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PENNSYLVANIA’S K-12 EDUCATION FUNDING SYSTEM

presented to

Education Finance Symposium

November 15, 2007 by

Ronald Cowell, President

The Education Policy and Leadership Center

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FRAMEWORK FOR EDUCATION POLICY

• Governance• Standards (Expectations)• Assessment (How are we doing)• Consequences• Educational Capacity• Education Finance• Alignment

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WHY STATE FUNDING FOR EDUCATION

• State Constitutional Mandate for General Assembly to Provide for System of Schools

• State Incentive for local government to fund schools

• State funding to reduce local taxes

• Need for Equity

• Need for Adequacy

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PENNSYLVANIA HISTORY

• 1776 State Constitution: “A school or schools shall be established in each county by the legislature, for the convenient instruction of youth….”

• 1790 State Constitution: “The legislature shall, as soon as conveniently may be, provide, by law, for the establishment of schools throughout the State, in such manner that the poor may be taught gratis.”

• 1831: Common School Fund established with $100,000 per year available

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PENNSYLVANIA HISTORY

• 1834: Free School Act required each municipality to establish an elected school board; state funding if matched at least 2:1 by county dollars

• 1835-1897: State school funding to counties based on number of taxable inhabitants in county

• Attempt in 1863 to base funding on number of children failed because of difficulty in counting children in attendance

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PENNSYLVANIA HISTORY

• 1874 PA Constitution: “The General Assembly shall provide for the maintenance and support of a thorough and efficient system of public schools, wherein all the children of this Commonwealth above the age of six years may be educated, and shall appropriate at least one million dollars each year for that purpose.”

• 1895: PA’s first compulsory attendance law• 1897: Number of children ages 6-16 added

to state funding formula

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PENNSYLVANIA HISTORY• 1923: First effort to use state funding for

equalization • 1930 to 1950: State aid increases from 17% to

40% of costs• 1947: General Assembly creates State Tax

Equalization Board to determine true market values of real property in each school district

• 1949: New School Code - State aid based upon “district teaching units” X fixed dollar figure established by Legislature X district’s standard reimbursement fraction

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PENNSYLVANIA HISTORY• 1957: State aid formula begins to consider

“actual instructional expense (AIE)”• Mid 60’s-1983: Statutory goal that the state

pay 50% of the statewide district instructional costs

• 1968: For 1966-67 school year and thereafter, State began to pay on basis of “weighted” pupils and local wealth; state also began to make additional payments for children in poverty, density, sparsity, and homebound instruction

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PENNSYLVANIA HISTORY

• 1971: State income tax established• 1974-75: State reimbursement at 54%• 1977: Personal income valuation becomes a

factor in determining district aid ratio (40%)• 1977-1980: State reimbursement averages

46% per year• 1982: All districts held harmless plus $72

million supplement for “Equalized Supplement for Student Learning (ESSL)

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PENNSYLVANIA HISTORY

• 1983: Equalized Subsidy for Basic Education (ESBE) enacted; includes “Factor for Educational Expense” (FEE); removes 50% funding requirement

• 1991: Special Education funding changed• 1992: ESBE abandoned• 1993 and 1994: Modest “foundation”

funding guarantee included in state funding• Ridge/Schweiker Administration

Vouchers & Charter School Funding

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PENNSYLVANIA HISTORY

• 2002 Rendell Campaign• 2003-04 Budget Debate• Accountability Block Grants in 2003-04• Act 72 of 2004• Special Session Act 1 of 2006 on Property

Tax Relief• Current efforts to cap state spending• 2007 Context: Requirements of State

Standards and NCLB

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KEY ELEMENTS OF 80’S ESBE FORMULA

WADMs (Number of Students)X

Aid Ratio (Relative Wealth of District)X

FEE (Cost Factor)=

Basic Subsidy to the District+

Other Factors (poverty, density, etc.)

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SUBSIDY PLUS “ADD-ONS”

• Poverty

• Density, Low-density

• Sparsity

• “Hold Harmless”

• Transportation

• Special education

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2007-08 EDUCATION BUDGET

• Basic Ed Subsidy - $4.951 billion (+617 million)

• Accountability Block Grants - $275 million• Transportation - $507 million (even)

• Special Education - $1.010 billion (+27 million)

• Social Security - $494 million (+20 million)

• School Employees’ Ret - $451million (+68 m)

• Higher Education - $1.604 billion (+41 million)

• PHEAA - $451 million (even)

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2007-08 EDUCATION BUDGET

• Pre-K Counts - $75 million (all new)

• Classrooms for the Future – $90 Million (+70 m)

• TOTAL BASIC & LIBRARIES - $9.384 billion

(Increase of $542 million)

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PUBLIC K-12 SPENDING

2004-05 1991-92 Amount Rank Amount Rank

Per Pupil Amounts for Current Spending

US $8,701 --- $5,001 ---PA 10,552 8th $6,050 6th

Source: US Census Bureau April 2007

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SO WHAT’S THE PROBLEM?

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INCREASING EXPECTATIONS AND CONSEQUENCES

for STUDENT ACHIEVEMENT• State Academic Standards Adopted• NCLB (All proficient by 2014)• State Requirement to Show Proficiency

for Graduation beginning in 2004• Implications for Higher Ed/Employment• Governor’s Commission on College and

Career Success Recommendations• Future State Graduation Requirements• Globalization and “Flat World”

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GOAL OF 50% STATE SHARE ABANDONED (1983)

STATEWIDE ED FUNDING FORMULA ABANDONED

(1991)

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SPECIAL EDUCATION FUNDING

• State paid 100% excess cost until 1991

• New formula as of 1991-92• Assumes 1% and 15% incidence rates• No consideration of district costs or wealth• In 2005-06, more than $1 billion non-reimbursed

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CHARTER SCHOOLS

* Approved by district or state appeal board• No limit on number in state

• Cost borne by local districts• Law assumes some savings to districts

• Almost half-billion annual cost to districts• Since 2002-03, state will pay up to 30%

• Cyber charter schools

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COST DRIVERS

Retirement CostsHealth Care Costs

Construction

Task Force on School Cost Reduction

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STATE/LOCAL SHARES for Elementary/Secondary Public Education

State Share Local Share PA National PA National

2004-05 35.6% (47.0) 56.2% (43.9)2003-04 35.9% (47.1) 56.1% (43.9)2002-03 36.7% (49.0) 55.8% (42.7)2001-02 37.4% (49.4) 55.3% (42.8)2000-01 37.3% (49.9) 56.3% (43.0)1999-00 37.9% (49.8) 55.8% (43.1)1998-99 38.3% (49.5) 55.8% (43.6)1997-98 38.7% (49.0) 55.5% (44.4)1996-97 39.2% (48.8) 55.4% (44.8)1995-96 39.8% (48.1) 54.8% (45.5)1994-95 40.0% (47.5) 54.8% (46.0)1993-94 40.1% (45.9) 54.5% (47.6)1992-93 39.9% (46.4) 54.2% (47.0)1991-92 41.0% (47.3) 53.3% (46.2)

Source: US Census Bureau April 2007

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PUBLIC K-12 REVENUEPER $1,000 PERSONAL INCOME

Source: US Census Bureau April 2007

2004-05 1991-92Amount Rank Amount Rank

US - Total $50.27 --- $48.87 ---PA - Total $52.03 19th $49.98 27th

US Local $22.08 --- $23.25 --- PA Local- $29.26 5th $27.24 13th

US State $23.62 --- $22.43 ---PA State- $18.54 40th $20.25 36th

Differences to 100% come from federal sources. Source: US Census Bureau.

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STATE FUNDING APPROPRIATED PER STUDENT

Source: US Census Bureau April 2007

2004-05 1997-98 1991-92

State $

per pupil

Rank State $ per pupil

Rank State $ per pupil

Rank

US

PA

DE

MD

NJ

NY

OH

WV

4,774

4,350

7,947

4,320

6,790

6,930

4,674

5,752

---

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3

30

7

6

23

12

3,473

3,186

5,311

3,026

4,196

3,855

2,999

4,485

---

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4

34

8

16

35

6

2,661

2,775

4,137

2,516

4,060

3,290

2,228

3,603

---

18

4

22

5

9

33

6

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RESULT: 2004-05 BURDEN ON LOCAL PROPERTY TAXES

Total K-12 State- Local K-12 % fromwide Revenues Property Taxes Prop T

US $488,452,878 $138,562,170 28.36%

PA $21,519,566 $9,442,884 43.88%

in ooo’s

Source: US Census Bureau April 2007

15.5% Difference = more than $3.335 billion/year

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RESULT: INEQUITY FOR STUDENTS ACROSS PA

Great Inequity for StudentsAmong 501 Districts

In 2005-06, “current expenditures” spending per pupil in Pennsylvania school districts ranged

from $7,420 to $18,445

This means, in an average classroom of 25 students, a gap of almost $275,000 per classroom per year.

Inequitable and Inadequate Resources in a NCLB and Standards-Based Environment with

Equal Expectations for All Students

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RESULT: INEQUITY FOR TAXPAYERS ACROSS PA

Great Discrepancies in Local Effort and Resultant Burden on Local

Taxpayers

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RESULT: INADEQUATE EDUCATIONAL RESOURCES

IN MANY DISTRICTS

• Qualified Teachers• Class Size• Early Ed/Kindergarten Programs• Curriculum• Books, Computers and Materials• Labs, Foreign Languages, Honors/AP

Courses• Facilities not conducive to learning

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TAX RELIEF EFFORTS

• Act 72 of 2004• Act 1 of 2006 Special Session on Property

Tax Relief• Nothing to do with improving education

funding system or meeting the needs of students

• Further limits ability of districts to raise local revenues (referendum)

• What Happens – Failed Referendum?

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ACKNOWLEDGE SOME PROGRESS

• State Funding for Pre-School started in recent years

• Basic Subsidy line item has grown

• Attention to “Foundation” funding

• Accountability Block Grants initiated

• School districts reimbursed 27% for charter school payments

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BUT…..

• State share and state appropriations per student remain far below the national average

• Dependency on property taxes remains, with resultant inequity and inadequacy

• No development of a “system”• Re-negotiating basic elements such as

growth every year• No legacy for Governor Rendell so far

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OTHER ACTIVITY

• Costing-Out Study

• Proposed Statewide Education Finance Reform Commission

• Discussion about TABOR and limits on state spending/taxes

• More Property Tax Relief/Elimination

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PRINCIPLES OF A SOUND STATE EDUCATION FINANCE SYSTEM

• Equity

• Adequacy

• Accountability

• Efficiency

• Predictability

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An ADEQUATE School Funding System will provide and ensure the use

of sufficient funding to establish and maintain

the effective and necessary educational capacity

to provide every student in every school a meaningful opportunity

to accomplish the academic proficiencies for which he or she will be held

accountable.

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ADEQUATE FOR WHAT?

Expectations for Student Performance Established by PA’s Academic Standards

The Expectations of No Child Left Behind Law and Related Policies

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WHAT IS WRONG WITH THE CURRENT PA FUNDING SYSTEM

• PA honors none of these principles• State Share in bottom five in nation• State Appropriations Per Student below

national average• Disproportionate share of state funds are

withheld from poorer districts• Therefore, districts too dependent on Local

Wealth & Property Taxes• Therefore, great Inequity and Inadequacy

among 501 school districts

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WHAT IS WRONG WITH THE CURRENT PA FUNDING SYSTEM

• We have a “Non-System” and there is no attention to development of a statewide “system” of education funding

• State Government has no sense of obligation to students or to honor a commitment to a funding formula

• Annual K-12 Funding is based on political considerations rather than educational

• Advocates must re-negotiate basic funding elements such as growth in enrollments every year

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Key Issues

Should all children in PA

have a “fundamental right”

to a quality public education?

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Key Issues

What is

“student success”

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Key Issues

Does Money Matter?

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Key Issues

Who should pay for the

implementation of

No Child Left Behind?

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Key Issues

State Mandates?

Who Should Pay?

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Key Issues

SBE Costing-Out Study

What are the costs of providing the educational capacity necessary to achieve expectations of NCLB and Pennsylvania’s

academic standards/graduation requirements?

What will be done with the Costing-Out Information?

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POLICY QUESTIONS FOR STATE POLICYMAKERS

• How much state funding?• By what formula will state funding be

distributed?• What conditions will be attached to the

state funds?• What taxing authority will be provided to

generate local revenues?• Targeted for some vs. general for all?• Categorical vs. basic subsidy?

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Key Issues

Tension of Local Control of Funding vs.

State Requirements/Conditions attached to some/all of the Funding

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Key Issues

501 School Districts

Structural Consolidation?

Functional Consolidation?

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Key Issues

How can state funding be used most effectively to level the “playing field” and ensure that adequate/sufficient resources are available to provide

the educational capacity needed for every student to have an opportunity

to be successful?

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Key Issues

How will communities and school boards make decisions that will ensure sufficient resources are

available, and effectively invested, to support the educational

capacity that is necessary and most effective to promote student

achievement consistent with state and local academic standards?

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OPTIONS

• Annual Budgets & Incremental Progress

• Costing-Out Study – Linking Student Success to Costs

• An Independent Statewide Education Finance Reform Commission

• Special Session called by Governor

• Litigation

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Key Issues

ACCOUNTABILITY

• For what?• How do we measure?

• Who is held accountable?• By Whom?

• What are the Consequences

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Key Issues

RESPONSIBILITY

Will Governor Rendell and the members of the General

Assembly accept responsibility to fix this problem?

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FOR MORE INFORMATION

Ronald CowellThe Education Policy and Leadership Center

717-260-9900

cowell@eplc.org

www.eplc.org