School Funding Cuts Hit Harder in Rural

Last year Congress eliminated the Secure Rural Schools program, which helps counties with large amounts of federal land make up some of their tax shortfalls. The cuts will have a disproportionate impact in rural areas, an analysis shows.

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The president and Congress will start battling over a new budget proposal next week. But for rural counties that lost federal funding for schools in December, there’s unfinished business in the current budget.

Rural and smaller counties were hurt worse by the elimination of the Secure Rural Schools program in December.

“Overall, rural counties would lose a disproportionate share of payments, and would feel the effects of the declines more steeply,” reports Headwaters Economics researcher Mark Haggerty in an analysis he released last month.

Prior to being zeroed out of the 2015 budget, the Secure Rural Schools program had been around for about 15 years. It helped local governments pay for school-related expenses.

The rationale for the program, and its related funding stream called Payments in Lieu of Taxes, is that counties with a large amounts of federally owned land miss out on revenue because federal land is untaxed, even though that land can generate revenue for the federal government through activities like commercial logging.

In 2013 Secure Rural Schools had $346 million in funding. The current budget has nothing for the program.

The funding cuts won’t be a complete loss for U.S. counties. That’s because Secure Rural Schools payments are based on a complex set of formulas that also include Payments in Lieu of Taxes. Some counties will make up part of the loss in Secure Rural Schools funding through increased payments from the other funding program. And in future years, the funding bumps will smooth out a little because of how the formula works.

But overall, there’s less money to go around. And some rural counties are going to feel the pinch this year.

Haggerty ran the numbers through the federal formulas and issued a report that projects just how much funding each county will lose (and in a very few cases, gain). It won’t come as a surprise that rural areas, which are more likely to have large swaths of federal land, will bear a disproportionately large share of the cuts.

The chart at the top of story is one indication. It shows that as the population of counties increases, the percentage cut in payments decreases. In other words, the bigger the county, the smaller the percentage cut.

(Headwaters Economics has a number of reports on the county-payments system. Their analysis, along with extensive notes and a spreadsheet with county-level data, is available on their website. Or you can download the Excel spreadsheet directly here.)

Below is a list of the counties that will have the largest raw-dollar declines in federal funding under Secure Rural Schools and the Payments in Lieu of Taxes programs, according to Haggerty’s analysis. Nineteen out of the 25 biggest losers in raw dollars are nonmetropolitan.

Another part of the report is even more dramatic. Haggerty estimated how big a hole the funding cuts could leave in local county budgets.

(To estimate each county’s annual budget size, Haggerty used 2007 Census of Governments data. He writes that this is a less-than-perfect reflection of actual county budgets. But it’s good enough to paint a picture of the broad impact of federal funding declines in the Secure Rural Schools program.)

Twenty-two of the 25 biggest losers as a percentage of county budget are rural. 

At the very top of this list of losers are Custer and Idaho county, Idaho, which will lose and estimated 64 and 49 percent of their annual budgets, respectively.

 

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