PROPERTY TAXES

There Is a Strong, Positive Relationship Between Property Wealth and State + Local Education Funding Even Though There Shouldn’t Be

Directly funding education through property taxes without any meaningful redistribution is inequitable. This is not a statement of opinion; it is a statement of fact. The Foundation Formula was developed with the stated aim of correcting for this fact. But there’s what policymakers said they wanted the Formula to do and then there’s what they actually built it to do, and those things are very different. As we asserted in the previous section, in so many ways (e.g., hold harmless provisions, treatment of high-need student populations, the way the formula determines the cost of education, etc.) the Foundation Formula is doing exactly what it was structured to do: give White wealthy districts an unneeded boost. 

We can see that same trend from a new vantage point if we look at the relationship between the value of all the property within a district’s boundaries (as measured in its “assessed valuation per student”) compared to the district’s local and state revenue per student. If the Foundation Formula was working to ensure adequacy, we would expect to see a negative relationship between these two variables: districts with lower property wealth would get more funding because their students are more likely to be costly to educate. 

Short of this, we might expect to see essentially no relationship between assessed value and local +  state funding, which would suggest that, holding the extra costs of educating low income students aside, state funding was bringing poorer districts up to parity with wealthier districts. In practice, we see neither of these things. Instead, we see the opposite of what we should see if equity was centered: there is a strong positive relationship between property wealth and state + local funding for education. 

Districts with more wealth to draw on put more dollars into their classrooms. Again, this is partly because the Foundation Formula was poorly built to execute on its theoretical mission. Another part of it, though, is that there is vast variability in wealth from district-to-district, and state funding can’t smooth that out because there simply isn’t enough of it. 

Majority White Districts Have Much Greater Residential and Commercial Property Wealth

The median assessed property value for majority Black districts is $97,751 per student. For majority White districts, it’s almost two times higher, at $181,899. The majority White school district with the greatest property wealth (Clayton at $428,446/student) has $173,117 more in assessed property value per student than the majority Black school district with the greatest property wealth (U City at $255,329/student). 

The greater property wealth in majority White districts is driven primarily by both residential and commercial properties that are worth more. For example, the median home in majority White districts is worth $215,700, while in majority Black districts it’s worth $91,400. We weren’t able to find data on commercial wealth for all the districts we studied, but we were able to find some, mostly through the notices, like this one from Rockwood in 2019, that districts have to put out before levying taxes. We wondered how commercial property values fit into the overall local funding pie from one district to another. Keep in mind that commercial property is assessed at 32% compared to 19% for residential property, so, we reasoned, districts with vigorous business presences have a sizable advantage over districts that do not. 

Let’s look at the example of Brentwood compared to Riverview Gardens. 

Tucked in North County, beleaguered Riverview Gardens covers an area of 9.3 square miles. Brentwood, one of the four school districts in the city of Richmond Heights, is smaller, at 2.1 square miles. However, Brentwood punches above its weight when it comes to business activity. Trader Joes, Target, Whole Foods, Dierbergs, Best Buy, and many others can all be found within a quarter mile radius of one another. Anyone who has been to the Target in the Promenade at Brentwood on a Saturday knows all too well just how busy that shopping area is. 

That’s a big part of why, in 2018, nearly 35% ($110,588,460) of Brentwood’s assessed valuation of $317,262,750 came from commercial property. By contrast, 13.6% ($26,812,490) of Riverview Gardens’ $198,924,110 of assessed value came from commercial property. The assessed value of the commercial property in Brentwood is more than four times higher than in Riverview Gardens, even though Riverview Gardens is nearly five times bigger in geographic size. 

The kicker is this: in 2018, Riverview Gardens enrolled 5,310 students. That same year, Brentwood enrolled 784 students. The massive commercial property wealth represented by all those stores is funneled into education benefits for less than 800 students, most of them White and upper-middle class. Put another way, Brentwood had $141,056 of assessed commercial property value per student, over 28 times more than the $5,049 per student in Riverview Gardens. A similar pattern plays out in Clayton, which is home to the Galleria; Kirkwood (West County mall); and many other majority White districts that benefit from thriving businesses that people come from all over the region to use. 

Right about now would be a good time to start reflecting (if you weren’t already) on why those thriving businesses are where they are, what was there before them, and why there are so many fewer such businesses in low-income majority Black districts. We’ll circle back around to that in Section 7. 

Majority Black Districts Tend to Pay Higher Taxes

The greater property wealth in many majority White school districts means they can raise enough money without taxing themselves as much as property-poorer districts. To raise the maximum property tax they can levy (i.e., the “tax rate ceiling”) above a certain point, districts need voter approval. Majority Black districts tend to have higher tax ceilings ($4.7804 per $100 of assessed value  vs. $4.2732) meaning their residents voted to tax themselves more heavily, despite having about half the income on average. Majority Black districts are also, on average, closer to hitting their tax ceilings. And again, since incomes in these districts are lower, paying these amounts in taxes hurts more. But at the end of the day, even if they tax themselves more, the property in majority Black districts just isn’t worth enough to even come close to the revenues generated in wealthier, Whiter districts.

Consider this final thought experiment: with a 4.4632% school district tax rate, the median household in Kirkwood pays about $2,900, or about 2.9% of their income, in taxes to their school district. For the median household in Jennings to pay a similar amount, the district would have to bump its tax rate up from 5.3889%—already one of the highest in the region—to over 22%, which works out to 9.1% of median household income. It’s just not feasible (it’s also not allowed by state law). And the state Foundation Formula wasn’t built to adequately correct for that fact.