Much of the reaction to the Basic Education Funding Commission’s final report has been positive—and for good reason. The commission proposed a formula that finally distributes funds based on enrollment and student need.
But a new formula alone is not sufficient to rectify Pennslyvania’s irrational system of distributing state aid to public schools. CF has written and testified about the state’s “hold harmless” provision, which guarantees each school district the same level of state funding it received the previous year. While the policy ostensibly exists to prevent school districts from being harmed by reduced funding, it has, in fact, brought harm and inequity to hundreds of growing districts across the commonwealth.
In order to ensure the year-long funding commission's work produces meaningful policy reform, a sensible transition away from hold harmless is essential. If, for example, the new formula is only applied to new spending—and some $5 billion in education funding remains attached to hold harmless—the broken funding method will remain unscathed.
In its report, the funding commission offered only broad suggestions regarding hold harmless. During a press conference last Thursday, Sen. Pat Browne explained phasing out hold harmless is a “budget decision” that must be tackled by the entire General Assembly.
This morning, the Senate Education Committee advanced SB 910, legislation that will implement the new formula. Unfortunately, SB 910 retains hold harmless for Basic Education spending during the “base year” (which will mean either 2014-15 or 2015-16) and applies the new formula only to future spending.
This is a moderate improvement over the status quo, as explained by Kara Newhouse in Lancaster Online:
In the past, districts were guaranteed at least as much money as they got the year before, and then some. Then the next year, the district would be guaranteed that new amount. And so on.
Doing that every year allowed inequities to snowball.
The commission instead wants to freeze the amount that districts get (either this year or next year) as the guaranteed base.
In other words, SB 910 would put an end to the “snowball effect” of annually resetting hold harmless levels, but it falls considerably short of an ideal outcome. The commission’s formula is rational, equitable, and transparent, which is why applying the formula to the entire Basic Education line item is preferable.
If lawmakers are hesitant to make substantial reforms in a single budget year, they could distribute a portion of the Basic Education appropriation under the proposed formula over a set time period. The funding commission, in its report, suggested 10 percent over 10 years, but this could be adjusted as lawmakers see fit. The key is to begin phasing in the new formula to as much of the line item as possible, while giving school districts reasonable time to prepare for new funding levels.
The sooner we distribute the bulk of education funding by a student-based formula, the better for Pennsylvania’s public school children.
A piece of legislation recently passed the Senate Education Committee that would provide a new solution for underperforming public schools.
Schools in the bottom 5 percent of statewide performance would be identified as “intervention schools”. Their school boards would be given more capabilities, such as increased flexibility to employ better teachers and more authority to spend funds efficiently, to improve students’ education.
James also elaborates on the bill’s creation of an Achievement School District (ASD).
The ASD would absorb schools in the lowest 1 percent and provide them with a completely “new school board that has new incentives” rather than continuing with the destructive status quo.
Click here or listen below to hear more.
The Gary Sutton Show airs daily on WSBA 910AM in the York area.
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Pennsylvania's public sector pension crisis is undeniable.
Consider the burden it places on local school districts, whose pension contributions increased from $1.4 billion in 2012-13 to $1.9 billion in 2013-14. In 2008-09, districts spent $562 million on pension contributions; schools have thus seen more than a three-fold increase in only five years.
And these costs will continue rising in coming years.
Take a look at our most recent Policy Memo for more information on education spending trends.
Contrary to claims about budget cuts to public education, Pennsylvania school districts continue to accumulate large reserve funds, up to $4.1 billion in 2013-14. This amounts to more than 15 percent of their total revenue, according to recent figures from the Department of Education, and a $100 million increase over 2012-13.
A school district's fund balance is essentially a rainy-day fund.
Take a look at our most recent Policy Memo for more trends in Pennsylvania public education.
State revenue to school districts reached an all-time high in 2013-14, at $9.7 billion. In part 2 of our week-long series on education finance in the commonwealth, take a look at this chart on state education revenue.
Funding levels slightly declined under Gov. Rendell in 2009-10, as they were supplanted by temporary federal stimulus dollars. However, since 2010-11, state aid has consistently increased. On a per-pupil basis, state taxpayers contribute roughly $5,400, which mirrors the national average.
For a more in-depth look at education spending trends, check out our most recent Policy Memo.
Pennsylvania spent $26.1 billion on public schools in 2013-14. According to state data, this amounts to a $600 million increase over the 2012-13 baseline.
As you can see from the chart below, school spending has steadily increased over the past decade, save for 2011-12 upon the expiration of federal stimulus funds. Contrary to the myth propogated by government employee unions, state funding for public education was not cut in 2011-12. More on that tomorrow.
School spending on a per-pupil basis also reached an all-time high in 2013-14, exceeding $15,000 per student. Of course, there are several steps lawmakers can take to more rationally and transparently allocate state education aid, but the broader argument that "schools are underfunded" doesn't align with the facts.
Take a deeper look at education spending trends in our most recent Policy Memo.
Amidst a flurry of hearings on severance taxes, incomes taxes, and pension reform, a piece of legislation with less fanfare advanced with bipartisan support out of the Senate Education Committee. Senate Bill 6 has the potential to rescue thousands of students from persistently underperforming public schools.
Senator Smucker's SB 6 has two major components. First, it would enable school districts to utilize new powers to improve schools in the bottom 5 percent of statewide performance. These schools would be identified as "intervention schools," and local school boards would have enhanced staffing flexibility, as well as the ability to convert the school into a charter.
Most importantly, the legislation creates an Achievement School District (ASD), which could absorb schools in the bottom 1 percent of performance. This is the most transformative aspect of the law. Perpetually failing schools would transfer to the ASD, which has similar powers outlined above. However, the ASD is overseen by a seven-member board appointed by the governor and legislature. This unique management structure provides the right incentives to institute meaningful school reform for students who need it most.
Achievement school districts are gaining in popularity across the country as a means to turn around chronically underperforming schools. They are perhaps most famous in New Orleans, where a Recovery School District was scaled up after Hurricane Katrina. In New Orleans, some 93 percent of public school students attend charters. Only 7 percent of schools are currently designated as failing, compared to 62 percent less than a decade ago. And 62 percent of students test at grade level or above, up from 35 percent in 2006.
Similar turnaround school district initiatives exist in Tennessee and Michigan, and they have recently been enacted in Georgia and Nevada.
Education solutions must be more innovative and forward-looking than simply raising taxes—especially given that Pennsylvania education spending is currently at an all-time high. During Tuesday’s hearing on SB 6, Democratic Senator Anthony Williams explained tax hikes over the last fifteen years have not improved the quality of schools in his district.
"Pouring more water into a bucket that has holes in it doesn't put out the fire." Take a look at Sen. Williams' complete remarks:
As I pointed out yesterday in a chart and blog post, Pennsylvania spends significantly more per student on public schools than the national average. Moreover, increased spending has not resulted in improvement in academic performance.
Calls for increased education spending tend to ignore these basic facts. At the same time, many readers have asked about our position on a dollar-for-dollar tax shift, which would redistribute the school tax burden in Pennsylvania.
To be clear, CF opposes tax shifting schemes that result in net tax hikes, such as those found in Gov. Wolf's budget. Other tax shifting proposals are revenue neutral, or dollar-for-dollar. Typically, these proposals ask the state to contribute more, or all, to public school funding in exchange for property tax reduction or elimination.
We believe that tax shifting—even of the dollar-for-dollar variety—will not solve structural problems with school financing. Here are our primary concerns:
- Tax shifting does not address overspending in public schools, which is driven by pensions, mandates, union contracts and lobbying, and a government monopoly over the school system.
- Tax shifting creates winners and losers. This is true among individuals who would be forced to pay higher sales or income tax rates (and in the case of expansion, some families would face exorbitant increases on nursing care, day care, or other items). Indeed, while the property tax is highly unpopular, it is less detrimental toward state economic growth than is the income tax, which affects workers and small business owners.
- Winners and losers will also emerge at the school district level. Tax shifting effectively forces residents in District A to pay more in state taxes, while District B would get more in “relief.” Districts with high property taxes will get less relief than districts that have responsibly kept taxes low.
- Tax shifting fails to provide a student-based funding formula.
- Tax shifting does not necessary prevent property taxes from coming back, and it can become a vehicle for increasing our overall tax burden on families and businesses.
Without other reforms, tax shifting will not resolve the larger problem of overspending and unaffordable taxes. As I pointed out in my testimony on property tax reform, there are other solutions that address the spending problem in education, of which high property taxes are just a symptom. Here are five recommendations:
Weighted Student Funding
While Pennsylvania spends more per student than the rest of the country, and provides about the national average in state funding per student, that support isn’t driven out to schools that need it the most. A broken funding formula, in which school districts have been “held harmless” regardless of changes in enrollment for more than 20 years, fails our students.
Moving to a student-based funding system would ensure state dollars go to the schools that need it most—based on student enrollment and student need. We should fund children, not buildings. This reform would better allocate the $26 billion we already spend.
Collective Bargaining Reform
Employee benefit cost growth has greatly exceeded salary growth in public schools. These costs are driven by unaffordable union contracts.
Reforming the collective bargaining process—providing taxpayers and voters with more information about the terms and costs of contracts—could result in major savings for public schools, money that could go back into the classroom.
Mandate relief, including prevailing wage reform and seniority reform
School districts across the state have complained about unfunded and unaffordable mandates. Among the largest of these is the prevailing wage mandate, which requires school districts to pay more for construction projects than the private sector pays for the same work. Prevailing wage mandates increase the cost of construction by 10 to 30 percent, which for Pennsylvania school districts results in $160 to $480 million in additional annual costs.
Likewise, state law that limits when school districts furlough employees, and requires furloughs be done solely on the basis of seniority, deny schools the flexibility to manage costs. Reform that values teacher performance above seniority would improve the quality of education across Pennsylvania, while giving schools the tools they need.
Over the past six years, pension payments from school districts have increased by $2 billion. This amounts to a $600 tax increase per Pennsylvania homeowner, or the salary of 20,000 teachers. Rising pension costs were the justification for 98% of school districts recently seeking exemptions to raise property taxes above inflation.
We need pension reform that moves the state out of the defined benefit business. Establishing a defined contribution retirement plan for new hires provides costs that are predictable and affordable. Responsible pension reform removes politics from pension management and prevent future crises from threatening our public schools.
Lawmakers should expand school choice programs, such as the Educational Improvement Tax Credit (EITC) and the Opportunity Scholarship Tax Credit (OSTC). These programs allow low and middle income families to attend better, safer schools.
Moreover, the EITC and OSTC save Pennsylvania taxpayers money. The average EITC scholarship is less than $2,000, while the average OSTC scholarship is approximately $4,000. These scholarships are significantly less than the average per-pupil spending in traditional public schools.
There is an ongoing myth that Pennsylvania underfunds public schools because our "state share" is low. Let's set the record straight.
As a reminder, schools receive revenue from local, state, and federal sources. In Pennsylvania, gross local spending is extremely high, while gross state spending is right at the national average. This creates an illusion of a small state share, when gross state funding is actually at a reasonable level.
The reality is that state funding per student ranks 25th in the country at $5,400 per student. At $8,474, Pennsylvania ranks 7th in local revenue per student, $3,000 more than then national average. Indeed, our total revenue per student ranks 10th in the country, at more than $15,100 per student—again, $3,000 more than then national average.
As James noted in a recent post, Pennsylvania spends more than the rest of the country in high poverty and low poverty districts.
I'll have more to say about this subject, and the implications for spending increases and tax shifting tomorrow. Stay tuned.
Last week, Pennsylvania’s House of Representatives approved a significant expansion of two state scholarship programs, the Educational Improvement Tax Credit (EITC) and the Opportunity Scholarship Tax Credit (OSTC).
Since 2001, EITC and OSTC have awarded over 430,000 scholarships to students across Pennsylvania, providing lifeboats to children looking to escape dangerous and failing schools.
Matt Brouillette recently spoke with Gary Sutton on WSBA about House Bill 752 and the benefits that its $100 million expansion will bring to children hoping to pursue school choice programs.
Matt explains that EITC and OSTC build connections between corporations and their communities. These programs allow businesses to “see a direct benefit from their tax dollars going to help educate children”–rather than sending that money to strangers in Harrisburg.
Listen below or click here to hear Matt’s interview.
The Gary Sutton Show airs daily on WSBA 910AM in the York area.
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