Oil money eyed for school funding

Efforts are under way in Helena to siphon oil money surpluses from Eastern Montana school districts for the benefit of schools across the state.

It’s a touchy pursuit, with some people warning that it has the potential to pit small, rural schools against large schools in more populated areas.

But it’s got momentum, with Democratic Gov. Brian Schweitzer behind a bill aimed at raising an additional $36 million annually for school funding, and Sen. Llew Jones, R-Conrad, offering alternative legislation that he contends will take a more targeted approach at districts that are flush with oil money.

In an interview this week, Schweitzer said Eastern Montana districts currently estimate what their oil tax revenues will be and then forward a share of that money to the state. In some districts, actual revenues have far exceeded the estimates.

Schweitzer cited a county that in one year estimated $700,000 but actually took in more than $12 million.

Schweitzer reasons that revenue from natural resources in other parts of the state is “equalized” and distributed statewide. Revenue from state cabin site leases that are abundant in Northwest Montana is distributed through the state’s school trust funds, and Schweitzer says the same concept should apply to oil and gas revenues.

Jones agrees with the idea that some districts shouldn’t be sitting on huge surpluses while others face budget deficits.

“There were a few communities where the [revenue] flow changed so hugely there are unneeded dollars,” he said. “I would agree with the governor that is not appropriate.”

But he warns there are many districts that currently don’t have large surpluses and could be faced with the impacts that come with an oil boom.

Jones said there 130 oil and gas school districts in Montana and “maybe 10 that have excess oil and gas money.” He estimates that about 100 of those districts are faced with budget shortfalls.

Jones said state government already gets 54 percent of the total oil and gas tax revenue. Counties get 20 percent, 4 percent goes to teacher and public employees retirement and schools get 19 percent.

He said the governor’s bill aims to take 90 percent of the schools’ share across the board, with some districts being reimbursed more than others with state school funding. That situation could lead to increased local mill levies in districts that have long counted oil and gas tax revenue as part of their property tax base.

The Sidney Herald recently reported that schools in Richland County received about $15.5 million in oil and gas revenue in 2009-10. Schools there were able to make a variety of improvements, but other counties that may experience future oil booms would not be able to respond to the impacts that follow.

“If you go to an area that’s going through a boom, they have many challenges in these small classrooms because they have [to assimilate] a population that comes and goes” in response to oil production, Jones said.

But there are some districts with hefty reserves.

Jones said the school district in the town of Baker “probably leads the pack” with total reserves of about $42 million. He estimates about 70 percent of that came from oil and gas revenues and that the reserve is several times more than the district needs to operate in a given year.

Flathead County school districts, meanwhile, face combined budget shortfalls of at least $2 million this year even with the governor’s proposed statewide K-12 spending increase of about 1.7 percent.

Jones’ legislation would allow districts to keep a portion of oil and gas revenue over a tax-supported base budget, with about 25 percent of oil and gas revenue to be put in a flex fund with a cap.

Oil-and-gas revenue that exceeds that threshold would be diverted and distributed to schools statewide.

“I believe we have a take-some, leave-some solution,” Jones said. “It’s a negotiated solution that could be supported by the majority.”

Reporter Jim Mann may be reached at 758-4407 or by e-mail at jmann@dailyinterlake.com.