The full import of state-local reliance on the property tax lies in controversies regarding the equity and administrative practicality of the property tax. Netzer's authoritative treatment of the property tax begins with these words:

The American property tax abounds in anomalies. During the past century, no major fiscal institution, here or abroad, has been criticized at such length and with such vigor; yet no major fiscal institution has changed so little in modern times. There is a vast literature on the property tax; yet less is known about its overall impact, incidence, and effects than is known about any other major tax. The demise of the property tax as a major factor in the American fiscal scene has long been heralded; yet it continues to finance more than one-fifth of the civilian general expenditures of federal, state, and local governments. The United States is the citadel of capitalism; yet this tax on wealth is more important in the fiscal system and relative to national income than are comparable taxes in any other advanced country in the world except Canada.*

Property taxes, of course, are the principal local source of revenue for all local government, not just the schools. Generally speaking, it has been a more elastic revenue source than is usually thought (its yield doubled during the 1960's) and every available indicator suggests that it will continue to be a major revenue source for state and local government in the foreseeable future. But despite its durability the property tax suffers from two critical administrative problems: (1) unequal assessment, and (2) under assessment.

Almost two-thirds of the states require assessment at full value, yet locally assessed real property averaged less than 30% of market value according to the 1962 Census of Governments. It is even more astonishing to note that assessment variations within assessment units are even larger than those typically found among units. For instance, the 1962 Census of Governments disclosed that in over two-thirds of the assessment units studies, the top quarter of parcels in assessment ratio were assessed on the average at more than twice the ratio for the lowest quarter. No state can be satisfied with its record in property tax administration, and no other activity of government in the United States is more in need of fundamental reform.

Another problem connected with the property tax is the tendency of many assessors to allow the ratio of assessed values to full market values to decline, thus reducing the capacity of the school district to tap local funds. For example, according to one estimate the assessment ratio in the city of Detroit declines from 90% in 1930 to about 50% in 1960. The estimates show a decline in assessment ratio in Baltimore from 90% in 1930 to 64% in 1960, from 80% to 45% in Cleveland, from 50% to 23% in Los Angeles, and 65% to 30% in St. Louis.** These reductions are particularly restrictive in many states which define local school taxing authority in terms of tax rates and even more restrictive on the many large cities for which taxing authority is limited even more stringently than for other school districts in the same state.

If equitable and reliable assessments are to be achieved, one of two courses of action is indicated. The first, statewide administration, while vulnerable to many of the same problems as local administration, represents a long range hope if not an immediate possibility.

In the meantime, an auditing function is needed. Perhaps state agencies can perform such a function adequately, but it is possible that the same vested interests and political influences that shape local assessments may ensnare state agencies as well. Use of private, state-certified appraisers to "audit" local assessments may be needed. similar to the way private C.P.A. auditors regularly review revenues and expenditures of public agencies.

*Dick Neter, 'Economics of the Property Tax. The Brookings Institution, Washington, D.C.. 1966, p. 1.

**Ratios for 1930 from National Municipal Review (December 1931), pp. 707-709: 1960 ratios provided by local officials: 1962 sales-based sample data. U.S. Bureau of the Census. "Census of Governments 1962. Vol II, Taxable Property Values" (Washington, D.C. U.S. Government Printing Office, 1963).

ADA 1968-69) 2

FROM THE STAFF OF THE SENATE SELECT COMMITTEE ON EQUAL EDUCATIONAL OPPORTUNITY-DISPARITIES IN SCHOOL FINANCE-Continued

Financial ability per pupil (17 Districts in State over 1,500

ADA 1968-69)2

Appendix 3

ITEMS PERTINENT TO THE HEARING OF
SEPTEMBER 23, 1971

Item 1-Material Supplied by the Witnesses

FROM JULIUS W. HOBSON

TABLE 1.-DISTRICT OF COLUMBIA PUBLIC SCHOOLS REGULAR BUDGET FUNDS: REQUESTS VERSUS APPROPRIATIONS, FISCAL YEARS 1966-71

Increase in appropriated funds from 1966 to 1971 equals 83.5 percent.

Average amount of funds appropriated versus funds requested, 1966–71 equals 95.8 percent.

Source: District of Columbia Public Schools Finance Office.

TABLE 2.-OPERATING EXPENDITURES PER PUPIL, PROFESSIONAL STAFF, AND TEACHER SALARY RANGES FOR WASHINGTON, D.C., AND OTHER SELECTED SCHOOL SYSTEMS, FISCAL YEAR 1969

1 Figures from District of Columbia public schools, "Proposed Operating Budget for Fiscal Year 1971," August 1969, p. 23-XX-6.

2 Figures from District of Columbia public schools, "Proposed Operating Budget for Fiscal Year 1971," August 1969, p. 23-XX-9.

8 Figures from National Education Association, "Salary Schedules for Teachers, 1968-69," Research Report 1968-R13, 1968, pp. 26-107.

Fiscal year 1969 figure not available; was $810 in 1967-68.

5 Not available,

Sources: District of Columbia schools, "Proposed Operating Budget for Fiscal Year 1971," p. 23-XX-2.

In a report prepared by the District government in June 1970, professional staff per 1,000 pupils is shown as 63 for fiscal year 1969. (Government of the District of Columbia, "Supporting Materials, Federal Payment," pp. 1-4.)

(7473)

D.C. ELEMENTARY SCHOOLS

Relation of Average Per Pupil Expenditures to Neighborhood Income Levels, 1969-70

Neighborhood Median Income (in $ thousands)

SOURCE: D.C. PUBLIC SCHOOLS