Variations in Local Funding Sources for Community Colleges and Their Relationship to Institutional Characteristics

reschovsky@lafollette.wisc.edu The property tax is the mainstay of local K–12 education revenue. Public schools derive over 80 percent of their local own-source revenue from the property tax (Reschovsky 2014). At the same time, nearly half of total property tax dollars collected in the United States is used to finance public elementary and secondary education (U.S. Census Bureau 2013, 2014). This close link between property taxation and school finance is one motivation for this special issue. Another motivation is the state and local fiscal aftermath of the Great Recession. Over the past few years the financing of public elementary and secondary education has become particularly challenging. In real per pupil terms, total revenues devoted to public education fell by 6.2 percent between the 2008–09 and 2011–12 school years.2 Although comprehensive revenue data are not yet available for the most recent years, existing evidence points to a continued decline in financial support for public education. Data from the U.S. Census Bureau’s Quarterly Summary of State and Local Tax Revenue indicate that per capita real local government property tax revenues (for school and non-school purposes) declined by 3 percent between fiscal years 2011 and 2013 (Collins and Langley 2014). And a survey conducted by the Center on Budget and Policy Priorities found that in 33 states, real

This paper attempts to address two long standing questions in Public Finance: (i) why is the property tax, despite popular complaints about its fairness, the almost exclusive tax instrument used by local governments, and (ii) why do we consistently observe higher levels of governments undermine local property tax systems through income tax funded grants and state imposed caps on local property tax rates. A new intuitive argument to explain (i) is presented and tested in general equilibrium simulations which utilize a compu- table general equilibrium model of local public finance with parameters set to be consistent with micro-tax data. Different types of agents are endowed with income and houses and are able to move to their most preferred house in their most preferred jurisdiction. Also, agents vote myopically on local property tax rates while non-myopic community planners set a local income tax. Six possible objective functions for community planners are postulated, and all 6 lead to the same equilibrium outcome: community planners will always set local tax rates at or close to zero. When faced with popular sentiment against the property tax, community planners can collude and introduce local income taxes simultaneously to prevent adverse general equilibrium migration and price changes. Since zero income tax rates are dominant strategies however, such an agreement is only enforceable if an outsider like the state government steps in. State grants funded through a state income tax can play such an enforcement role.

This paper addresses two long‐standing positive questions in public finance: (i) Why is the property tax, despite widespread popular complaints against its fairness, the almost exclusive tax instrument used by local governments, and (ii) why do we consistently observe higher levels of governments (states) undermining local property tax systems through income tax‐funded grants and state‐imposed caps on local property tax rates? A new intuitive argument to explain question is presented and tested in simulations using a computable general equilibrium model with parameters set to be consistent with New Jersey data. Both the intuitive argument and the simulation results indicate that setting local income tax rates to zero is a dominant strategy for community planners. When faced with popular sentiment against the property tax, community planners can collude and introduce local income taxes simultaneously to prevent adverse general equilibrium migration and price changes. Since zero income tax rates are dominan...

Several Virginia localities have used local funding and financing sources to complete major street improvement projects when state or federal funding was not available. Many other localities have combined local funding sources with state or federal funds or both to accelerate a project of importance to the locality. In addition to lessons learned, this research documented through case studies what local governments have been able to accomplish under Virginia statutes that enabled various types of funding and financing tools in addition to the lessons learned. As cities, counties, and towns in Virginia increasingly fund and administer their own roadway projects because of scarce state funds, the experience of Virginia localities becomes more and more transferrable to localities in other states.

This paper examines why local governments rely heavily on the property tax, even when they have access to another revenue source, using data from Ohio's recent experience of permitting local school districts to use both property taxes and residence-based income taxes. Nechyba's (1997) theory that local governments' reliance on the property tax instead of the income tax is due to fiscal competition for relatively high-income residents is tested using data from 610 Ohio school districts. The Ohio residence-based school district income tax is used by only 119 school districts, at low tax rates, to supplement the traditional property tax. The use of a local income tax declines sharply as fiscal competition increases, as measured by the number of nearby school districts. School districts with greater opportunities to export the burden of the property tax to non-residential property owners are less likely to adopt a local income tax.

This paper examines why local governments rely heavily on the property tax, even when they have access to another revenue source, using data from Ohio’s recent experience of permitting local school districts to use both property taxes and residence-based income taxes. Nechyba’s (1997) theory that local governments’ reliance on the property tax instead of the income tax is due to fiscal competition for relatively high-income residents is tested using data from 610 Ohio school districts. The Ohio residence-based school district income tax is used by only 119 school districts, at low tax rates, to supplement the traditional property tax. The use of a local income tax declines sharply as fiscal competition increases, as measured by the number of nearby school districts. School districts with greater opportunities to export the burden of the property tax to non-residential property owners are less likely to adopt a local income tax.

According to the U.S. Census (2000), 42 percent of adults in the United States between the ages of 25 and 64 have no more than a high school education (authors’ calculations). Unfortunately, however, most new jobs and the vast majority of jobs that pay wages sufficient to support a family require at least some education beyond high school (Carnevale & Derochers, 2003), and low educational attainment is associated with high rates of unemployment and poverty. Community colleges are an important entry point to postsecondary education for adults with no previous college education or even a high school diploma. In Fall 2002, for example, adults between the ages of 25 and 64 represented 35 percent of fulltime equivalent (FTE) enrollments at two-year public colleges, compared with only 15 percent of FTE undergraduate enrollments at four-year public institutions (authors’ calculations, based on U.S. Department of Education, 2001). Moreover, more than two-thirds of the community college students who entered postsecondary education at age 25 or older were low income (authors’ calculations based on “Beginning Postsecondary Students Longitudinal Study” [BPS:96/01], 2003) The potential of community colleges to serve as a “pathway” for lowskill adults to college and career-path employment, therefore, is evident. Across the nation, several major projects are underway whose goal is to develop policies and practices supportive of this role. Funded by national foundations, these initiatives include the Ford Foundation’s Bridges to Opportunity initiative and the National Governor’s Association’s Pathways to Advancement project, funded by Lumina Foundation for Education. Despite this interest, relatively little is known about the unique experiences and the educational and employment outcomes of adults who enter community college with limited education. We do know that their experiences and outcomes differ from those of traditional college-aged students. Compared with community college students who enrolled soon after high school (at ages 18-24), those who start later (at ages 25-64) are more likely to earn a certificate and less likely to earn an associate degree. The late starters are also far less likely to transfer to a four-year institution and earn a bachelor’s degree. Indeed, among students who entered a community college for the first time in 1995-96, 60% of older first-time students did not earn any credential or transfer to a baccalaureate program after six years, compared with 40 percent of younger, first-time students (authors’ calculations, based on BPS:96/01, 2003). This Brief summarizes findings from a new study that seeks to fill information gaps about older community college students. Researchers used student record information from the Washington State Community and Technical College System to examine the educational experience and attainment as well as the employment and earnings of a sample of adult students, five years after first enrolling. The students in the sample were age 25 or older with, at most, a high school education. The study was conducted by staff at the Washington State Board of Community and Technical Colleges (SBCTC), with assistance from the Community College Research Center, as part of Ford’s Bridges to Opportunity initiative. Its goal was to provide educators throughout Washington’s community and technical college system with a detailed profile of their low-skill adult students, who make up about one-third of the approximately 300,000 students served by the system annually. The study also sought to identify the critical points where adult students drop out or fail to advance to the next level in order to help SBCTC staff stimulate thinking among educators throughout the system about how to bridge those gaps and thereby facilitate student advancement.

R URAL PUBLIC SERVICES are viewed here as the local governmental functions performed in areas of submetropolitan status. Water supply and wastewater treatment, hospitals and health care, libraries and education, public housing, police and fire protection, refuse collection, and road maintenance are included among these services. Local funding sources include primarily real estate taxes, service charges, and debt financing. Use of a local sales tax and a local income tax is authorized in several states. In almost all states, local governments derive small amounts of income from fees for licensing business, making inspections, new construction permits and miscellaneous functions.

Theoretical background: In public economics, there is well-established research on the fiscal efficiency of local tax sources (fiscal capacity) and the sensitivity of local authorities’ tax revenues to changes in the parameters of their local tax policy (fiscal stress). However, there is a need for a critical approach to these characteristics in the conditions of the division of tax authority between central and local authorities, in particular regarding the application of a hybrid model combining the shares of local authorities in taxes that are the subject of central tax policy (personal income tax) and local tax authority over property taxation. Purpose of the article: There are no indicators for identifying the relationship between changes in personal income taxation policy and local property taxation policy. Therefore, the theoretical goal of the article is to develop indicators for determining the willingness and ability of local authorities to compensate for the undesirable fiscal effects of the personal income taxation policy pursued by the central authorities. The research goal of the article is to evaluate the differentiation of these indicators in municipalities in Poland. Research methods: Drawing conclusions based on the estimated basic parameters of statistics of the developed pressure and capability indicators for the population of Polish municipalities; distinguishing the subpopulations of urban municipalities, urban-rural municipalities, rural municipalities, and cities with county rights, both in the temporal and spatial dimension. Main findings: The paper’s conceptual framework enables a critical adaptation of the fiscal stress and fiscal capacity research methods to analyse the confluence of unfavourable changes in the conducted by central government personal income taxation policy and the property taxation policy controlled by local tax authorities. The proposed pressure to compensate and ability to compensate indicators were estimated for all Polish municipalities in the years 2019–2023. On their basis, their statistics were developed, allowing for the formulation of the following conclusions. The median of the index of pressure to compensate, that is the ratio of shares in personal income tax to current expenditures subtracted by earmarked grants was stable in the years 2019–2022 despite numerous and profound shocks to municipal budgets triggered both by taxation reforms and exogenous events such as the COVID-19 pandemic and the war in Ukraine. The year 2023 saw a significant drop in exposure to unfavourable changes in personal income taxation. The decreased variation accompanied a decrease in the indicator in question. On the other hand, the median index of the ability to compensate for unfavourable changes in personal income taxation provided by central government, that is the median of relations between tax expenditures and revenues from property taxes, was very stable from 2019 to 2023. The activity of the local authorities in pursuit of tax policy did not exceed 20%, which can be assessed as a stable but low level of compensation capacity. The empirics show that the pressure-to-compensate indicator establishes noteworthy variances among municipalities depending on their type. The higher the level of urbanization, the higher the values of this indicator, as local revenues from personal income taxation in urbanized regions are usually higher. This presentation of results and comparison of the size of these indicators spatially make it possible to identify regions that may need special attention from policymakers when planning future tax reforms.

The value of federal income tax deductions, such as the home mortgage interest deduction (MID), varies across geographic regions. This study uses 1995 tax data to investigate the extent to which the current mortgage deduction is used and how the utilization differs across regions. The authors show that substantial regional differences in using the MID are related to differences in income, the level of house prices, the rate and form of state and local taxation, and demographic differences that affect homeownership and the amount of mortgage debt. About 40% of the explained regional variation in itemization is due to regional differences in house prices; another 20% is due to differences in state and local income and property taxes. About two thirds of the explained regional variation in the average size of the MID is due to regional differences in housing prices and state and local income and property taxes.

Community colleges have become among the most popular public higher education institutions in the nation to provide transfer, technical, developmental, business and industry, and community service education. Once considered the junior partner in the higher education enterprise (and on average receiving less state aid per student than their four-year counterparts), public community colleges now provide education to more than one-half of all citizens enrolled in postsecondary education. In the last decade, they have also become the core workforce development institutions of our nation. In many ways, these institutions have seen their role and mission evolve to the point that they now have goals that in many respects resemble those defined for land grant universities, established by the Morrill Act during the nineteenth century (Cohen & Brawer, 1996). Public community college leaders often lament that their institutions are low on the food chain when it comes to their state's funding priorities. This may be due partially to the lack of attention paid to cost-and-benefit analyses in funding requests. Policymakers around the nation will likely find themselves spending increasing amounts of time validating fair and equitable funding allocation criteria (Burke & Serban, 1998). As the squeeze on available state aid becomes increasingly oppressive, comparing costs outlays to the investment returns gained by states were they to invest more in community college education will become a higher priority for community college leaders. Yet barriers exist to promoting this position (Goodchild, Lovell, Hines, & Gill, 1997), among which include the following: (a) a noticeable inability of college leaders to demonstrate that community colleges are underfunded, especially in the context of their sizable contributions to life in America, (b) the lack of consensus among policymakers regarding efficient and equitable policy options that a state's higher education systems might choose in making resource requests and allocation decisions, (c) a dearth of consistent and timely research that explores, tests, and develops functional theories of state funding, and (d) the absence of ongoing examinations of how existing funding model practices affect postsecondary education institutions and the broader society they seek to serve. Literature Review As the new millennium begins, a variety of methods exist for requesting and allocating state funds to support the operation of public community colleges (Breneman & Taylor, 1996). Practitioners and scholars with an understanding of the theories, practices, and nuances in the finance and funding strategies employed by community college systems recognize that one approach to state aid does not fit all. Indeed, a plethora of forces unique to each state environment shape how funding requests and distributions are made. The rationales and methods that state policymakers use to allocate financial support for higher education can be nearly as important as the amount of that support (Richardson, Bracco, Callan, & Finney, 1999). More pointedly, an acceptable sense of fair play must exist in any funding allocation model. Moreover, the methods selected for allocating state funds typically must be viewed as affordable as well as politically acceptable to those approving and those receiving state financial support. Funding can be complex, highly politicized, and not prone to easy solutions (Kane, 1999). Although seldom discussed in a scholarly framework, politicizing of funding practices can be potent: The history of political parties in power and the relative pecking order of the various sectors consuming public funds, including higher education, play a major role in funding allocation decisions (McKeown & Alexander, 1986). Currently, in many states, the responsibility for establishing state funding allocations to public institutions of postsecondary education lies directly with each state's legislative bodies. …

Most of the early empirical estimates on effects of intergovernmental grants contradict theoretical predictions. In the more recent literature that emphasizes the importance of convincing empirical strategies, the results are more mixed. This paper contributes to this literature by estimating causal effects on local expenditures and income taxes of general, unconditional grants. This is done in a difference-in-difference model utilizing policy-induced increases in grants to a group of remotely populated municipalities in Finland. The finding is that increased grants have a statistically and economically significant positive immediate effect on local expenditures. The effect on local income taxes, while statistically significant, is considerably smaller in magnitude. Furthermore, there is no evidence of dynamic crowding-out—i.e., that the immediate response in expenditures is reversed in later years.

This chapter considers local income, sales, and environmental taxes. Personal income and sales taxes are major local taxes in only a handful of countries and they are often (but not always) supplemental to local property taxes. Their attractiveness often depends on the services to be funded and alternative revenues. While not as good as the property tax in meeting the criteria for a solid local tax, they have positive features. Relevant issues include local administration versus piggybacking, setting local rates versus tax sharing, limits or no limits on tax rates, cross-border effects, harmonization with senior governments, and capacity to generate revenue. Although comparatively small but of potential importance, environmental taxes are also reviewed.

Brown, J. N. (2012). First in the World: Community Colleges and America's Future. Lanham, MD: Rowman & Littlefield. 152 pp. $49.95 (hardback). ISBN 978-1-4422-0997-8. $48.99 (eBook). ISBN 978-1-4422-0999-2.J. Noah Brown, CEO of the Association of Community College Trustees (ACCT), has a monumental task as he aims to identify and define the key issues that he suggests have the power to benefit or threaten the long-term health and vigor of community (p. 8). His intent in the book is to identify salient public policy issues and articulate how community colleges can be reimagined to support the long-term health of the community college and the nation. The primary intended audiences for Brown's book are academics, higher education practitioners, and association leaders. His book is structured according to five issues: leading with accountability, citizen governance, resource and scarcity, completion matters, and leadership imperatives. Brown guides readers through these five issues with relative ease, exploring the issues from economic, social, and political contexts.Brown's discussion of the five issues begins with accountability, where he argues that community college leaders should not follow but rather lead the accountability movement. The book identifies many inherent challenges associated with the accountability movement for community colleges such as the dominant use of success metrics that are more appropriate for 4-year colleges and universities, and the diverse characteristics, attributes, and behaviors of community college students that often impede students' degree progress and success.In his chapters on citizen governance and leadership imperatives, Brown's role as a former community college trustee and current leader of the ACCT is most recognizable as he outlines the purposes and functions of community college Board of Trustees (BOT) and the desired characteristics and attributes of community college leaders. Not only do these chapters include useful descriptions of BOT responsibilities and leadership styles, Brown also provides practical guidance on how effective boards should operate and the appropriate roles and priorities of community college leaders.Two chapters address two of the most salient contemporary public policy issues in higher education: resources (i.e., finance) and college completion. Brown frames the resources chapter based on the idea of scarcity and outlines the ways community colleges increasingly rely on limited alternative resources (e.g., earmarks and National Science Foundation funding, outsourcing services, entrepreneurial activities, philanthropic contributions) in a climate of diminishing state and local funding. He argues that to ensure sustained and increased public investment in community colleges, BOT and institutional leaders must be the loudest advocates for community colleges and reinforce, champion, and assert the value of community colleges in local communities and the states. The fifth chapter addresses the ubiquitous public policy issue of college completion, and Brown identifies the conflict between the college completion movement and community colleges' open access purpose. He cautions that community college leaders must balance the contradictory goals of open access and college success and offers several practical suggestions to achieve this balance.Brown concludes the book by arguing that history should inform future decisions and actions of policy makers and community college leaders. Brown reminds readers that the growth and success of community colleges and the higher education system are the result of deliberate investments and bold thinking. Historic national investments in higher education such as the G.I. Bill in 1944, the National Defense Education Act in 1958, and the Higher Education Act in 1965 illustrate this type of public investment and bold thinking that has sustained community colleges and advanced American higher education to its first in the world status. …

The impact of tax enforcement on corporate energy efficiency: Evidence from a tax collection reform in China