School funding and tax rebates

Hey there, time traveller!
This article was published 19/06/2023 (867 days ago), so information in it may no longer be current.

It is not surprising that a cheque arriving in the mail from the provincial government amounting to half of the education portion of your municipal property tax bill for the year is going to capture your attention, as a series of letters to the editor over the last two weeks have illustrated.

Since the passing of Bill 71 The Education Property Tax Reduction Act in 2021, Manitobans have experienced three years of rebates on the education portion of their property tax bill — a 25 per cent rebate in 2021, 37.5 per cent in 2022, and 50 per cent in 2023, representing a $453.2 million provincial budget item.

Reactions to the most recent edition of the Progressive Conservative government’s implementation of Bill 71 revolve around two inter-related issues: a concern for the government’s commitment to a fairly funded, high-quality public-school system for Manitoba; and the place of locally set education property tax in the funding of public schools in the province.

While the government maintains that the education tax rebate helps Manitobans offset the increased cost of living, critics raised a number of concerns about the initiative.

First, simply, that taxation and public service spending are two sides of the same coin: if we want a high-quality school system, we must also pay for it.

However, the tax rebate prioritizes tax cuts over public investment.

While these tax cuts — funded by provincial borrowing — are not immediately reflected in reduced education funding they do constitute a large cut in provincial revenues from which all public services have to be funded. Borrowing money to fund tax cuts does not offer an encouraging picture for a sustainable public school system.

Another critique of the school tax rebate has been its application to commercial and industrial property owners as well as individual homeowners, and the fact that the rebate being paid as a percentage of education property taxes paid, rather than a fixed dollar amount for all homeowners (as was the case with the pre-existing Education Property Tax Credit).

As such, critics argue, the tax rebate clearly provides the largest benefits to the wealthiest homeowners, as well as to large, often out-of-province, commercial property owners such as Toronto-based Cadillac Fairview, owners of the Polo Park Shopping Centre, or industrial property owners such as Canadian National Raiways.

For a long time there has been a widely expressed view that the funding of public schooling in Manitoba has been too reliant on local property taxes — which currently account for some 40 per cent of costs of education — rather than provincial general revenues.

The primary argument currently used to justify the move away from locally set education is an inequity argument: that wealthier school divisions with a stronger tax base can, and do, generate more revenues for their schools than those with a lower tax base.

By moving the funding of public schools entirely to general provincial revenues (the Bill 71 solution) this inequity is removed. What is missing from this argument is any recognition of the important role that school boards play as the local voice in education decision-making, and the weakening of that authority that would flow from the loss of taxing authority.

The Progressive Conservative government’s attempt in 2021 to abolish school boards and centralize authority with a provincially appointed Provincial Education Authority Board through Bill 64 The Education Modernization Act faced such a broad-based opposition that the proposal was withdrawn, but Bill 71 continues that agenda of central control and the undermining of local school boards.

There is a middle ground in this debate.

In the early 2000s there was an emerging consensus among education partners in favour of an 80/20 funding split where the provincial general revenues would provide 80 per cent and local property taxes 20 per cent.

This, combined with a strengthening of the current provincial equalization grants that already offset some of these divisional inequities, could address the equity issue and at the same time retain a degree of taxing authority for school boards.

The last three years of the Education Property Tax Rebate have effectively shifted the funding formula towards that 80/20 ratio, but with several harmful side effects, noted above.

Halting any further increase in rebates and reworking the character of the existing provisions by, for example, capping the size of all rebates, limiting it to in-province owners, and reinstating benefits for renters, could begin to offer a route to a fairer, more equitable and sustainable approach to supporting a well-funded public school system for all Manitobans.

Jon Young, is acting head of the Department of Educational Administration, Foundations & Psychology at the University of Manitoba, and professor emeritus.