Why Should Delaware Care?
After months of hearings in Dover, school leaders closed out the final meeting of the General Assembly’s reassessment committee by calling for lawmakers to implement long term funding solutions over a series of quick fixes. But what exactly those solutions could look like remains unclear.
For public school leaders considering education funding woes in Delaware, the value of a penny – or sometimes, the lack thereof – is always top of mind.
A panel of four school district leaders explained to lawmakers on Monday how a reassessment that was spurred by inequities in public education funding ultimately still left poorer districts in the lurch.
If the Delmar School District were to raise its taxes by one penny, said Chief Operating Officer Monet Smith, the western Sussex County school district would generate about $105,000. If Cape Henlopen instituted that same penny increase, it would generate nearly $4 million.
Smith used the fictional penny increase to illustrate how residents in lower property value school districts wind up paying more in taxes than their counterparts in higher property value areas to raise the same amount of money.
“This is not a reflection of local choice or efficiency, but a structural inequity in the tax base,” Smith said.
Her testimony was part of a broader presentation by school district leaders stretching from Red Clay to Delmar during the final hearing of the General Assembly’s joint committee investigating the far-reaching impacts of Delaware’s first-in-40-year property reassessment.
In part a defense of public schools – which came under fire this fall after residents decried the property tax bill hikes that came from the reassessment – and the complicated funding structures within which they operate, Monday’s hearing also served as a vehicle for school leaders to offer their recommendations for how best to move forward as lawmakers look toward the start of the legislative session next month.
PEFC reforms, education equalization formula
As lawmakers look ahead to the 2026 legislative session, the panel of school leaders recommended prioritizing the recommendations being made by the Public Education Funding Commission.
Nick Johnson, the director of operations for Kent County’s Polytech School District and a member of the PEFC, said those recommendations could be turned over to the General Assembly as early as April.
Delaware’s public education funding currently follows what officials call a unit-count system, which distributes money to districts based on the number of students enrolled.
The PEFC voted last week to approve a hybrid system that would supplement the unit-count with new categories that direct additional dollars to schools with large numbers of low-income students or those who don’t speak English as a first language.
Along with this new hybrid system, Johnson said the PEFC is considering updates to the state’s education equalization formula, which has been frozen since 2009.
That formula, Johnson said, is meant to provide relief to taxpayers in school districts with lower property values by reallocating state funding from districts with higher property values. The wealthier areas would receive less state support and have a heavier reliance on local taxation.
But in order for equalization to work properly, properties need to be assessed fairly. The state’s assessed property values had become so outdated that the formula had essentially become obsolete, Smith said.
But properly implementing equalization, Smith said, is imperative to neutralizing the tax base inequities she highlighted in her penny example.
Next steps for lawmakers
Senate Majority Leader Bryan Townsend (D-Newark/Glasgow) said after Monday’s committee hearing that one of the most immediate things lawmakers will need to address in January is the ability for New Castle County school districts to tax residential and commercial properties at different rates.
That split rate tax structure was passed as a temporary measure, he said. So lawmakers will need to determine what, if anything, to replace it with.
“You have different types of individuals or small businesses who were hit with tax bills that really aren’t workable in the immediate moment, and trying to figure out how to reconcile that is very, very important,” Townsend said. “I particularly think, as we head into another tax year for July 1, 2026, there will be new structures in place.”
But what exactly those structures will look like is unclear.
One panelist suggested moving from a split tax rate to using assessment ratios as a more simple way of delineating how much tax to collect for different types of properties. Under that system, a single tax rate is set for all properties, but the percentage of a property’s taxable value changes. So a school district could tax commercial properties at 100% of their assessed value, but choose to only tax residential properties at 80% of their value.
Townsend said he was interested in learning more about the pros and cons of that approach, but that internal conversations about it have not been happening in great detail.
Reflecting on the reassessment fallout, Townsend said it is clear that some commercial entities underpaid on their property taxes. In trying to find immediate fixes to that problem, however, other commercial properties – primarily small businesses – subsequently saw sudden tax hikes, he said.
“We’re trying to smooth out and address these inequities as fast as we can,” Townsend said. “And we have more to do.”