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Fiscal Equity: Florida’s Intra-District Distribution Of Ad Valorem Revenue

Fiscal Equity: Florida’s Intra-District Distribution Of Ad Valorem Revenue. Association of Education Finance & Policy 38 th Annual Conference – New Orleans Patrick V. Gaffney Barry University – Miami, Florida. Overview - Quotation.

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Fiscal Equity: Florida’s Intra-District Distribution Of Ad Valorem Revenue

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  1. Fiscal Equity: Florida’s Intra-District Distribution Of Ad Valorem Revenue Association of Education Finance & Policy 38th Annual Conference – New Orleans Patrick V. Gaffney Barry University – Miami, Florida

  2. Overview - Quotation • “Paying taxes, for most people, is about as rewarding as having a root canal. Indeed, some would prefer the latter. Taxes, however, have an important purpose in a democracy. They provide for the general welfare and redistribute wealth, spreading the cost of providing services over the greatest number of people possible. Without this distribution, the wealth gap and the achievement gap would widen.” • Owings and Kaplan (2013, p.xviii)

  3. Equity • “Equally difficult and important as financing education adequately is the challenge of distributing and expending available revenues with fairness to schools and to students, regardless of their location within a state. This is the principle of equity, or fairness” (Brimley, Verstegen, & Garfield, 2012, p.59) • Equity encompasses connotations of fairness and justice (Greenhalgh, 1984). • The pursuit of equity is a generally accepted goal of education finance. Reasonable people differ, however, as to the specific applications of equity in context (Jones, 1985).

  4. State Constitutional Mandate • Article IX, Section 1 of the Florida constitution, establishes the state’s commitment to funding K-12 education as follows: “The education of children is a fundamental value of the people of the State of Florida. It is, therefore, a paramount duty of the state to make adequate provision for the education of all children residing within its borders. Adequate provision shall be made by law for a uniform, efficient, safe, secure, and high quality system of free public schools that allows students to obtain a high quality education…” • Florida Department of Education, 2012-13

  5. Florida Education Finance Program (FEFP) • The Florida Education Finance Program (FEFP) was established by the state legislature in 1973. • The FEFP remains today as the foundation program for the primary funding of the state’s public school districts’ operating costs. • Florida Department of Education (2012-13)

  6. Selected Characteristics of Florida Public School Districts • All Florida public school districts are fiscally-independent, i.e., school boards do not have to have their budgets nor their millage rates approved by any other level of local government. • “Strong pleas for fiscal independence can be made in terms of the desirability of ‘local control’…” (Jordan, 1969, p. 127).

  7. Selected Characteristics of Florida Public School Districts • By 1947, 720 school districts were eventually consolidated into the present 67 school districts which are coterminous with Florida’s 67 counties.

  8. Efficiency • “Refers to procedures that increase goal attainment with no increase in cost, reduce cost without reducing goal attainment, or enhance goal attainment while also reducing cost” (Johns, Morphet, & Alexander, 1983, p.347). • Accomplished through applications of economy of scale and/or economy of scope. • Economy of scale and/or economy of scope are represented in school district consolidation.

  9. Broward County Public School District • Broward County Public Schools (BCPS) is the sixth largest public school system in the United States, the second largest in the state of Florida and the largest fully accredited K-12 and adult school district in the nation. BCPS has over 258,000 students and approximately 150,000 adult students in 234 schools and education centers and 76 charter schools (BCPS Website, 2012). • July 1 – June 30 is the fiscal year for BCPS, while October 1 – September 30 is the fiscal year for Broward County.

  10. Broward County • Broward County is located in southeast Florida. Along with Palm Beach and Miami-Dade counties, it comprises the South Florida metropolitan area. Its county seat is Fort Lauderdale. • As of 2012, the population was 1,860,088, thus making it the second most populated county in the state next to Miami-Dade County. It is also the eighteenth most populous county in the United States. • www.localistica.com

  11. Broward County City Populations - 2011 U.S. Census Bureau • Ft. Lauderdale – 168,528 • Pembroke Pines – 157,594 • Hollywood – 143,357 • Miramar – 124,302 • Coral Springs – 123,338 • Pompano Beach – 101,617 • Davie – 93,674 • Plantation – 86,524 • Sunrise – 85,995 • Deerfield Beach– 76,389

  12. Broward County City Populations - 2011 U.S. Census Bureau • Lauderhill – 68,117 • Weston – 66,544 • Tamarac – 61,542 • Margate – 54,270 • Coconut Creek – 53,915 • Oakland Park – 42,126 • North Lauderdale – 41,782 • Hallandale Beach – 37,800 • Lauderdale Lakes – 33,191 • Dania Beach – 30,183

  13. Broward County City Populations - 2011 U.S. Census Bureau • Cooper City – 29,076 • Parkland – 24,404 • Wilton Manors – 11,843 • Lighthouse Point – 10,536 • Southwest Ranches – 7,480 • Pembroke Park – 6,214 • Lauderdale-By-The-Sea – 6,056 • Hillsboro Beach – 1,910 • Sea Ranch Lakes – 682 • Lazy Lake - 24

  14. Broward County City Populations -Descriptive Statistical Analysis • N = 30 • Mean = 58,300.43 • Median = 48,020.50 • Positively Skewed Distribution • Range = 168,504 • Standard Deviation = 49,059.58

  15. Broward Median Home Sale Prices – 6/– 8/2012 • Sea Ranch Lakes - $687,400 • Parkland - $433,950 • Southwest Ranches - $430,000 • Lighthouse Point – $357,000 • Hillsboro Beach - $300,000 • Lazy Lake - $297,000 • Weston - $285,100 • Cooper City - $245,000 • Wilton Manors - $198,900 • Ft. Lauderdale - $185,000 • www.trulia.com

  16. Broward Median Home Sale Prices – 6/– 8/2012 • Davie - $184,500 • Coral Springs - $166,000 • Plantation - $160,500 • Hollywood - $147,612 • Pembroke Pines - $135,000 • Hallandale Beach - $131,990 • Miramar - $130,000 • Dania Beach - $104,960 • Oakland Park - $91,700 • Sunrise - $90,000 • www.trulia.com

  17. Broward Median Home Sale Prices – 6/– 8/2012 • Pompano Beach - $89,000 • Margate - $88,500 • Coconut Creek - $87,000 • Deerfield Beach - $84,000 • North Lauderdale - $75,000 • Tamarac - $74,500 • Lauderdale Lakes - $67,500 • Lauderhill - $56,500 • Pembroke Park - $50,000 • www.trulia.com

  18. Broward Median Home Sale Prices -Descriptive Statistical Analysis • N = 29* • Mean = $187,365.94 • Median = $135,000 • Positively Skewed Distribution • Range = $637,400 • Standard Deviation = $145,089.64 • *No home sales data found for Lauderdale-By-The-Sea

  19. Relationship - City Populations & Median Home Sale Prices • df (n-2) = 27* • Pearson r = -.40 • Critical Value (.05 alpha level) = .367 • There was found a statistically significant inverse relationship between the variables of city populations and median home sale prices at the .05 alpha level. • *Lauderdale By-The-Sea Not Included

  20. Intra-City Variation In Median Home Sale Prices – 6/-8/12 – Hollywood, FL • Hollywood Lakes - $218,500 + • Emerald Hills - $192,250 + • Hollywood Hills - $177,100 + • Hillcrest - $59,000 – • Hollywood Overall - $147,612 • www.trulia.com

  21. Intra-City Variation In Median Home Sale Prices – 6/-8/12 – Ft. Lauderdale • 1 Bed & 1 Bath = $129,148 - • 1 Bed & 2 Bath = $217,500 + • 2 Bed & 1 Bath = $145,388 - • 2 Bed & 2 Bath = $242,676 + • 2 Bed & 3 Bath = $554,727 + • 3 Bed & 1 Bath = $163,658 - • 3 Bed & 2 Bath = $438,100 + • 3 Bed & 3 Bath = $665,095 + • 3 Bed & 4 Bath = $1,275,857 + • 4 Bed & 2 Bath = $257,646 + • 4 Bed & 3 Bath = $760,500 + • 4 Bed & 4 Bath = $741,167 + • 4 Bed & 5 Bath = $3,152,500 + • 5+ Bed & 3 Bath = $263,039 + • 5+ Bed & 4 Bath = $614,111 + • 5+ Bed & 5+Bath = $2,342,575 + • Ft. Lauderdale Overall = $185,000 • www.trulia.com

  22. Fiscal Capacity • Refers to the ability of a local school system to obtain revenues from its own sources through taxation or as a quantitative measure of economic resources within a governmental unit which can be used to support public functions (Johns, Morphet, & Alexander, 1983). • Florida public school districts rely primarily upon county ad valorem tax/property tax revenue with surtaxes and bonds as subsidiary sources of revenue.

  23. Major Sources of Tax Revenue for Florida Public Schools • Lunenburg and Ornstein (2012) contend that the local contribution to school financing has decreased over the last decades, whereas the state contribution has increased. • In 2010-2011, Florida public school districts received 35.53% of their funds from the state, as opposed to 32.84% in 2009-2010. • In 2010-2011, Florida public school districts received 46.32% of their funds from local sources, as opposed to 51.11% in 2009-2010. • In 2010-2011, Florida public school districts received 18.14% of their funds from the federal government, as opposed to 16.06% in 2009-2010. • Florida Department of Education, 2011-2012 & 2012-13

  24. Ad Valorem/Property Tax • This type of tax represents an in remtax which is levied on things, e.g., property, as opposed to in personam taxes which are levied on persons, e.g., income. • In rem taxes make no provision for taxing the equity of property, only the value of the property itself. • Property taxes have been the primary source of tax revenue for local governments and always the mainstay of public school financing in this country. • Alexander & Salmon, 1995; Webb, McCarthy & Thomas, 1988

  25. 2011-2012 Millage For Broward County Public Schools • By state law the required local effort millage rate which is a necessary condition for participation in the FEFP = 5.1700 mills • By local board the discretionary millage levied for both current operations (0.748 mills) and capital outlay and maintenance (1.5 mills) = 2.248 mills • Total = 7.418 mills for the 2011-2012 school year for BCPS • According to the state constitution, 10 mills is the maximum amount of millage that a school board can levy.

  26. 2012-2013 Proposed Millage For Broward County Public Schools • By state law the required local effort millage rate which is a necessary condition for participation in the FEFP = 5.208 mills • By local board the discretionary millage levied for both current operations (0.748 mills) and capital outlay and maintenance (1.5 mills) = 2.248 mills • Total = 7.456 mills for the 2012-2013 school year for BCPS

  27. Homestead Exemption • “All Florida residents are potentially eligible under state law for a Homestead Exemption on their homes, condominiums, co-op units, and certain mobile home lots. Every person who has legal or equitable title to a residential property and who lives there permanently may be eligible for Homestead.” • Broward County Property Appraiser, 2012

  28. Homestead Exemption • $25,000 is the standard minimum homestead exemption applied in the case of the ad valorem funding of Broward County School District. • $25,000 is subtracted from the market or assessed value of a property, resulting in the taxable value of that property. • In the case of the ad valorem funding of the local public school district, any additional homestead exemptions above $25,000 are not applied. • Additional homestead exemptions above $25,000 are normally applied in Broward County to the ad valorem funding of county, municipal, and independent (state or federal) government services.

  29. Formula For Potential Average Ad Valorem Revenue • Assessed Property Value (APV) – Homestead Exemption (HE) = Taxable Property Value (TPV) X Millage (M) = Potential Average Ad Valorem Revenue (PAAVR) • Example: Sea Ranch Lakes • $687,400 (APV) - $25,000 (HE) =$662,400 (TPV) X .007456 (M) = $4,938.85 (PAAVR)

  30. Potential Average BCPS Ad Valorem Revenue – 6/-8/2012 • Sea Ranch Lakes - $4,938.85 ($687,400) • Parkland - $3,049.13 ($433,950) • Southwest Ranches - $3,019.68 ($430,000) • Lighthouse Point – $2,475.39 ($357,000) • Hillsboro Beach – $2,050.40 ($300,000) • Lazy Lake - $2,028.03 ($297,000) • Weston - $1,939.31 ($285,100) • Cooper City - $1,640.32 ($245,000) • Wilton Manors - $1,296.60 ($198,900) • Ft. Lauderdale - $1,192.96 ($185,000)

  31. Potential Average BCPS Ad Valorem Revenue – 6/-8/2012 • Davie - $1,189.23 ($184,500) • Coral Springs - $1,051.30 ($166,000) • Plantation - $1,010.29 ($160,500) • Hollywood - $914.20 ($147,612) • Pembroke Pines - $820.16 ($135,000) • Hallandale Beach - $797.72 ($131,990) • Miramar - $782.88 ($130,000) • Dania Beach - $596.18 ($104,960) • Oakland Park - $497.32 ($91,700) • Sunrise - $484.64 ($90,000)

  32. Potential Average BCPS Ad Valorem Revenue – 6/-8/2012 • Pompano Beach - $477.18 ($89,000) • Margate - $473.46 ($88,500) • Coconut Creek - $462.27 ($87,000) • Deerfield Beach - $439.90 ($84,000) • North Lauderdale - $372.80 ($75,000) • Tamarac - $369.07 ($74,500) • Lauderdale Lakes - $316.88 ($67,500) • Lauderhill - $234.86 ($56,500) • Pembroke Park – $186.40 ($50,000)

  33. Potential Ad Valorem Revenue -Descriptive Statistical Analysis • N = 29* • Mean = $1,210.60 • Median = $820.16 • Positively Skewed Distribution • Range = $4,752.45 • Standard Deviation = $1,081.79 • *Lauderdale-By-The-Sea Not Included

  34. Relationship - City Populations & Potential Average Ad Valorem Revenue • df (n-2) = 27* • Pearson r = -.40 • Critical Value (.05 alpha level) = .367 • There was found a statistically significant inverse relationship between the variables of city populations and potential average ad valorem revenue at the .05 alpha level. • *Lauderdale By-The-Sea Not Included

  35. Potential Average BCPS Ad Valorem Revenue – Hollywood, FL • Hollywood Lakes - $1,442.74 ($218,500) + • Emerald Hills - $1,247.02 ($192,250) + • Hollywood Hills - $1,134.06 ($177,100) + • Hillcrest - $253.50 ($59,000) - • Hollywood Overall - $914.20 ($147,612)

  36. Potential Average BCPS Ad Valorem Revenue - Ft. Lauderdale • 1 Bed & 1 Bath = $776.53 ($129,148) - • 1 Bed & 2 Bath = $1,435.28 ($217,500) + • 2 Bed & 1 Bath = $897.61 ($145,388) - • 2 Bed & 2 Bath = $1,622.99 ($242,676) + • 2 Bed & 3 Bath = $3,949.64 ($554,727) + • 3 Bed & 1 Bath = $1,033.83 ($163,658) - • 3 Bed & 2 Bath = $3,080.07 ($438,100) + • 3 Bed & 3 Bath = $4,772.55 ($665,095) + • 3 Bed & 4 Bath = $9,326.39 ($1,275,857) + • 4 Bed & 2 Bath = $1,734.61 ($257,646) + • 4 Bed & 3 Bath = $5,483.89 ($760,500) + • 4 Bed & 4 Bath = $5,339.74 ($741,167) + • 4 Bed & 5 Bath = $23,318.64 ($3,152,500) + • 5+ Bed & 3 Bath = $1,774.82 ($263,039) + • 5+ Bed & 4 Bath = $4,392.41 ($614,111) + • 5+ Bed & 5+Bath = $17,279.84 ($2,342,575) + • Ft. Lauderdale Overall = $1,192.96 ($185,000)

  37. 2011 Broward Municipality Millage Rates • Sea Ranch Lakes – 23.3817 mills ($4,938.85) • Parkland – 19.8155 mills ($3,049.13) • Southwest Ranches – 18.6111 mills ($3,019.68) • Lighthouse Point – 19.7419 mills ($2,475.39) • Hillsboro Beach – 19.2717 mills ($2,050.40) • Lazy Lake – 20.7438 mills ($2,028.03) • Weston – 17.7957 mills ($1,939.31) • Cooper City – 19.9386 mills ($1,640.32) • Wilton Manors – 22.7951 mills ($1,296.60) • Ft. Lauderdale – 21.0505 mills ($1,192.96)

  38. 2011 Broward Municipality Millage Rates • Davie – 21.3964 mills ($1,189.23) • Coral Springs – 20.4811 mills ($1,051.30) • Plantation – 20.4099 mills ($1,010.29) • Hollywood – 23.6885 mills ($914.20) • Pembroke Pines – 20.9788 mills ($820.16) • Hallandale Beach – 20.5707 mills ($797.72) • Miramar – 21.1361 mills ($782.88) • Dania Beach – 22.0464 mills ($596.18) • Oakland Park – 21.8095 mills ($497.32) • Sunrise – 21.8500 mills ($484.64)

  39. 2011 Broward Municipality Millage Rates • Pompano Beach – 21.0844 mills ($477.18) • Margate – 23.7849 mills ($473.46) • Coconut Creek – 22.1814 mills ($462.27) • Deerfield Beach – 21.6505 mills ($439.90) • North Lauderdale – 23.5461 mills ($372.80) • Tamarac – 22.5731 mills ($369.07) • Lauderdale Lakes – 26.6517 mills ($316.88) • Lauderhill – 23.8906 mills ($234.86) • Pembroke Park – 23.1707 mills ($186.40)

  40. 2011 Broward Municipality Multiple Millage Rates • Ft. Lauderdale – 20.0845 mills, 20.1705 mills, & 21.0505 mills* • Dania Beach – 20.9214 mills & 22.0464 mills* • Hollywood – 22.5635 mills & 23.6885 mills* • Deerfield Beach – 21.5645 mills & 21.6505 mills* • Pompano Beach – 20.9984 mills & 21.0844 mills* • Davie – 20.2714 mills & 21.3964 mills* • Weston – 16.6707 mills & 17.7957 mills* • *Figures used in previous reporting of 2011 Broward municipality millage rates.

  41. 2011 Broward Municipality Millage Rates – Descriptive Statistical Analysis • N = 29* • Mean = 21.59 mills • Median = 21.3964 mills • Positively Skewed Distribution • Range = 8.856 mills • Standard Deviation = 1.85 mills • *Lauderdale By-The-Sea Not Included

  42. Relationship - Broward Municipality Millage Rates & Potential Average Ad Valorem Revenue • df (n-2) = 27* • Pearson r = -.41 • Critical Value (.05 alpha level) = .367 • There was found a statistically significant inverse relationship between the variables of 2011 Broward municipality millage rates and potential average ad valorem revenue at the .05 alpha level. • *Lauderdale-By-The-Sea Not Included

  43. Discussion • According to Jones (1985), throughout this century a primary focus of school finance has been the tax and expenditure inequalities generated by a heavy local reliance on ad valorem revenue. • Does the state of Florida represent progress in terms of eradicating or minimizing such inequalities through its county-wide system of ad valorem funding?

  44. Discussion • According to Odden and Picus (2000, p. 24), “the primary school finance problem today may be to link school finance to the strategies needed to accomplish the goal of teaching students to higher standards.” • In terms of fiscal adequacy, does Florida’s county-wide system of ad valorem funding represent the potential to generate adequate local revenue to enable public schools to prepare student to meet mandated academic standards?

  45. References • Alexander, K., & Salmon, R.G. (1995). Public school finance. Boston, MA: Allyn & Bacon. • Brimley, V.R., Verstegen, D.A., & Garfield, R.R. (2012). Financing education in a climate of change. Boston, MA: Allyn & Bacon. • Florida Department of Education. 2011-12 & 2012-13 Funding for Florida school districts (FEFP).Tallahassee, Florida.

  46. References • Greenhalgh, J. (1984). School site budgeting: Decentralized school management. Lanham, MD: University Press of America. • Johns, R.L., Morphet, E.L., & Alexander, K. (1983). The economics & financing of education. Englewood Cliffs, NJ: Prentice-Hall. • Jones, T.H. (1985). Introduction to school finance: Technique and social policy. New York: Macmillan.

  47. References • Jordan, K.F. (1969). School business administration. New York: Ronald Press. • Lunenburg, F.C., & Ornstein, A.C. (2012). Educational administration: Concepts and practices. Belmont, CA: Wadsworth. • Odden, A.R., & Picus, L.O. (2000). School finance: A policy perspective. Boston, MA: McGraw Hill.

  48. References • Owings, W.A., & Kaplan, L.S. (2013). American public school finance. Belmont, CA: Wadsworth. • Webb, L.D., McCarthy, M.M., & Thomas, S.B. (1988). Financing elementary and secondary education. Columbus, OH: Merrill.

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