Judge: Funding system for school capital projects unfair

‘Property-wealthy’ districts have edge, Gallup judge says

Fred Trujillo estimates about half of the buildings housing the 13 schools in the Española Public School District are “antiquated.”

The problem is the district doesn’t have the funding to address those issues, said Trujillo, the district’s superintendent.

He was heartened, though, by 11th Judicial District Judge Louis DePauli’s ruling Tuesday that the state’s funding system for school capital projects is unconstitutional. The judge ordered the state to develop a system that “does not create substantial disparities in capital

funding among the school districts in New Mexico.”

DePauli ruled in favor of the Zuni and Gallup-McKinley County school districts in their lawsuit against the state, which argued the funding system is neither uniform nor sufficient for all districts.

“If they do restructure and come up with a different formula, it would affect the vast majority of our state,” Trujillo said. “I know funding is limited, but it will be interesting to see how that comes about.”

Because capital outlay is directly tied to property values in respective districts, it benefits “property-wealthy” districts to the detriment of poorer ones, DePauli ruled.

Districts with higher property value can build higher-quality facilities, while also paying “significantly” lower taxes, he wrote. Meanwhile, districts in areas with lower property values face the opposite problem: poorer-quality buildings while also paying more in taxes.

“A system that ties funding to wealth does not provide a uniform education and a system that gives less money to the districts with the greatest needs does not provide facilities that are sufficient,” the judge wrote.

However, DePauli’s ruling has some state leaders split on how to proceed with capital outlay funding. Sen. Mimi Stewart, D-Albuquerque, said she didn’t want to comment on how the Legislature should address the issue because she needed more time to study it. She suggested, however, the state should appeal the ruling.

“I don’t see how we can fully vet it, study it and think about what to do and move forward in January,” Stewart said.

Tripp Stelnicki, a spokesman for Gov. Michelle Lujan Grisham, did not say whether the state intends to appeal, but the administration will continue to work with the Legislature about improving the state’s education model.

“This administration has worked every day to help create a public education system where funds are distributed equitably and every student and school district have all the tools they need to succeed,” Stelnicki said.

Rep. Patty Lundstrom, D-Gallup, said she will use her role as chairwoman of the House Appropriations and Finance Committee to ensure New Mexico students get the funding they need for a quality education.

“As a representative of the Gallup area, our schools need adequate infrastructure and facilities,” Lundstrom said. “I recognize some tweaks in how we fund our schools have been made recently by the Legislature, but the judge said — and I agree — the current school funding system is failing too many students.”

Sen. Bill Soules, D-Las Cruces, said lawmakers have dealt with the issues regarding capital improvement funding almost every year to establish a more equitable system, and this legislative session won’t be any different. He said that a couple of years ago, the Legislature changed the percentage of matching state funds for a district’s capital outlay project to reflect the cost of building a new facility in each district. It increased the amount more prosperous districts had to spend on those facilities, he said, which did not go over well with Las Cruces school administrators.

“I’m a state senator and I have to look after all of the children in New Mexico,” said Soules, who is a teacher. “Some districts got better, some got worse in terms of what the state-match portion would be.”

Soules, who heads the Public School Capital Outlay Oversight Task Force, said the system is inherently problematic because it can punish poorer school districts.

For example, he said Zuni has no property tax base because it is on federal land, which is exempt from property taxes. The only way it can get a facility built is if the state funds it, at what the state considers to be adequate, Soules said.

Meanwhile, another school district with a larger property tax base can go above and beyond what is needed for building a facility.

“Those projects [at Zuni] are covered to what is called an adequacy level, which doesn’t allow putting in a swimming pool or any other fancy things,” Soules said. “A district that is property wealthy might be able to build a building where they are only getting a 10 percent match from the state. They have to come up with 90 percent of the dollars, but they can come up with 120 percent of adequate and thus build a school with a swimming pool and other kinds of things on it.”

Trujillo said the state’s formula for matching funds means a district like his has to spend more money on a project in order to receive matching funds. The only way to do that, he said, is through general obligation bonds to raise the needed revenue. Being in a region where the property value is low hamstrings that process.

“If you cannot generate property taxes, which helps the revenue source for districts, ultimately what happens is you can’t generate as much money,” Trujillo said.

Soules said the real problem lies in the state’s inability to fully fund its educational system. He said about 44 percent of the state budget goes toward education, but it clearly is not enough. Soules compared the situation to a bunch of hungry people fighting over a slice of pie.

“We’re all gonna starve,” Soules said. “Everybody is fighting over who is getting more of not enough money and not enough resources.”