Transportation Funding Formula Study

Derek Graham, Section Chief

DPI Transportation Services

Background:Current Funding Formula Origin

• 1989 Legislative Session

“…the Department shall report its final recommendations for achieving improved efficiency and economy in pupil transportation operations to the 1990 Session of the General Assembly. These recommendations shall include incentives for encouraging cost-effective operations in local school administrative units as provided in the General Statutes.”

Transportation Funding

Local Control Accountability• Block Grant

Allotments:Eliminated Line Item Allotments – Fuel– Salaries– Tires/Repair Parts

• Flexibility to Use Funds where needed

• Block Grant based on a Budget Rating– Expenditures– Students

Transported– Buses Operated

• Budget Rating is an indication of Efficiency

1990 - 1992

Tools Provided

Transportation Information Management System (TIMS)

Budget Rating Simulator

1990 - 1992

Problem: The formula was not fully funded

Even those counties with 100% ratings were shorted because DPI did not have enough funds to allot what the formula required

1992 - 1995

General Assembly Actions 1995

• Review of Transportation Funding

• Study of Caswell, Chatham and Cumberland Counties– Reports/Recommendations given to counties

• Regional Discussion Sessions for Superintendents, Finance Officers, Transportation Directors– What Works? / What Doesn’t?

1995

Regional Discussion Sessions

• RESULTS:– Formula Does Promote Efficiency– Flexibility is Good– Overall Funding is a major problem– E.C. Contract Transp. Costs Beyond Control– Modifications to formula math to improve equity

*** *

*

1996

2005 General Assembly Action* DPI shall contract for a study of the current allotment

formula for school transportation. The study shall be conducted by an independent consultant. The consultant shall consider whether:

(i) the current formula sufficiently encourages the efficient and effective use of school transportation funds by urban and rural school systems,

(ii) the formula is adequately and equitably meeting the needs of school systems, and

(iii) the formula is appropriate in light of the Leandro litigation.

The consultant shall also propose options for reducing the severe and growing disparity in funding that exists under the formula among local school administrative units.

2005

Contract for Study of the Transportation Formula

Management Partnership Services (MD)

TransTech Management (NC)

Project team included:

• Staff with transportation fleet/funding expertise, but not with the NC model

• Staff familiar with the development and mathematics of the existing formula

• Staff dedicated to gathering LEA input

Recommendations

This report provided by Management Partnership Services includes recommendations for the State Board of Education to forward to the General Assembly

North Carolina Department of Public Instruction

Funding Formula RecommendationsFunding Formula

Recommendations

Management Partnership Services, IncMay 2006

Project ObjectivesProject Objectives

Meet with & allow administrators from all LEAs to provide feedback on formula

Identify key issues expressed by LEAs

Evaluate formula effectiveness in creating efficient transportation in NC

Recommend equitable funding process that retains efficiency incentives

Project MethodologyProject Methodology

Survey LEAs LEA interviews/ meetings Test site characteristics Sensitivity analyses Trend analyses Simulation scenarios

LEA Input:LEA Input:

Is not equitable – favors larger LEAs Provides inadequate overall State funding Permits base year & local funding to perpetuate

advantage to “have” LEAs Limits options to improve for Small LEAs Inadequately adjusts for (their) key site

characteristics Doesn’t guide LEAs on how to improve

The current formula …

Other comments: Change, but don’t replace the formula Funding objectives & general operation understood

Step 1: Improve Formula Effectiveness

Step 1: Improve Formula Effectiveness

A. Retain the basic funding mechanism

B. Emphasize good service & safety outside of formula

C. Upgrade statistical and data recovery tools

A. Retain Funding MechanismA. Retain Funding Mechanism

Allocation process influences behavior: Resulted in improved efficiency No evidence of bias Provided for an effective statewide

student transportation system A complex problem requires a complex

solution

Current formula operationally sound

Buses Have Been Used More EfficientlyBuses Have Been Used More EfficientlyBuses per 100 ADM

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

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ses

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Early Years

Later Years

The formula has reduced buses per 100 ADM by 28%.

Early Trend: 1.38 buses per 100 students

Later Trend: 0.99 buses per 100 students

…Leading to A Reduction of 675 Buses…Leading to A Reduction of 675 Buses

School Bus Fleet Size

11,000

11,500

12,000

12,500

13,000

13,500

14,000

14,500

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Early Years

Later Years

Projected Trend: 14,110 Buses

Later Trend: 13,435 Buses

Efficiency incentives resulted in North Carolina operating 675 fewer buses for the past 14 years.

Formula Has Also Reduced MilesFormula Has Also Reduced MilesMiles per ADM

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Mile

s p

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Later Years

Early Years

Early Trend: 158 Miles

Later Trend: 124 Miles

The formula has reduced miles per ADM by 27%.

Rating Changes: FY1997 – FY2004Rating Changes: FY1997 – FY2004

Average Budget Rating by LEA Size

89%

90%

91%

92%

93%

94%

95%

96%

97%

98%

99%

100%

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tin

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Smallest 10 LEAs Median 10 LEAs Largest 10 LEAs Linear (Smallest 10 LEAs) Linear (Largest 10 LEAs)

Change in Costs (Uncapped)Change in Costs (Uncapped)Cost per Transported Student 1997 - 2005

4.8% 4.7%

10.9%

7.2%

3.5%3.0%

3.8%

12.1%

$-

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

$400.00

$450.00

1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Cost per Student Y-Y Change (%)

Average Increase: 5.5%

(vs. inflation 2.8%)

Average Increase: 5.5%

(vs. inflation 2.8%)

Resource Changes: FY1997 – FY2005Resource Changes: FY1997 – FY2005

Change (%) OverallTotal Costs 61.8%Active buses 4.9%Transported Students 5.5%Enrolled Students 12.0%Miles 20.8%Buses per 100 students -0.6%Miles per bus 13.2%Pct. Transported Students -6.2%

B. Emphasize Good Service & Safety B. Emphasize Good Service & Safety

Publish performance results by LEA

COSTSERVICE

Ride time distribution Earliest pickup, latest (PM) drop-off Bus accidents per thousand miles Traffic citations per driver Annual fatalities/ injuries Service & safety should not

be traded down for cost

Ride Time Comparison: Ashe CountyRide Time Comparison: Ashe County

Ashe County Ride Times: 1997 & 2005Runs - 1997: 69 2005: 53

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

0:15 0:30 0:45 1:00 1:15 1:30 1:31

Ride Times (less Than/ Between)

Pe

rce

nt

of

To

tal B

us

Ru

ns

1997 2005

Factoring Service and SafetyFactoring Service and Safety

Collect service indicator data from each LEA.

Adjust service indicators for site characteristics

Compute expected level of performance for each LEA.

Compare with actual level of performance. Test for statistical significance of

differences

Compare performance on equitable basis

C. Upgrade Administrative ToolsC. Upgrade Administrative Tools

Utilize commercial software for statistical and frontier computations

Upgrade simulator Facilitates better, faster analyses Improved reporting capability Improved audit capability

Better support for DPI management

Step 2: Improve Formula EquityStep 2: Improve Formula Equity

A. Modify calculation; “Frontier Model”

B. Standardize site characteristics to improve clarity for LEAs

C. Reduce budget rating buffer and continue to limit the eligibility of certain local $$

D. Treat busing for non-traditional programs consistently with State education priorities

A. Modify Calculation “Frontier Model”

A. Modify Calculation “Frontier Model”

Eliminates “Alley Anomaly”

Current model: LEAs can increase local $$ without a resulting funding reduction

Frontier Model limits maximum funding relative to most efficient LEAs

Method adjusts costs and buses; helps LEAs to determine cost and number of buses needed to be efficient

Alley Illustration: “Removing the Slack”Alley Illustration: “Removing the Slack”

Adjusted Buses/Student

Adjusted Cost/Student

O

F

A

T Frontier Model limits highest cost per student = most bus

efficient LEA (“T”)

Most (bus) efficient LEA sets $$ maximum

B. Standardize Site CharacteristicsB. Standardize Site Characteristics

Student density largest impact Circuity & distance to school next Not necessary to re-run variables each

year Predictable site characteristics improve

clarity for LEAs Frontier formula site characteristics identify

94 – 95% of influence on resource (inputs)

Recurring factors simplify calculation

Budget Rating

Site Characteristic Max Impact Min Max

Pupil Density Using DOT Road Miles 17.8% 82.2% 100%

Third Quartile of Circuity 11.3% 86.9% 98.2%

Third Quartile of Distance to School 9.1% 85.5% 94.6%

Elevation 7.0% 87.6% 94.6% Proportion of Pupils who are Exceptional Children

5.8% 88.8% 94.6%

Key Site CharacteristicsKey Site Characteristics

C. Reduce Budget Rating Buffer & Limit Local $$ Infusion

C. Reduce Budget Rating Buffer & Limit Local $$ Infusion

Problem: Efficient LEA using local $$ can get an infinite stream of additional State funding

Continue to limit eligibility of certain local $$ Some buffer needs to be preserved Reducing 10% buffer to 5-6% and

maintaining some local $$ cap will mitigate the issue

MPS continuing evaluation

Decide on Local $$ Inclusion

Simulation : Impact of Local $$ and Buffers Simulation : Impact of Local $$ and Buffers

High Wealth LEA (Squares) Starts with $15M, Annual Local Contribution = $3M, Various Buffers

0.0

2.0

4.0

6.0

8.0

10.0

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18.0

0 1 2 3 4 5 6 7 8 9 10

Year

Sta

te F

un

din

g (

Mil

lio

ns

$)

Low Wealth District 10% 8% 6% 4% 2% 0%

High wealth LEA, making $3M annual local contribution. Buffers 0% – 10%

Low wealth LEA, making no annual local contribution

Caps on Local Funding have Contained State Funding Levels

Caps on Local Funding have Contained State Funding Levels

1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 Total

=Total ExpendituresCUMBERLAND 5,054,105 5,048,338 5,660,410 6,386,862 6,894,632 7,286,217 7,481,475 7,829,542 8,893,020 60,534,600 WAKE 16,495,716 17,366,548 18,511,747 23,161,754 25,097,002 26,399,110 27,813,014 29,154,243 32,787,943 216,787,077

Eligible State ExpendituresCUMBERLAND 4,959,663 5,403,083 5,513,627 6,107,335 6,573,018 6,796,911 7,213,577 7,575,976 8,677,640 58,820,830 WAKE 14,672,308 17,991,755 19,722,759 22,041,283 23,934,641 24,658,175 26,955,647 28,791,093 31,868,642 210,636,302

+Eligible Local Expenditures (Not capped)CUMBERLAND 94,442 (9,559) 259,479 330,422 472,079 499,173 291,138 269,722 215,380 2,422,276 WAKE 2,464,745 1,355,763 1,202,302 3,841,605 3,510,713 3,835,001 4,486,823 7,093,408 4,822,834 32,613,194

(-)LOCAL EXCESS CAPPED 50,000 50,000 200,000 200,000 200,000 200,000 50,000 200,000 150,000 CUMBERLAND - 345,186 112,696 50,895 150,465 9,867 23,240 16,156 - 708,506 WAKE 641,337 1,980,970 2,413,313 2,721,134 2,348,352 2,094,066 3,629,455 6,730,258 3,903,534 26,462,418

D. Non-Traditional ProgramsD. Non-Traditional Programs

Political, not a logistical decision

RESOURCEDEMANDRESOURCEDEMAND

SITECHARACT.

SITECHARACT.

COSTCONSTRAINTS

PROGRAMNEEDS

A. Include programs if State wants to fund Federal, local mandates; Leandro

Educational priorities of State

B. Keep as is if to remain a local choice Formula treats LEA programs

appropriately if funded locally

Presents some equity issues (Rich v. Poor)

NCLB funded separately

A: Include in FundingA: Include in FundingImplications of Decision

Decision should conform to other areas of educational funding

Specific programs funded is a management choice

A: Include in Funding, cont’d.A: Include in Funding, cont’d.

Programs to be funded should be factored into funding model; or

Fund outside of formula during transition period Develop site characteristics during transition Integrate in formula once data history developed

Program start up may require State $$ infusion Low-wealth districts may need $ infusion Wealthy LEAs: Factor treatment of infused local $$ Do not penalize LEAs choosing only traditional

programs

B: Retain As IsB: Retain As IsImplications of Decision

State pays only for basic transportation Current formula with recommended changes

treats costs appropriately Decision implies programs funded locally Further analysis: Adjust influence of existing

non-basic transportation for site characteristics

SummarySummary1. Modify calculation: Basic formula design has achieved

desired result re: efficiency. Site characteristics can be standardized.

2. Resolve local funding issue: Unintended increased result from infusion of local $$ by LEAs and the rating buffer

3. Consider service factors: Effort to increase rating may be resulting in service being traded for efficiency

4. Decide on treatment of non-traditional programs: Decision based on educational priorities and political considerations

5. Upgrade administrative tools: Newer statistical applications will simplify calculation process and funding administration.

Transportation Funding Formula Study

Derek Graham, Section Chief

DPI Transportation Services