Pennsylvania school districts spent $27.4 billion in 2014-15, an all-time high, according to the latest data from the Pennsylvania Department of Education. This represents a $1.3 billion increase from 2013-14.
Districts spent nearly $16,000 per student in 2014-15, up from $15,019 in 2013-14. Total education spending steadily increased over the last five years, save for 2011-12 upon the expiration of temporary federal stimulus dollars.
Pennsylvania’s private school scholarship programs account for less than 2 percent of the $11 billion in state funds allocated for public schools. Yet it is impossible to overstate the significance of these programs for children and families.
Kevin McCorry of Newsworks tells the story of Thomas Short, a parent in South Philadelphia, who can send his sons to private school thanks to the Educational Improvement Tax Credit (EITC) and Opportunity Scholarship Tax Credit (OSTC) programs:
The only way he's able to afford Catholic school tuition is because he takes advantage of a scholarship program that's funded by state tax credits. Tuition for two children normally runs north of $9,000 per year.
With the scholarship, he pays just $1,500.
"Without this, [they're] not going here," he said.
According to Mr. Short, St. Thomas Aquinas Elementary is a better option than the traditional district school:
Short's perception of the nearby neighborhood public schools is low.
"They're not trying to develop the person as much as just trying to get them through to the next grade," he said. "I don't know why I'm saying that. It's just my opinion. Maybe that's how the public schools used to be back in the day when I went."
If House Speaker Mike Turzai has his way, the EITC and OSTC will see a sizable boost during the next fiscal year. Speaker Turzai recently released a co-sponsorship memo for legislation increasing the caps on how much businesses may donate to both programs—up from $175 million to $250 million.
This, on the heels of a $25 million EITC increase last July, would be welcome news for families and schoolchildren across the commonwealth.
In June, CF published a searchable database showing fund balance data for each of Pennsylvania’s 500 school districts as of 2015.
Given the recent Lower Merion School District lawsuit—in which a judge found Lower Merion’s school board improperly raised taxes despite flush fund balances—we have taken the database a step further and examined which districts have accumulated large fund balances while also requesting tax hikes.
This new database shows total fund balance along with requested tax increases, per student, for each school district.
Here’s why this is important:
The Taxpayer Relief Act of 2006 (Act 1) was intended to limit property taxes and empower Pennsylvanians with referenda on real estate tax hikes. Each September, the Pennsylvania Department of Education (PDE) calculates the base Act 1 index for the following fiscal year. This index is the maximum allowable school district tax increase, usually between 2 and 4 percent.
After the index is announced, districts must do one of two things: pass a resolution promising not to raise taxes above the index, or pass a preliminary budget identifying proposed tax increases above the index. Districts adopting a preliminary budget must either initiate a voter referendum on the tax hike or apply for referendum exceptions from PDE.
In practice, virtually all districts seeking to raise taxes above the index apply for, and receive, exceptions. Since 2006, there have been seldom few property tax referenda, and property taxes have continued to rise.
Our new database displays how much each school district requested to raise taxes (above the index) in its preliminary budget. A blank cell means the district did not request tax increases above the index. It does not necessarily mean the district avoided tax hikes altogether.
Further, see this list of 8 school districts with fund balance percentages larger than Lower Merion’s that also requested tax increases above the Act 1 Index in 8 or more of the last 10 years.
Unlike residents in the majority of other states, where school districts must hold a referendum vote in order to approve new taxes, residents of the commonwealth have little control over real estate tax hikes. All the more reason to pass SB 909, which would require both voter referenda for any school district tax increase, as well as public sector pension reform, which is each district’s largest cost driver.
The National Center for Education Statistics recently released 2013-14 figures on revenues and expenditures for U.S. public schools. How does Pennsylvania stack up when it comes to funding?
On a per-pupil basis, Pennsylvania exceeds the national average in revenue from local, state, and federal sources. Overall, public schools in the commonwealth are funded 9th highest in the country and $3,500 more than the national average.
Note that these figures are for the 2013-14 school year and thus pre-date Tom Wolf's tenure as governor.
As I pointed out earlier this week, Pennsylvania public school spending is at an all-time high. In fact, the state's per student spending is significantly above the national average.
James’ analysis adds that the latest state budget represents yet another increase in state funding for public schools, building on the all-time high established during the 2015-16 fiscal year.
Even the Secretary of Education recognized the commonwealth's education spending is high—relative to other states—and represents increases rather than cuts to funding levels. Detractors normally concede this point, but they respond with “it’s not the amount of funding, it is the inequality.”
They cite data showing a large gap in spending between wealthy (low-poverty) and poor (high-poverty) districts. Here’s the rub: That data shows Pennsylvania spends more per student in every category of districts. That is, even Pennsylvania’s high-poverty districts spend more than high-poverty districts nationally.
What does this mean? If greater “equality” is the goal, we could cut spending by wealthy districts (caps on local school property taxes would be a way to do this) and spend at the national average. These two changes would produce greater equality between districts.
Ironically, government unions, the school boards association, and their allies have lobbied against efforts to control property tax increases.
These statistics aren't meant to downplay or ignore the equity in education funding. As we've made clear in the past, Pennsylvania’s practice of “hold harmless” has created a vast disparity in state funding per student. Hold harmless is the practice of guaranteeing each school district at least the amount of state funding they received in the prior year—regardless of enrollment changes.
The result—over decades—is that districts with declining enrollments receive far more aid per student. Meanwhile, areas with growing student populations have not gotten increases to match their enrollment.
Phasing out the “hold harmless” formula so all state aid is distributed using the new student-based funding formula would fix this problem—without requiring a multibillion dollar tax increase.
In Pennsylvania, 130,000 kids attend public charter schools—about 5 percent of the state’s schoolchildren.
For many of these kids and parents, charter schools are a lifeline to a safer, better education. Unfortunately, demand for charters continues to far exceed supply, resulting in thousands of students languishing on waiting lists—subject to the whims of a lottery to determine their future.
In this week's episode of Commonwealth Insight, we talk with Nina Rees, president & CEO of the National Alliance for Public Charter Schools, about why charter schools matter, what to do about failing charter schools, and the elements that bring success to a charter school.
Regarding charter school oversight, Nina says charters are, “given a degree of autonomy and freedom in exchange for accountability.” What level of accountability? “A charter can be closed if it doesn’t live up to expectations in its contract or attract enough students.”
The truth is, no one is forced to attend a charter school—they truly are schools of choice. The fact that thousands are lining up to choose them speaks volumes about the value parents see in these alternatives to local school districts.
Later in the podcast, James Paul, CF’s senior policy analyst and education expert, joins to discuss school choice in Pennsylvania—and addresses claims that choice drains resources from school districts.
“If you believe, as I do, that these funds belong to children and families, then any objections to draining funding simply don’t pass muster,” James says.
Indeed, the first goal of public education funding should be to serve the next generation of Pennsylvanians, not to simply maintain the status quo in an educational system or institution. When funds follow families, everyone wins.
posted by DOUGLAS BAKER | 11:03 AM | Comments
"The General Assembly shall provide for the maintenance and support of a thorough and efficient system of public education to serve the needs of the Commonwealth." So reads the Constitution of Pennsylvania under its section on Education.
As Nate mentioned earlier this week, a recent lawsuit seeks the Supreme Court to force the legislature to increase school funding by billions of dollars — primarily on the grounds that Pennsylvania is failing to honor its constitutional mandate. Is it true that the commonwealth is failing to provide a "thorough and efficient system" of public education?
State support of public schools is at an all-time high in Pennsylvania, recently eclipsing $11 billion. Claims of "cuts" from state taxpayers are simply without merit. And remember: average per-student funding in the commonwealth exceeds the national average by more than $3,000.
Should the Pennsylvania Supreme Court order the Legislature to give billions more dollars to school districts? That's what a recent lawsuit demands. But to make their case to the public, the lawsuit's advocates are repeating the widely discredited myth that the state once—but no longer—funded 50 percent of public school spending.
In reality, the state share of education spending never reached 50 percent. Records from the Pennsylvania Department of Education show that it peaked at 44.7 percent in 1974-75.
While the state share declined from 45 percent to 36 percent of total school district revenue, this was not due to a reduction in state subsidies for education. State aid—adjusted for inflation—increased by 41 percent since 1974. The state “share” only declined because local tax revenue—also adjusted for inflation—increased 98 percent over that time frame.
Pennsylvania actually provides more state funding than the national average on a per-student basis. The “state share” as a percentage only appears low because Pennsylvania schools receive about $3,000 more per student from local revenue, and in total revenue, than the national average.
That is, if Pennsylvania reduced local public school taxes to the national average, the “state share” would reach this mythical 50 percent.
(Note: The charts below are interactive. Touch or click on the tabs at the top or the bars to see more information.)
Lower Merion School District must revoke a portion of its most recent tax hike, according to a Montgomery County court. In his ruling, Judge Joseph A. Smyth said the district misled taxpayers by projecting large budget shortfalls despite squirreling away millions of dollars in reserve.
Kathy Boccella of Philly.com has the full report:
Between 2010 and 2015, the 8,300-student Lower Merion district - which, with a $259 million spending plan, is one of the wealthiest public school systems in the Philadelphia area - predicted large annual budget deficits, yet had millions stashed away in its reserves, Smyth said in his ruling.
For instance, in 2009-10, the district projected a $4.7 million budget hole but ended the year with a $9.5 million overage. In 2011-12, it anticipated a $5.1 million gap but wound up with $15.5 million to the plus side.
How did the school district manage to continually raise taxes above the Act 1 index? By overstating special education and pension costs:
According to the judge's findings, the district got away with raising taxes above the Act 1 index of 2.4 percent by telling state officials the money was needed to cover soaring special-education and employee pension costs, two of the biggest expenses for most public school districts.
However, audits of Lower Merion's budgets show it had year-end surpluses ranging from hundreds of thousands to millions of dollars for special education. The district also had $15.3 million tucked away in a retirement fund that was never used for pensions; instead, those benefits were paid from the general fund, according to the findings.
Because the Pennsylvania School Code does not permit a district of Lower Merion's size to store more than 8 percent of its money in reserve funds, the district transferred its surpluses to other accounts, the court found.
The last paragraph, above, is crucial—and has implications for all Pennsylvania school districts. If school board directors can so easily shift funding between various reserve funds (assigned, committed, and unassigned) then there is essentially no distinction between them. This undercuts the argument made by many school directors, as well as the Pennsylvania School Boards Association, that districts should only be judged on their unassigned fund balances.
By law, districts can only raise taxes if their unassigned funds are less than 8-12 percent of total expenses. From the CF fund balance database, you’ll notice many districts keep their unassigned funds stocked to the maximum legal amount, while holding millions earmarked as assigned or committed.
At the end of the 2014-15 school year, roughly 100 school districts had larger total reserve balances (as a percentage of spending) than did Lower Merion. Could this suggest administrators in other districts also mischaracterize their financial hardships?
Back to Lower Merion, whose school board wasted no time sensationalizing the judge’s ruling:
The ruling could eliminate $4 million targeted for special education and retirement benefits in the coming year, according to the board, which added, "If the court's decision stands, the financial health of LMSD and districts across the state is in jeopardy.
In a separate letter to parents, the board said the decision "could significantly impact the quality of school programs," and warned it might have to impose personal income taxes to make up for shortfalls.
Of course, money is fungible. If the directors at Lower Merion decide to cut funding for disabled students and elderly teachers, that will be by choice. Much like they chose to systematically mislead the very taxpayers financing their schools.
That’s the upshot of the 10th annual public opinion survey from Education Next, which covers a range of topics including school choice, school spending, personnel policy, testing, and accountability. The entire poll results are worth reading—check out the interactive results from 2016, as well as trends over the last decade—but here are a few key findings.
On the topic of school choice:
- Tax credit scholarships are favored 53-29 by the general public, 64-17 by African Americans, and 60-25 by parents. Tax credit scholarships, including Pennsylvania’s Educational Improvement and Opportunity Scholarship Tax Credits, are the most popular school choice mechanism.
- The general public supports charter schools by a 51-28 margin, including 45-33 among Democrats.
- Support for both means-tested and universal vouchers is slightly greater among Democrats than Republicans. Hispanics support universal vouchers 57-24.
Regarding school spending:
- The general public underestimates the average amount spent on children in public schools, which mirrors the experience in Pennsylvania. When asked to estimate the per-pupil cost, respondents guessed $8,500. The actual average is more than $12,000.
- The general public estimates the average yearly teacher salary is roughly $40,000, which is 30 percent below the actual average teacher salary ($58,000) reported by the National Education Association. Even teacher respondents underestimate average teacher salaries—they guessed $46,000.
Finally, on personnel policy:
- 62 percent of the public supports “basing part of the salaries of teachers on how much their students learn,” also known as merit pay. Only 20 percent of teachers are supportive of merit pay.
- Support for teacher tenure has declined by 10 percentage points since 2013, with the general public opposing teacher tenure 54-28.
- By a margin of 44-35, the public opposes agency fees—which require non-union members to nonetheless pay roughly 80 percent of full-member dues to the union.
- The public is split, 33-32, on whether unions have a negative effect on public schools.
Auditor General Eugene DePasquale recently uncovered $2.5 million improperly paid to nine public charter schools. At issue is whether buildings owned by charter schools are eligible for the state's lease reimbursement program.
But in the scrutiny rightly given to these payments, are we missing an even bigger issue?
According to DePasquale:
The Pennsylvania Department of Education’s [PDE] own guidelines for the lease reimbursement are clear that buildings owned by the charter school are not eligible. The problem is that PDE makes no effort to verify ownership of the buildings or look for conflicts of interest between the school and related parties. They simply write a check for whatever amount the charter school submits. That is a disservice to Pennsylvania students and taxpayers.
Jan Murphy of PennLive adds:
Robert Fayfich, executive director of the Pennsylvania Coalition of Public Charter Schools, said he believes this dispute comes down to a difference of interpretation of the state's lease reimbursement guidelines.
"The auditor general takes the position if the building is owned by a charter school then it's not reimbursable and PDE says ownership is irrelevant to reimbursement," he said. "I'm sure charters are working based on the recommendation from their legal counsel plus direction from PDE."
DePasquale acknowledged that charter schools were not at fault for applying for reimbursement but he said the education department was wrong in making those payments.
To correct the mistake, the Department of Education could claw-back improper payments. State lawmakers could also pass legislation clarifying the state’s reimbursement guidelines.
But DePasquale’s audit should raise a more important question: Is state government doing everything it can to maximize the value of each dollar spent on public education?
After all, this is not the first time the Auditor General has uncovered examples of wasteful education spending. In May, for example, DePasquale estimated districts could save nearly $55 million if they made use of competitive bidding for transportation services.
There are numerous other ways for districts to save money. CF has long championed prevailing wage reform (and other mandate relief), pension reform, and collective bargaining transparency to ensure taxpayer funds are directed to the classroom, where they belong.
These, too, must be top priorities for lawmakers and public officials who seek to maximize the value of each education dollar.
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The Commonwealth Foundation is Pennsylvania's free-market think tank. The Commonwealth Foundation transforms free-market ideas into public policies so all Pennsylvanians can flourish.