Public Education Advocates Push for Overhaul of State Funding Formula Ahead of 2025 Legislature

Amid ongoing conflicts between school districts, elected officials and taxpayers over who is responsible for funding public schools in Montana, experts are pushing for a reconfigured appropriations formula that they say will relieve the burden on taxpayers while better serving schools.

Each school district in Montana currently sets the rate at which it taxes local property owners to fill its base budget — a complex calculation that is determined by the taxable value of the district, the number of taxpayers within it and the budgetary needs of the school district. With the district-by-district system, there are hundreds of different school mill rates in Montana, creating a tax structure that education experts say is “near impossible” to understand. While the formula favors small districts in tax-base wealthy areas, such as resort destinations and natural resource hubs, it leaves lower income areas shouldering a higher burden of local funding.

To address the inequities between communities and balance the load on taxpayers, a coalition of public education advocates are pressing the state to do away with the district-by-district model and adopt county-wide mills, which they say will lower taxes for over 80% of Montanans.

Montana’s public schools are funded through a complex combination of local, state and federal dollars.

The state every year doles out a flat “basic entitlement” to each school district. On top of the basic entitlement, schools receive about $4,900 per elementary and middle school student and $6,300 per high school student. This per student funding — called “average number belonging,” or ANB — makes up the largest amount of funding schools get from the state.

A number of other specific programs top off state funding. School districts receive about $3,500 per certified teacher they employ, $235 per Indigenous student and an additional allocation per “at-risk” student. Districts also receive funds to implement the Indian Education for All and Data for Achievement programs.

State funding and local funding combine to, ideally, meet the district’s base budget, or the legal minimum amount of general fund money a district is required to spend each year. At the local level, base funding comes from general fund mill levies, which are consistent property tax levies that fund school districts (unlike the occasional general fund, technology, safety and other levies that voters see on the ballot during school elections).

Taxpayers across the state pay between 0 and 51 mills to fund their local school district’s base budget, which are split between elementary and high school mill rates. A mill is equal to $1 per $1,000 in taxable value.

Taxpayers who lived within the Whitefish School District in 2024 paid 31 base mills (20.14 for the elementary district and 10.86 for the high school). Taxpayers in the Kalispell School District paid 42.13 mills (27.29 for the elementary and 14.84 for the high school). A taxpayer who lived within a small, rural elementary school district –– for example, the Helena Flats School District –– paid a base mill for Helena Flats and a secondary mill for the Kalispell high school district. Helena Flats taxpayers paid a total of 43.08 mills.

For school districts with high property tax bases and small student populations, meeting the base budget with local funding is an easy task. Examples include the Ennis School District, where the members-only Yellowstone Club is located, or the Ekalaka School District, which brings in substantial tax revenue from oil production. For small tax base schools and urban districts with large budgets, on the other hand, the typical state and local funding formula does not get the district to its base budget.

To fill the gap between, the state uses the Guaranteed Tax Base program (GTB). Each district has a GTB ratio, or a calculation that determines how much state funding is needed to get the district up to its mandated base budget. Funding for the GTB comes largely from the 95 mills of school equalization tax collected by counties each year. With the GTB system, high-value properties across the state — such as natural resource manufacturers or luxury resorts — are put back into a statewide pot to benefit schools across Montana.

Despite substantial state aid, districts with a lower property value experience a higher burden than wealthier districts due to the discrepancies in the size of their tax bases.

For example, in the Flathead Valley, the communities of Bigfork and Evergreen have similarly sized elementary school districts. Because Bigfork is a high property value resort community with a small student population, its school district can pull from a much larger funding base to serve a small number of students, lessening the burden on individual taxpayers. The taxable value of property in Bigfork is $51 million, compared to Evergreen’s $16 million. To make up for the difference, the state of Montana supplied Evergreen with $1.3 million in GTB aid in 2024 to Bigfork’s $391,933. Evergreen, which serves a large population of low-income students, also received around five times the amount of at-risk student funding that Bigfork did. Nonetheless, Evergreen taxpayers in 2024 paid 41.76 mills to Bigfork’s 35.63 mills.

If school districts want to exceed their base budget –– which is often necessary for funding specialized programs, sports, arts, targeted interventions and student support –– they’re required to pass additional levies in their communities. Districts can also run bonds, which pay for infrastructure and building repair projects.

School levies in the Flathead Valley have seen mixed fates in recent years as taxpayers have felt the burden of rising property taxes and grown frustrated with continued asks for funding. Voters in Kalispell rejected four school levies last fall at the same time that Whitefish voters struck down a bond that would have paid for additions to the city’s growing high school. Kila and Smith Valley voters earlier this year declined to pass bonds to expand and reconstruct the small, rural schools. The Kalispell Public Schools is currently contending with a $1.7 million budget deficit, following in a pattern of budget woes, layoffs and program closures across the state.

Public education advocates argue that this formula is overly complicated and inequitable, frustrating taxpayers who are constantly asked to support public schools and unnecessarily burdening some communities over others.

To lessen the disparity between districts, a coalition of experts has proposed replacing individual district mills with county mills to fill districts’ base budgets. Rather than the nearly 400 different mill rates for each school district across the state, which currently range from 0 to 51 mills, each county in the state would have a set mill levy rate. All county mill levy rates would fall between 36 and 41 mills (with the exception of four rural counties that would see lower rates).

Lance Melton, executive director of the Montana School Boards Association, presented the proposal to the education subcommittee of the Governor’s Property Tax Task Force earlier this month. The proposal was officially recommended to the task force at its June 4 meeting.

Melton told the Beacon the proposal is a “significant enhancement” that would provide “more equity among taxpayers across the state.”

Under the county equalized mill system, Flathead County would see a uniform mill rate of 38.7. Taxpayers in Whitefish and Bigfork would see a slight increase. All other districts would see a reduction in their base mill rate. The dip in funding from local mills, Melton said, would be made up through GTB allocations.

Doug Reisig, executive director of the Montana Quality Education Coalition, said that county mill equalization is a way to narrow the funding gap between poorer and wealthier school districts, relieving the burden on the taxpayers who are required to put the most towards local schools.

By equalizing the county mills and decreasing the load on many communities, education advocates hope it will open the door for districts to pass additional levies. The Montana School Boards Association, Montana Quality Education Coalition, School Administrators of Montana, the Montana Rural Education Association and the Montana Association of School Business Officials, under the umbrella of the Coalition of Advocates for Montana’s Public Schools (CAMPS Coalition), have all voiced their support for the proposal, which they say will reduce taxes for 83% of Montanans.

The proposal, if approved by members of the Governor’s Property Tax Task Force, will land on the Gov. Greg Gianforte’s desk in the form of a recommendation that can be brought to the 2025 Legislature. If it does not make it to the governor’s office through the task force, a lawmaker can still carry it during the upcoming session. Education experts and lawmakers anticipate a number of proposals to reconfigure the state funding formula will be brought in 2025.

“We’re looking at the full funding formula this next session,” Rep. Linda Reksten, R-Polson, a member of the education interim committee, said. “We’re understanding where the funding is going and really schooling up legislators, as well as exploring how we can solve various issues.”

The CAMPS Coalition is advocating for a number of other funding mechanism changes.

According to Melton, the group hopes to move the state away from the per-student funding formula and towards payments per quality educator. With the current per-student formula, a 50-student school district that loses five students in a year will see a 10% drop in funding, a critical and sometimes insurmountable loss for small public schools. By putting more weight on educators and less on students, Melton said, the state can stabilize funding, especially for small, rural schools.

The group is also pushing to allow districts to increase taxes to meet the pressures of inflation. The Montana Legislature adjusts the growth rate for state education funding, which may not increase by more than 3% per year to account for inflation. The Legislature in 2023 authorized a 2.7% funding increase for 2024 and a 3% increase for 2025. 

Yet inflation has far outpaced a 3% rate, and educators have argued that it costs more to do everything, from running school buses to buying paper. The consumer price index saw 4.7% inflation in 2021; 8% in 2022; and 4.1% in 2023.

Melton said the 3% growth rate for school funding historically met Montana’s needs, but now is barely enough to help districts keep the lights on.

“It became a big deal when we had inflation following the pandemic that we hadn’t seen since 1978,” he said.

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