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City schools and the taxing dilemma

How can Baltimore reverse course if school funding formula penalizes progress?

Property owners in Talbot County have the distinction of being the least taxed in Maryland. Although the Eastern Shore county is famous for its sprawling waterfront estates and its A-list millionaire homeowners ("Look, former Vice President Dick Cheney!"), county officials have been loath to tap that revenue stream.

As recently as 2011, Talbot's tax rate dipped to 0.432 per $100 in assessed value, or roughly one-fifth what a Baltimore City home or business owner faces each year. Yet the county has also demonstrated a reluctance to spend tax dollars on its schools — its $12,501 per pupil average in fiscal 2013 was not only well below the statewide average of $14,457, it was third from the bottom of all of Maryland's 24 subdivisions.

That historic reluctance to raise property taxes in Talbot County — enforced by a voter-imposed tax cap — has caused the county to be penalized by the state education funding formula. It is the "tough love" of school funding: If Talbot residents are unwilling to raise taxes to pay for public schools, why should state taxpayers come to their rescue?

Now, it appears, Baltimore is poised to feel that same harsh treatment so frequently and lovingly dispensed on Talbot. The state budget submitted by Gov. Larry Hogan contains about $35 million less for Baltimore's public schools next year. One of the biggest chunks of that (nearly $14 million) is not of the Republican governor's doing but a product of the school funding formula that penalizes Talbot and now condemns Baltimore for growing its assessable base by $1.3 billion last year.

Making matters worse, much of Baltimore's growing tax base can't be touched even if city leaders wanted to do so. Various forms of tax incentives offered developers like the payment in lieu of taxes that helped create the Baltimore Marriott Waterfront Hotel and the tax increment financing bonds that are being used at Harbor Point prevent that from happening.

One can always argue the wisdom of tax incentives on a case-by-case basis, but collectively, these arrangements have played a large role in Baltimore's revitalization. That the city's property tax base is growing ought to be cause for celebration, not hardship for the city's children. Schools CEO Gregory E. Thornton has warned that the loss of funds could mean 393 fewer teachers in the city. Just as troubling would be if the cutback — and the risk of similar formula-driven reductions in the future — forced Baltimore to abandon its revitalization efforts.

Neither Governor Hogan nor the General Assembly should lose sight of the bigger picture — the need to put Baltimore on firmer financial footing by lowering its high property tax rate, improving its schools, creating jobs, reducing crime and making the city a better place to live and work. Considerable progress has been made in this direction in recent years, but major setbacks are possible in the months ahead — not only in the possible loss of school funding but also the potential delay or scrapping of the Red Line transit project and/or the State Center redevelopment plan.

Lawmakers ought to be reminded that the point here is not to make Baltimore more reliant on state funding but to make it less so. That can only be achieved, however, if the city is allowed to flourish. Save tens of millions in state aid now, and Annapolis could get stuck with a financial burden in the hundreds of millions of dollars later if Baltimore returns to the days of exodus and despair.

Perhaps, as House Appropriations Chair Maggie McIntosh has suggested, enough can be cut from elsewhere in the budget to finance Baltimore and other schools systems at a more appropriate level this year. The state is already in the process of reviewing the adequacy of education funding (the so-called Thornton II study) and may need to reexamine formula funding issues when those findings are released in December of 2016.

Property values are a valid component of the formula but only one of many, and the realities of educating students in Baltimore deserve due consideration — even if it means less state aid for other districts. This is no small challenge given the complexity of the problem and the tendency of lawmakers to seek funding for their own districts first.

And yes, every time Baltimore grants a tax incentive for a new development, the impact on state aid ought to be considered — as should many other factors, pro and con. That tail of a relatively obscure provision of state law should not wag the dog of development decisions. The stakes are high, and if Mr. Hogan is serious about making Maryland business friendly — and making Baltimore the state's "economic engine" as he recently promised — he ought to be leading the charge to restore funding to city schools.

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