How fitting that Wolf chose Groundhog Day to demand another $577 million in basic education funding—$377 million for the rest of FY 2015-16 and an addition $200 million in the next fiscal year. The governor’s demands are rooted in the “framework budget” from last November, which was rumored to include $350 million in new basic education funding.
“I believe they may be the only party that does not believe the framework is dead,” said Senate GOP spokeswoman Jenn Kocher of the Wolf administration. “I'm sorry but it died the day that pensions did.”
The administration provided no explanation for why the $350 million figure increased to $377 million. Perhaps this was intended to offset the $50 million in borrowing costs incurred by school districts as a direct result of Wolf’s budget vetoes. Nonetheless, the administration seeks to distribute the 2015-16 funding through a hyper-political “formula” that ignores the recommendation of the state’s Basic Education Funding Commission.
Wolf continues to demand more spending while placing little value on smarter spending, which is exactly what the Funding Commission was created to ensure. The governor is not demonstrating a willingness to compromise, either: his education spending requests are not much different than his original proposal last March.
Rather than a $377 million windfall, what schools really need is the $3.1 billion that Wolf vetoed in December.
Of course, Pennsylvania revenue per-student already exceeds the national average by $3,400. Even when looking solely at state funding, Pennsylvania schools are better-funded than average.
Upon finally approving the majority of a state budget, Gov. Tom Wolf admonished the General Assembly for "cutting $95 million from public schools." Yet it is the governor himself who is responsible for vetoing $3.1 billion worth of education funding.
In a recent op-ed, my colleague Nate Benefield explains Wolf's misleading budget math:
Wolf is propagating the bold-faced lie that the budget cuts education by $95 million.
In truth, the budget increases public school funding by $400 million. The only education line item reduced is school construction reimbursement. This is not being cut, however. Instead, it’s being funded with state bonds, and school districts will actually get more in construction reimbursements.
This cynical negotiation ploy—intended to force House and Senate leaders to return to the bargaining table—shows Wolf's primary motivation is higher taxes, not higher education spending. By only releasing six months worth of school funding, the administration refuses to fully free the state's budget hostages.
The chart below illustrates Wolf's education cut and how much money he withheld from local districts. (All figures from the Department of Education.)
Tom Wolf finally admitted he held school children hostage in hopes of higher taxes: “We're now at a point where I don't want to hold the children of Pennsylvania hostage.” But the governor’s six month crusade for tax hikes hurts more than children. His refusal to sign earlier emergency funding measures resulted in unnecessary pain and worry for countless Pennsylvanians.
Here are ten of Wolf's budget hostages from 2015:
- Children on the brink of returning to failing or violent schools: The governor waited until Christmas Eve to release authorization letters that allow businesses to donate private school scholarships, even though these programs are part of the tax code and have nothing to do with the budget. This resulted in confusion, and possibly fewer donations, which could disrupt the education for thousands of low- and middle-income students.
- Human service employees: Delayed funding to human services agencies caused more than 700 furloughs, according to a United Way survey. Others employees lost benefits or took salary reductions.
- Pre-kindergarteners: At the start of December, 15 early childhood centers were closed, according to the state Department of Education, affecting about 540 children from low-income families.
- Domestic abuse victims: Wolf cut off all funding—including federal—for domestic violence programs, forcing workers at shelters like Survivors Inc. in Adams County to turn away pregnant women and over 100 children. At the beginning of December, Wolf released some federal funds for these victims.
- Charter school students: Across Pennsylvania, charter schools were forced to reach into rainy day funds in order to remain open. Since charters are viewed as riskier investments than traditional school districts, it is more challenging for charters to borrow money. Pennsylvania charters were also denied revenue from the state Treasury when local districts were unwilling or unable to contribute per-student payments.
- Senior citizens: Senior centers around the state closed during the impasse. All four senior centers in Mercer County closed and laid off 50 percent of their employees.
- The hungry: Food banks across the commonwealth struggled throughout the impasse and some dipped into their reserve funds to keep putting food on the table.
- Local taxpayers: Interest payments for schools borrowing money to stay open have reached nearly $1 billion
- Local taxpayers II: Municipalities and counties have skimped on payments and considered borrowing funds to remain afloat. These measures resulted in tax increases or even bond rating downgrades.
- College students: State and federal grants for college students were on hold, as well. East Stroudsburg University offered bookstore credit to PHEAA grantees beginning in November and Penn State added the grants as a credit to bills even though the money hadn't yet come through.
When Gov. Wolf finally agreed to sign the majority of an emergency funding bill, it remained unclear how his administration would distribute the increased education funding approved by the legislature. Without passage of an Education Code—legislation typically enacted in conjunction with an appropriation bill—the governor had no specific instructions for doling out education dollars.
Wolf is taking full advantage of this opening to distribute funds in a highly political “formula” that ignores the recommendations of the bipartisan education funding commission. On Monday, the administration announced a “hybrid funding formula that would have been fully enacted as part of the bipartisan framework budget agreement.”
From the Department of Education, here’s what Wolf’s hybrid-formula essentially boils down to:
- Line item veto roughly $3 billion in education funding (continuing a political game of chicken and setting the stage for further student hostages)
- With the remaining funds: send each district the same amount it received in 2014-15.
- With the new, increased education funding (prorated over six months, thanks to Wolf’s veto):
- Send out $50 million based on the allocation of the previously eliminated Education Assistance Program
- Send $12 million to Chester-Upland School District
- Send $3 million to Wilkinsburg Borough School District
- The rest is distributed to districts on a pro-rated basis to restore federal stimulus dollars which expired 2010. Although the Department of Education intentionally mischaracterizes these funds as “cuts under the previous administration," the only true cut to state education funding occurred last week, when Wolf vetoed $3 billion.
- The governor uses a portion of the increased Ready to Learn block grant to subsidize districts with high levels of charter school enrollment
Wolf is distributing education dollars on a whim, on his decree. What is listed above is not a formula; it is a political scheme. If not for Wolf's $3 billion education funding veto, this highly-politicized formula would be unnecessary. Instead of providing dollars based on enrollment or student need, Wolf is creating winners and losers as he sees fit.
The School District of Philadelphia, for example, receives more than 36 percent of the new education funding. Wilkinsburg Borough SD receives a 46 percent increase over 2014-15 levels and Chester-Upland receives a 25 percent increase. The average district receives 2.76 percent more than last year’s appropriation.
Speaking to the Pittsburgh Post-Gazette, Republican staffers indicate that Wolf’s “formula” is not, in fact, related to any framework budget agreement:
At the state Capitol, legislative Republicans took issue with how the Wolf administration plans to distribute the money.
“We’re still reviewing the numbers at this point,” said Jennifer Kocher, spokeswoman for Senate Majority Leader Jake Corman, R-Centre. “It doesn’t appear to adhere to anything that we had talked about in the framework, but this governor has certainly proven he wants to do things his own way.”
“He just chose to do it his own way,” said Steve Miskin, spokesman for House Republicans. “We’re still trying to determine exactly what type of formula he used to do it.”
Where do we go from here? The governor should release the billions of education dollars he’s currently withholding—providing the largest state support of public schools in Pennsylvania history—and the legislature should approve an Education Code that distributes those dollars based on the Basic Education Funding Commission’s student-based formula.
On Christmas Eve, Gov. Tom Wolf posted a blog attacking Republicans and the “extremist” budget now sitting on his desk—which passed the Senate on a bipartisan 33-17 vote. Wolf claims it “cuts” funding for public schools, while the “framework” budget presents an increase for public schools.
It is difficult to understand, much less justify, Gov. Wolf’s shoddy claims.
- Under HB 1460, the budget sent to the governor on Dec. 23, “Support for Public Schools”—a subtotal of education spending that excludes higher education, nonpublic school funding, and library subsidies—would increase by $404 million.
- The increase for public schools in the “framework budget,” which would require hikes in the income and/or sales tax to fund, was $672 million (a difference of $269 million).
So why does Wolf consider HB 1460 a “cut”?
School Funding Less Pensions
Perhaps Gov. Wolf is excluding the costs of pension contributions in his comparison. His logic: While taxpayers will pay more, this funding cannot be used to hire more teachers.
In both the framework budget and the enacted budget, state payments to public schools for pension costs would increase by $567 million. Taking this funding away does make it appear that funding is being cut—but doesn’t explain Wolf’s position.
- Under HB 1460, public school funding minus pension costs would decline by $163 million.
- Under the “framework,” public school funding minus pension costs is increasing by $106 million (a difference of $269 million).
School Funding Excluding PlanCon
All of the “cuts” are in the line item called “authority rentals and sinking funds requirements”—a program known as PlanCon. These are reimbursement for school construction projects.
This funding is not actually being cut. Rather, the proposal shifts this from an ongoing expense—part of the budget—to a capital project funded with a $5 billion bond issue. This shift would occur in both the framework budget and HB 1460
Schools would actually get more funding for construction, even though the line item in the budget is being reduced. (As a consequence, annual state debt payments will increase in future years).
Figuring in PlanCon adjustments changes the dynamic dramatically:
- Under HB 1460, public school funding excluding the PlanCon shift would increase by increase by $711 million.
- Taking both PlanCon and pension reimbursements out of the equation means a $143 million increase.
In every scenario, the difference between HB 1460 and the “framework” is $269 million in support for public schools.
What about Under a Veto
Should Wolf choose to veto this budget again, he would be denying $10.466 billion in public school funding—a new record high. Instead, schools would get nothing.
|2014-15 Available||HB 1460||Difference|
|Support of Public Schools||$10,061,550||$10,465,948||$404,398|
|Authority Rentals and Sinking Fund Requirements||$306,198||$0||($306,198)|
|School Employees' Retirement||$1,157,853||$1,725,000||$567,147|
|Public School funding excluding Pensions||$8,903,697||$8,740,948||($162,749)|
|Public School funding excluding Plancon||$9,755,352||$10,465,948||$710,596|
|Public School funding excluding Pensions & Plancon||$8,597,499||$8,740,948||$143,449|
In a nutshell, Gov. Tom Wolf’s guiding philosophy on education reform is to spend more money on public schools.
Embracing the repeatedly-debunked myth of education cuts under the previous administration—and undeterred by the weak relationship between spending and academic outcomes—Wolf leans heavily on this slogan in speaking engagements and social media:
However, no one is proposing to “make Pennsylvania schools weaker.” Even if you accept the governor’s shaky premise that a school’s strength is solely measured by dollars spent, you’d be hard pressed to find lawmakers—Republican or Democrat, conservative or liberal—arguing for less education spending.
Except, of course, when it comes to cyber charter students.
Since the governor’s March budget address, Pennsylvania’s cyber students have been under attack. Wolf initially proposed to slash cyber revenues to $5,950 per student—an arbitrary sum that would reduce per-student spending by one-third. (For the sake of comparison, traditional school districts spend over $15,000 per-student in Pennsylvania).
This radical proposal never gained traction, but late last week Wolf demanded the “budget framework” include a provision cutting cyber funding by an estimated $65 million over the next two years. At a time when the state is increasing aid to school districts by more than $350 million, cyber schools—which enroll a higher percentage of low-income and special education students than do district schools—are threatened with devastating cuts.
In June, many cyber leaders actually agreed to provisions in a House-passed charter reform bill that included, among other things, a significant reduction in per-student revenue. But the Wolf-approved Senate plan cuts cyber funding three times more than the original agreement.
Can Pennsylvania grow stronger if cyber schools are made weaker? Or is Wolf content to treat 36,000 cyber students like second-class citizens?
As proposals to reduce, reform, or (mostly) eliminate school property taxes continue to be debated in Harrisburg, many readers have asked about our position on a dollar-for-dollar tax shift, which would redistribute the school tax burden in Pennsylvania.
We remain concerned that proposals to shift the tax burden without addressing spending levels will result in little relief to Pennsylvania families.
Pennsylvania spends significantly more per student on public schools than the national average. Moreover, increased spending has not resulted in improvement in academic performance. The "state share," on a per-student basis, is close to the national average. Calls for increased education spending tend to ignore these basic facts.
To be clear, CF opposes tax shifting schemes that result in net tax hikes, such as those found in Gov. Wolf's original budget, or the proposed "budget framework."
Revenue neutral, or dollar-for-dollar tax shifting proposals typically ask the state to contribute more, or all, public school funding in exchange for property tax reduction or elimination.Tax shifting—even of the dollar-for-dollar variety—will not solve structural problems with school spending. 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 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 more relief than districts that have responsibly kept taxes low.
- Current tax shifting plans fail to provide a student-based funding formula.
- Tax shifting does not necessarily prevent property taxes from coming back, and it can become a vehicle for increasing our overall tax burden on families and businesses.
Tax shifting alone 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. High property taxes are simply a symptom of poorly structured education spending. 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.
Should voters have the right to approve property tax increases? This is a central point of contention within a rumored budget framework that purports to provide Pennsylvanians with property tax relief.
In exchange for increasing the state sales tax to 7.25 percent—with higher amounts in in Allegheny County (8.25 percent) and Philadelphia (9.25 percent)—Pennsylvanians are promised significant property tax reductions, to tune of $1.5 billion.
Unless taxpayers are given proper control over property tax rates, however, nothing would stop school boards from large tax increases in future years. This could completely negate any tax relief doled out by the rumored budget agreement.
Thankfully, Sen. Don White's SB 909 would protect taxpayers from this scenario by requiring voter referenda when a school board requests higher taxes. This commonsense legislation makes school boards accountable to the residents in their districts. Could property taxes increase under SB 909? Yes, but school boards would have to make a compelling case to raise taxes—and voters would be given the opportunity to vote yes or no.
Act 1 in 2006 promised Pennsylvania voters access to tax hike referenda. However, Gov. Rendell pushed for nearly a dozen exceptions which excused school boards from actually facing voter approval. Since then, the Department of Education has approved 1,428 school districts for waivers from referenda, including 172 in 2015-16. It is common, too, for districts to receive multiple exceptions in the same year (pension obligations and special education costs are the most common).
Number of Districts Approved for Exceptions
SB 909 eliminates these exceptions and empowers taxpayers with control over local taxes. Currently, 34 other states require a school district to hold a referendum vote in order to approve the levy of school taxes or an increase in the tax rate.
Predictably, the requirement for voter referenda has been met with fierce resistance the Pennsylvania School Board Association (PSBA) and other staunch defenders of the educational status quo. PSBA executive direction Nathan Mains recently penned this piece, foreshadowing the dystopian world in which SB 909 passes and taxpayers are given a voice:
Scenario 1: In five years or less, school facilities will start to see the effects of no investment in their upkeep. Roofs start leaking because there is no money to fix them, buildings are overrun with weeds because maintenance staff were let go. Students are injured as ceiling tiles and drywall start to crumble.
Scenario 2: Pennsylvania student achievement rates over the next decade are compared to the results of Third World countries because the state has opted not to meet its financial obligation of funding public education and has instead left each community to its own devices.
Needless to say, the hysteria is reaching fever pitch. The central claim from the PSBA is that voters will always reject potential tax increases, forcing school districts to make draconian cuts. However, this flies in the face of the experience of other states which employ voter referenda.
Consider Ohio, where voters approved 85 of 101 potential increases to school taxes in 2015. Older data from New York, New Jersey, and Michigan tells the same story: Taxpayers approved more than half of all school budgets, tax increases, or bond issues.
Here’s the bottom line: Taxpayers are willing to raise their own taxes when districts demonstrate the need for additional revenue and a plan for responsible spending.
A budget agreement that shifts taxes without providing local control is a bad deal for taxpayers, who deserve a voice—especially given the astounding growth in property taxes since 2004. Even including the "relief" from slot machine revenue, passed in 2004, property taxes have grown by 34 percent.
The conventional wisdom in Harrisburg suggests Gov. Wolf is nearing an agreement with the legislature on a state budget. The specific details remain largely unclear, although it appears the deal would increase Pennsylvania’s sales tax to the second highest rate in the nation—amounting to a net tax increase of $190 per family of four.
Central to the budget framework is a substantial increase in state education spending. Wolf has reportedly agreed with legislative leaders to increase the Basic Education line item by $350 million and the Special Education line item by $50 million.
How do these figures—touted by Wolf's office as a "record increase" in school funding—compare to earlier stages of the budget negotiations? See the chart below.
The first columns illustrate the funding Wolf requested in March during his budget address. The middle columns represent the additional funding provided by the House and Senate in the no-tax, on-time budget, which was ultimately vetoed by the governor. The third columns represents the “budget framework” agreement.
If reports are accurate, Gov. Wolf will emerge with most of the new spending he requested in March—including more than 87 percent of the Basic Education funding.
This is notable, given the broader context of education spending in Pennsylvania. The commonwealth currently spends more than $15,000 per public school student, which ranks 11th in the nation. What’s more, funding for public schools is already at an all-time high, both at the state level and overall.
Pennsylvania may be on the verge of a record-high increase to an already record-high level of education spending. Of course, most evidence suggest a tenuous relationship between spending and educational outcomes.
Fell Charter Elementary School near Scranton will stop paying teachers next month and the school is considering a four-day week thanks to the state budget stalemate.
Fell's announcement is just the latest reminder of Governor Wolf's strategy to leverage schools for tax hikes. First the governor withheld EITC and OSTC scholarship funds, which allow thousands of Pennsylvania kids to escape failing schools—even though these scholarships are part of the tax code which is still in effect.
Next, a handful of district schools stopped sending tuition payments to charter schools, which serve more than 100,000 kids in Pennsylvania. When the state began to pay charters by redirecting gaming revenue, districts vehmently protested, leading the Treasury to stop payments at the request of Senate Democrats.
It's not just students at charter schools that are pawns in Gov. Wolf's political game. District schools desperate for funding were told they could not seek loans from the state Treasury. This is in spite of the comparisons they made to a loan floated to House Democrats from the Treasury.
In short, all types of schools and students across the commonwealth are held hostage.
Yesterday, Auditor General Eugene DePasquale announced at least 27 school districts and two intermediate units are now borrowing money to stay open. That puts total borrowing at $431 million, plus an estimated $14 million in interest costs. DePasquale expects the number of borrowing districts to jump to 54 by Thanksgiving
Hours later, the state Senate tried once again to provide relief to schools by attempting a veto override of a stop-gap budget that would release four months of funding to schools and social service agencies. The move fell short by 3 votes.
As rumors of a new deal circulate one thing should be clear: No one wins by holding schools hostage for historic tax increases.
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