As Missouri lawmakers eye tax cuts, some voice concerns about funding public schools

Advocacy groups representing Missouri public schools and teachers are sounding the alarm about a number of tax cuts pending before state lawmakers.

The bills, they warn, could have serious consequences for public education amidst growing concerns about teacher retention in the state.

In a hearing last week, Otto Fajen, a spokesperson for the Missouri National Education Association, a public school advocacy group, testified against a bill that would phase out the state’s corporate income tax.

He said the state already has a number of tax cuts awaiting implementation, and that adding more now could have a significant impact on public education.

“We’re just concerned that any progress that the legislature might want to make on recruitment and retention and teacher salaries could be undermined by a cut of this magnitude,” Fajen said.

The bill, sponsored by Sen. Mike Moon, an Ash Grove Republican, would cost the state almost $800 million per year once fully implemented, according to a fiscal note prepared by nonpartisan staff.

Moon’s proposition hasn’t made it to the Senate floor. But two versions of another bill, which would change the way vehicles are assessed for personal property tax purposes, have made it to both floors and were passed by the House.

Either version of the bill could cost local governments an estimated $350 million.

Vehicle tax assessments

The proposals were sponsored by Rep. Mike McGirl, a Potosi Republican in the House and state Sen. Travis Fitzwater, a Holts Summit Republican in the Senate. Under the depreciation schedule outlined in the bills, newer vehicles would be assessed at a slightly higher rate, while older vehicles could be assessed at as little as $8.

The proposition received approval from the House late last month by a vote of 115-19, and now awaits a hearing in the Senate.

Fitzwater said the new depreciation schedule would “right size” personal property taxes, citing growing state revenues.

“I wish local taxing jurisdictions would reduce their levies as they see record revenues, but that’s not happening,” Fitzwater said.

Senate Democrats voiced concerns during the debate that the bill would impact local governments’ abilities to collect revenue and provide public services. Sen. Tracy McCreery, a St. Louis County Democrat, said that current revenues didn’t justify lowering taxes.

“I don’t think you’re going to adjust your levy down just because there was an influx of one-time money that came in as a result of the pandemic and things like that,” McCreery said.

Sen. Lincoln Hough, a Springfield Republican and chair of the Senate’s powerful budget-writing committee, said Fitzwater’s bill was a “responsible” tax cut and was “moving in the right direction.” Hough was absent during a preliminary vote on the measure.

“The same way that I drafted the bill to reduce income taxes for individuals, he’s trying to do the same thing on personal property taxes in a more measured way,” Hough said. “We’ve gotten members with more extreme ideas about property taxes that would have far-reaching implications on local governments that derive an awful lot of their resources.”

Rep. Deb Lavender, a St. Louis County Democrat, opposed the bill in the House. She said Fitzwater’s “record revenues” assertion in the Senate was out of context.

“Our growth as a state has lagged behind most of the rest of the nation for the last many decades,” Lavender said. “Where we all were bragging that Missouri’s (revenue) increase was two percent last year, it was lowest of all the states that surround us … so, yahoo, we had a two percent increase in a year where inflation probably gobbled up all of that.”

Who foots the bill?

In most school districts across the state, local revenue makes up the majority of school funding. But school districts in and around Kansas City rely on local revenues even more than other districts.

That local revenue generally is derived from property taxes, but other kinds of taxes contribute as well.

During the 2022-2023 school year, Kansas City Public Schools received around 76% of its funding from local revenue. North Kansas City Schools received around 63%, according to data from the Missouri Department of Elementary and Secondary Education.

Out of 13 Kansas City area schools, only two received a lower-than-average proportion of their funding, the agency reported.

The burden of funding public schools has shifted more and more onto the shoulders of local governments over the years, McCreery argued during debate.

Indeed, a 2018 audit of the Missouri budget’s ability to withstand stress showed that the state had the fourth-highest percentage of school funding from local sources in 2015 and 2016. Much of that local funding comes from local property taxes.

The report also indicated that 68% of school districts saw local contributions increase from 2006 to 2016.

“As school districts face reduced state revenues and become more dependent on local tax revenues, districts may be forced to request increased property tax levies, increasing the burden to families, or cut key educational programs,” according to the report. “Increased reliance on local property taxes will also lead to increased inequality between school districts in the state.”

Paul Katnik, assistant commissioner in DESE’s Office of Educator Quality, declined to comment on how the specific tax cuts being considered would impact districts. He said the department would “do the best we can with what we’ve got to work with.”

Teacher retention

The slew of proposed tax reforms come as schools across the state grapple with poor teacher retention.

From 2021 to 2022, the percentage of teachers staying in the profession was 90.5%, according to data released last month by DESE. From 2022 to 2023, that percentage dropped to 88.2%.

For first-year and non-tenured teachers, that rate is even lower.

Teacher retention in Kansas City-area school districts varies widely. In North Kansas City schools, the three-year teacher retention rate is just a few percentage points above the state average — but in Kansas City public schools, it’s almost 20 percentage points behind.

Katnik said teacher salaries in the state need to compete with those in surrounding states in order to retain quality teachers.

“We don’t want people leaving to go work in another state or living in our state and driving across the river to work in another state because they can get paid more,” he said. “We’d rather be competitive and keep them here.”

Missouri’s annual budget already includes grants and scholarships intended to raise teacher salaries. But Todd Fuller, a spokesperson for the Missouri State Teachers Association (MSTA), said districts would rather see the raises in statute.

“Since it’s not in statute, there’s still some school districts out there that don’t budget for that money,” Fuller said. “There’s going to need to be a much higher starting salary that goes into statute. Right now, the talk is $40,000 — but honestly, we’ll still be behind (other states) at that level.”

But Katnik and Fuller both acknowledged that other factors also influence whether a teacher will leave the profession.

An MSTA survey of 2,300 teachers found that the top three reasons they considered leaving the profession were stress, student behavior and pay, in that order.

“Right now, our schools don’t have the staff that they need for our kids,” Katnik said. “That should not only worry me, but it should worry everybody in our state.”