Starving Schools 

The fight to force corporations to pay their share for education

In the past decade, electricity generating plants and out-of-state utilities have gotten huge tax breaks at the hands of tax-fearing Republicans in the Legislature and the Governor’s Office. But as many Montanans seem to have noticed, as those companies pay fewer taxes, the demands on taxpayers grow ever larger—especially when it comes to money for public education. Now, a Billings couple hopes to rectify that unequal treatment with a lawsuit they’ve filed against the state.

Conrad and Teresa Stroebe claim that the Legislature has shifted the tax burden in recent years from industry to working-class Montanans, and that public education has suffered as a result.

Conrad Stroebe, a certified public accountant, has served on the Billings school board for 15 years, and Theresa has been on the neighboring Lockwood school board for two years. He was Montana School Board Association president about a decade ago. She ran for the state Senate last year, in an unsuccessful challenge to incumbent Republican Bill Glaser. He ran for a House seat—also unsuccessfully—16 years ago. But just as important, they have 10 children and five grandchildren. “So our [interest] in education and the Legislature go way, way back,” Teresa Stroebe says.

On May 24 the Stroebes sued the state in Helena District Court, charging that public education funding has become so inequitable that it violates the Montana Constitution, which guarantees equal educational opportunities to all Montana citizens.

The lack of money for public education is not a problem that cropped up only recently, with the busloads of lobbying teachers, trustees and parents who descended on the 2001 Legislature. And the Stroebes’ lawsuit is not the first of its kind. In the 1980s, school districts across the state teamed up with the Montana Education Association and sued the state for funding education unequally. The Montana Supreme Court voted unanimously in favor of the school districts in 1989. That summer, the Legislature met in a special session and devised a new funding formula. The deep tax cuts enacted since then, however, have forced schools to make up for the shortfalls by asking local voters for operating levies.

As evidence of this trend, the Stroebes point to the local elections held this spring, in which schools across the state went to the voters looking for operating levies. Some schools were successful, others were not, creating the unequal funding situation that is at the heart of the Stroebe lawsuit.

Stroebe argues that education revenue should come from taxes that are equally assessed across the state, much as income taxes or gas taxes are now. “All we’re saying is the state, by shifting their share of the base budget to the local taxpayers, they’re creating an inequitable tax,” he says.

The biggest beneficiaries of the Legislature’s tax cuts on business equipment, says Stroebe, were the corporate owners of Colstrip coal-fired energy generating plants—Montana Power Co., Portland General Electric and Puget Sound Energy. (PP&L Global acquired controlling interest in the plants in November 1998.)

The electricity generated at those plants is shipped to Portland and Seattle—“probably right through your back yard,” Stroebe says. And the tax cuts on business equipment have saved the corporate owners between $10 and $15 million a year for nearly a decade, he adds. That’s money that isn’t going into Montana’s coffers. Instead, it’s the users of that power—consumers in Seattle and Portland—who benefit, as well as the providers who serve them.

“They’ve taken major taxes out of the picture over the years,” Stroebe says. “As equipment taxes went down and oil and gas pulled out of the tax base, that burden basically fell to ranchers and farmers, homeowners and small businesses.”

In Lockwood, for instance, the taxable valuation of the ExxonMobil refinery plant there went from $8 million a year to about $4 million because of legislative tax cuts on equipment. The overall tax base in Lockwood declined from $15 million to $11 million because of the tax cuts to ExxonMobil, he says.

Stroebe is skeptical that tax cuts stimulate the economy, as the Legislature claims. “Not funding education is probably the most anti-economic development move the Legislature can make,” he says. When tax money is spent on teacher salaries, that money stays in the community. “That’s the best economic development.”

Still, tax fairness—or unfairness—isn’t the only problem plaguing education, the couple points out. Stroebe says the 2001 Legislature placed a higher priority on other services, like Medicaid, administrative costs and prisons. “They don’t get the connection that if you don’t educate a kid he might drop out and end up in prison,” he notes.

Stroebe also senses that the Legislature and the governor simply don’t value education as highly as he believes they should. As he puts it, “The Legislature and the executive branch just don’t support education.“

Nonetheless, the tax cuts enacted in the 1990s form a “good part” of the argument that schools receive unequal funding from district to district, he says. “They’ve been cutting taxes, but they’ve been cutting [large industrial] taxpayers out.”

“It’s unusual we’re suing on behalf of the taxpayers, not the school board,” adds Teresa Stroebe, who declares herself “passionate and vehement” about school funding.

Stroebe is relying on a favorable court decision to turn around a situation that threatens one of the state’s most basic guarantees. He also hints at the possibility the case may end up before the state’s high court. “If the Supreme Court doesn’t do something, it’s going to get terrible.”

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