CF’s work in education focuses on promoting opportunity and improving children’s lives though incentive-based reforms. Instead of repeating the failed attempts to reform education through new rules or additional funding, such reforms use competition to improve education. Incentive-based reforms include providing choice within the public school system through charter schools and cyber schools, providing families with private school options through vouchers or tax credit-funded scholarships, and measuring and rewarding success in education for both schools and teachers. Only when parents are able to choose the best school for their child, have an abundance of educational choices and ample information, and schools are forced to compete for students will we provide the best education to Pennsylvania’s youth.
School district reserves total $4.3 billion statewide. When cries for more school funding—and property tax increases—are constant, how much is too much to hold in reserve?
Contradicting the claim that Pennsylvania underfunds its school system, public school spending hit an all-time high in the 2014-15 school year, approaching $27.4 billion—or $15,854 per student—according to the latest state Department of Education data.
Pennsylvania school districts spent approximately $27.4 billion in 2014-15. This represents a $1.3 billion increase from 2013-14, despite a 12,000 student decrease in average daily membership.
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Let’s talk for a moment about rainy days—specifically, the need to save funds to spend on one. Several school board administrators and lobbyists have taken issue with CF’s searchable, sortable database of school district fund balances, showing public schools are sitting on over $4 billion in “rainy day funds”. Meanwhile, 85 percent of school districts plan to raise property taxes.
A Temple University report, authored by a former Pennsylvania School Boards Association employee, argues:
“Just as an individual or family should maintain a savings account for unforeseen expenses or emergencies, school districts should also have funds in reserve to pay for emergency repairs or cover unexpected interruptions in revenues – such as a layoff at a major factory which suddenly affects tax collections.”
If an individual or family could impose real estate taxes on their friends and neighbors, this analogy might pass muster. But an obvious difference exists between families socking away their own hard-earned money in a savings account and a school board severely over-taxing its district. The CF database shows 21 districts with over 50 percent (!) of their total expenditures squirreled away in reserve.
Every dollar held in excess by a school board is money earned by taxpayers that could otherwise be saved, invested, or spent by taxpayers. While some school districts stock up reserve funds, thousands of Pennsylvanians struggle to balance their family budgets.
Typically, the school board lobby defends excessive reserves by drawing an ironclad distinction between unassigned funds and assigned or committed funds. As CF explained in an earlier blog:
A district’s fund balance—what it owns minus it what it owes—is comprised of assigned, committed, and unassigned funds. Assigned and committed reserves are available funds designated for a specific purpose, while unassigned funds are available for any purpose.
School board directors argue the public should only scrutinize unassigned funds, since assigned and committed funds have already been earmarked for a specific purpose. [For example, the Temple University report focuses solely on unassigned funds. Other funds are largely ignored.] They fail to mention, however, how easily money can be shifted among the three funds—often with a mere majority vote at the next board meeting.
The CF database anticipates this line of argument—and provides both total and unassigned reserve funds as a percent of expenditures. You’ll notice many districts keep their unassigned funds stocked to the legally mandated maximum amount at which they can still raise taxes, between 8 and 12 percent of total expenses, depending on district size.
Whether school boards should be judged on all reserve funds or simply unassigned funds is ultimately for taxpayers to determine. But the fact remains that dozens of Pennsylvania districts amassed large rainy day funds while also seeking tax increases.
What’s more, the Temple University report makes no mention of school districts’ capital reserve funds—yet another pot of money districts use to plan for construction projects.
Drawing attention to reserve funds is critical in order to increase transparency and raise awareness for taxpayers. While few school districts are sitting on a “pot of gold,” Pennsylvanians have a right to know that almost of all districts enjoy alternatives to higher taxes.
In a victory for taxpayers, the Public School Employees Retirement System (PSERS) has revoked pension credit illegally given to Allentown “ghost teachers” who were hired to teach but instead worked full-time for the local teachers’ union.
Even as the Allentown School District laid off 272 teachers in the past five years, the district used tax dollars to fund the salary and benefits of the full-time president of the Allentown Education Association.
In response to a lawsuit filed by the Fairness Center, PSERS determined the tenures of the current and previous AEA presidents were “non-retirement-covered compensation and years of service credit were removed for the same number of years that each served as union president…”
With this announcement, reported by the Allentown Morning Call and the Easton Express-Times, PSERS declared more than $1 million in salary earned by these ghost teachers ineligible for pension credit.
But pensions aren’t the end of it. Allentown taxpayers have also funded the salaries and other benefits of the city’s ghost teachers—even while the cash-strapped district laid off hundreds.
Pennsylvanians expect their education tax dollars will actually fund education. The fact remains that taxpayers should not be on the hook for union work, and teachers should be paid to teach.
Members of the General Assembly agree. Last month legislation that would strictly limit ghost teaching (HB 2125) advanced in the House.
PSERS’ decision is an important first step toward protecting taxpayers from funding employees of a private organization and making sure teachers are actually in the classroom.
In addition to general appropriations (SB 1073) and the fiscal code (SB 1320), lawmakers are finalizing language in the education code, HB 530. This legislation promises significant reforms to Pennsylvania’s charter school law.
Here’s the bottom line on HB 530: It is a sweeping bill that includes a number of positive provisions, but also imposes steep funding cuts on cyber charter schools.
Critically, an amendment by Speaker Mike Turzai increases the available tax credits for the Educational Improvement Tax Credit (EITC) program by $25 million. The EITC, which provides tens of thousands of private school scholarships to students in need, is a pillar of school choice in Pennsylvania. Thanks to the Turzai amendment, $75 million in tax credits would be available for K-12 scholarships, $37.5 million for educational improvement organizations, and $12.5 million for pre-K scholarships.
A large EITC increase would be welcome news, and it is one of the best aspects of HB 530.
On the other hand, the bill increases payment deductions that districts may claim when sending funds to cyber charters. The exact magnitude of this funding cut is unclear, but some cyber school administrators suggest it could reach as high as $27 million per year. These cuts, while less severe than earlier versions of HB 530, are particularly punitive given that spending for traditional public school continues to grow on autopilot.
Additionally, previous iterations of HB 530 included direct pay language for cyber charters, which would ensure cybers receive funding from the state—rather than being stuck in limbo waiting for overdue funds from districts. The direct pay provision was amended out of the bill. (Update: A reader informs us this was removed at the request of cyber schools, who may have changed their view on the subject after last year's budget impasse.)
What else is included in HB 530? Here are some of the notable provisions and regulations:
- A statewide funding commission, composed of lawmakers and school administrators, tasked with making recommendations about how charter schools are funded.
- Clarification that cyber schools may utilize in-person instruction for students with special needs.
- Increased financial disclosure regulations for charter school administrators.
- Increased regulations on charter school debt payment.
- A standardized application will be created by the Department of Education for charter applicants and charters requesting renewal.
- Expanded initial charter terms from three to five years, and renewal terms from five to ten years.
- School districts, intermediate units, and public universities must provide cyber charters with reasonable access to facilities for the purpose of administering standardized tests.
- Clarifies that charter schools are not subject to caps on enrollment.
- Charter schools are granted the right of first refusal to purchase or lease unused public school buildings.
- Allows two or more charter schools to consolidate into a “multiple charter school organization.”
- Expands the size of the Charter School Appeal Board.
- Limits the amount of funding charter schools may hold in unassigned reserve funds, and requires that funds in excess of these limits be refunded to school districts. This provision is notable, given the massive reserve funds that many school districts have accumulated.
Although aspects of the law will be welcome news for charter schools, such sweeping reforms may have been better considered in smaller pieces of legislation, rather than one comprehensive bill. The EITC increase, however, is unquestionably a terrific development.
HB 530 is expected to be voted in the House later today, at which point it will still need to pass the Senate.
Let’s talk for a moment about rainy days—specifically, the need to save funds to spend on one. Several school board administrators and lobbyists have taken issue with CF’s searchable, sortable database of school district fund balances, showing public schools are sitting on over $4 ...