SCHOOL FUNDS: STATE LENDS TO CONFUSION

Last week, Missouri Gov. Mel Carnahan warned school districts not to take advantage of "an unintentional loophole" in Missouri's new school financing law.

It could threaten the law's goal of providing a more equal education for Missouri's students.

But a state education department official says the loophole the governor has been discussing isn't technically a loophole.

The official, School Finance Director Vic Slaughter, said Monday, "My guess is that with most legislation involving something as complicated as this, a great number of these (loopholes) creep in. But this one didn't creep in.

"Some legislators knew it was there and some legislators like it just the way it is."

The state funding law allows school districts to gain additional state aid by refinancing building projects from bond debt to lease-purchases.

A district's state aid is based largely on its property tax rate. In general, that means the higher a district's operating levy, the more state aid it receives.

That same rule doesn't apply to debt-service levies, which are used to pay off bonds. Debt-service levies don't count for the purposes of determining state aid.

If school districts convert their debt to lease-purchase levies, they will receive increased state aid while their property tax rate stays the same.

Slaughter disagrees with the contention that this option constitutes a loophole. "Personally I think of a loophole as something that is inadvertently added, a change you didn't know was in there, or a change that had unexpected results," he said.

Slaughter said the law didn't change. Under the old formula for funding schools, converting debt to lease-purchase levies made little difference in the amount of state money generated.

"It drove a little (additional state money)," Slaughter said. "But the formula was so out of whack, almost all your money was dictated by the amount of state money you received the year before."

Under the new Senate Bill 380, signed into law by Carnahan in May, school districts that increase their local tax levies are rewarded with added state funds.

Slaughter said: "It's not a change in what could be done. It's a change in the amount of money the district could make. Senate Bill 380 made it more attractive."

Cape Girardeau's Board of Education planned to take advantage of the same provision in the law had the October ballot issue been successful, the difference being that the district would have created a new lease-purchase levy rather than converting an existing debt.

Slaughter said the governor's office and the state department of education didn't know how many districts have voted such changes. A small district in southern Missouri, Greenfield, has announced publicly that voters today will decide if they should convert their debt to a lease-purchase.

He said the only way to learn if a district is passing a levy for the purpose of converting its debt to a lease-purchase is to contact the district.

Regardless of whether it's a loophole or not, Slaughter agrees that the mechanism that makes transferring debt to lease purchase plans profitable for local school districts is a problem that needs to be resolved.

He estimated that lease-purchase projects already in existence drive about $69 million in state money. If all school districts' debt services were converted to lease purchase levies, it could cost the state $180 to $200 million a year. If districts voted new lease-purchase building projects, that number could grow, maybe to $400 million a year.

Making the change requires a vote of the people.

"We know that won't work," Slaughter said. "There is simply not enough money available."

The new formula guarantees per-pupil expenditures will be about $3,100. The old formula ranged from $2,653 to $9,750 per pupil.

Lawmakers had hoped to resolve the problem by boosting school funding by $360 million a year within the next four years.

Slaughter said he has seen one piece of draft legislation that includes a provision that districts approving new lease-purchases or tax-rate increases for building purposes approved after Jan. 1, 1994, would not be able to take advantage of added state funds.

He said the governor has indicated that such measures approved by voters in October or today could be in jeopardy.

"I don't know how any of that would come out," Slaughter said.

"We know it should be changed, nobody argues that," Slaughter said. "But the problem now is how do you go about doing that."

Slaughter said a new problem looms on the horizon. The state requires school districts to levy a minimum of $2.75 in order to receive any new state funds.

"Some people think they should be allowed to do anything they want with that money, including lease-purchase," Slaughter said. "Others say students deserve that much money for programs, not including buildings.

"It's a philosophical issue of what was intended. There are some sticky wickets laying out there for us."