DALLAS - As Utah lawmakers consider how to equalize funding across school districts, the state's largest is dividing up its own cash as one half of the district prepares to secede.

In a process tinged with acrimony, the Jordan School District board of trustees last week voted 4 to 2 to give the west side of the district $17 million, about $7 million more than will be provided to the east when the split comes in 17 months.

The younger west side is growing at a faster rate than the mature east side and is expected to need more money for schools and services, board members said.

Voters in the east side of the suburban Salt Lake City district voted to secede in a controversial election last November. Voters on the west side of the Jordan River did not get a say in whether the district should split.

With fewer schoolchildren and more mature neighborhoods, residents of the east side sought to reduce their commitment to future bond-funded school projects. The election came two months after the combined district sold $196 million of general obligation bonds carrying a natural triple-A rating from Fitch Ratings, AA-plus from Standard & Poor's, with a Aa1 from Moody's Investors Service. Backing from the Utah School Bond Guaranty secured triple-A ratings across the board.

While affirming its triple-A rating last year, Fitch put the district on watch for a possible downgrade.

With four board members from the east and three from the west, the west prevailed for more funds when Ellen Wallace, from east-side suburb Sandy, teamed with the west-siders. Wallace cited safety as her reason for giving the larger share to the west.

Board member Kim Horiuchi, from the east-side suburb of Cottonwood Heights, said east-side schools should have gotten 80% of the renovation money, because of its older schools. Cottonwood Heights Mayor Kelvyn Cullimore said east-siders have kicked in more cash than west-siders. Although the east side provides 57% of the tax revenue in the 2008 budget, it will receive only 33% of available cash, he noted.

The district's $355 million of outstanding GO bonds, including last September's issue, must also be apportioned between the districts based on property values. Bondholders will see no change in the tax pledge on the bonds, officials say.

In addition to dividing assets and debts, the two districts must divide the 6,000 employees of the current district. State law protects employee salary and benefits for the first year, but after that, the boards can reset the pay and benefits. The district must also divide resources, including magnet schools, transportation and other shared services. A special committee is studying that process.

At the state capitol in Salt Lake City, meanwhile, a report from the nonprofit Utah Foundation showed that equalizing funding between schools could cost $67 million to $178 million.

The state's Capital Outlay Foundation Program is well-suited to help poorer school districts raise funds for construction through property taxes, said Steve Kroes, president of the Utah Foundation.

The report found that wealthier districts have up to seven times more funding for facilities than poorer districts. Taxpayers in poorer districts also pay property taxes at rates up to five times greater than those in wealthier districts, according to the report.

Legislators are investigating how to solve the problem in light of rapid growth and the breakup of the Jordan district. q

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.