not guarantee a complete overhaul of Wisconsin’s education financing system. It would, however, create an opportunity for lawmakers to pursue changes that have historically faced significant political obstacles. At the center of the debate would be the state’s K-12 equalization aid formula, the revenue limits imposed on school districts, and the growing reliance on local referendums to finance ordinary operating expenses.
A funding system built on state and local dollars
Wisconsin does not finance public education through a single statewide funding source. Instead, school districts rely on a combination of state aid, local property taxes, federal funding, and other revenue sources.
The state’s equalization aid system accounts for differences in local property wealth. Districts with less property wealth relative to their educational spending generally receive more state assistance than districts with stronger tax bases. The goal is to reduce disparities between communities and help ensure that students have access to educational opportunities regardless of where they live. The system operates under Wisconsin Statutes Chapter 121, particularly Section 121.07, which establishes the general equalization aid framework.
But equalization aid does not eliminate differences in local financial capacity, nor does it guarantee that state funding will cover the full cost of operating a school district. Districts still face rising expenses for teacher salaries, health insurance, utilities, transportation, building maintenance, and classroom materials. Those costs can increase even when enrollment remains flat or declines.
For districts operating under state revenue limits, finding additional money can be difficult.
Why referendums have become part of the equation
Wisconsin’s school district revenue limits, established under state law, restrict how much revenue districts can raise through certain state and local sources. The restrictions are intended to control spending growth and property tax increases. However, they can also limit a district’s ability to respond to rising operational costs.
When a school board determines that existing revenue will not support the district’s needs, it can ask voters for permission to exceed the revenue limit through an operational referendum. The money can support recurring expenses such as employee compensation, classroom instruction, utilities, and transportation.
For many communities, that creates an uncomfortable choice. Voters may support maintaining current educational services but oppose higher property taxes. Others may approve additional funding because they fear that rejecting a referendum will lead to teacher layoffs, larger class sizes, or reduced programs. The result is a system in which the quality and stability of school services can become heavily influenced by local voting patterns and property tax capacity. A district with residents willing and able to approve additional taxes may have more flexibility than a financially constrained district facing similar educational needs.
That disparity is one argument behind calls for broader school funding reform.
What Democrats could change
A Democratic-controlled Legislature could increase its state contribution to K-12 education.
One likely starting point would be to increase general equalization aid rather than create an entirely new funding system. Lawmakers could increase the amount of eligible educational costs the state supports, revise the formula’s treatment of property wealth, or add additional considerations for student poverty, special education needs, and declining enrollment. The state could also expand categorical aid programs that help districts pay for specific expenses.
Special education funding would be a particularly important area because districts can face substantial costs serving students with disabilities. Additional transportation aid could also benefit rural districts, where long bus routes and geographically dispersed populations create expenses that differ from those in urban and suburban communities.
Another possibility would be a statewide minimum operating funding guarantee. Under such a proposal, the state would establish a baseline level of financial support per student, potentially adjusted for special education, poverty, transportation, and other factors. The purpose would be to give districts a more predictable financial foundation.
However, designing such a formula would require lawmakers to decide how much money each district needs and how to treat differences in local operating costs.
The property tax question
Increasing state aid does not automatically mean school property taxes will decline. The outcome depends on how lawmakers structure the additional funding.
If the state increases aid while maintaining existing revenue limits, the additional money could replace a portion of the local property tax revenue districts otherwise would collect. That could provide meaningful property tax relief without increasing total school district spending authority.
Alternatively, lawmakers could increase state aid while also allowing districts to spend more. That approach could improve educational services, but it would not necessarily produce the same level of property tax relief.
The distinction is important because homeowners may expect increased state funding to lower their tax bills, while school administrators may argue that additional resources are needed to maintain educational quality. A comprehensive reform could pursue both objectives, but it would require a larger financial commitment from the state.
Beyond schools: The shared revenue connection
School districts are not the only local governments affected by Wisconsin’s property tax structure. Cities, villages, towns, and counties also rely on property taxes and state financial assistance to provide public services. Wisconsin’s shared revenue system distributes state funding to local governments, helping municipalities and counties finance services such as public safety, infrastructure, and administration.
A Democratic administration could pursue changes to both school aid and shared revenue. The goal would be to reduce pressure on local property taxpayers while providing municipalities and school districts with more predictable financial resources.
But the two systems are separate. Increasing municipal shared revenue does not automatically increase school funding, and increasing school aid does not automatically provide additional money to cities and counties. A comprehensive fiscal strategy would have to address both.
A major question for the next budget
The central challenge would be finding enough recurring state revenue to support a permanent increase in education funding.
Wisconsin operates on a biennial budget cycle, and lawmakers would need to account for the long-term cost of any expansion. Temporary money could help districts in the short term, but it would not provide the certainty needed to make long-term staffing and compensation commitments.
A sustainable reform would require recurring revenues, spending reallocations, or changes to existing tax policy. It would also require agreement among lawmakers representing communities with very different educational and financial needs.
The debate would ultimately come down to whether Wisconsin wants to maintain a system in which local communities frequently turn to voters for additional operating money or move toward a model in which the state assumes a larger share of the responsibility.
Next in the series: A larger state role in school funding could change more than property tax bills. It could also reshape the relationship between teachers, municipal employees and the government agencies that employ them.
Editorial note: This four-part series examines a hypothetical political scenario. It does not assume that proposed legislation has been introduced or enacted. References to Wisconsin statutes and labor laws describe the legal frameworks underlying the analysis.
