THE EVIDENCE-BASED MODEL FOR SCHOOL FUNDING SENATE BILL 1 THE EVIDENCE-BASED MODEL FOR SCHOOL FUNDING Ensuring equitable funding to help  all students succeed. What does an equitable system do?  1.  It takes equity into account in the calculation of adequacy. In other words, an equitable system takes into account the different needs of diverse learners in order to calculate the cost of providing all students with a high quality education. 2. An equitable system takes into account the varying resources communities are able to provide from local resources, recognizing vast disparities in property wealth mean that some districts are able to contribute more than others. 3. An equitable system will close funding gaps, on average, between low-income and non low-income students, and keeps them closed. 4. Provides a long-term solution that works for at least the next ten years. (not a stop-gap solution or a formula with a shelf-life of a couple years, but a system that will continue to produce consistently equitable outcomes for an extended period of time.

OVERVIEW Yesterday, Governor issued an Amendatory Veto of SB1 SB1 is the evidence-based model and was outcome of years of work, starting with Vision 20/20 Governor’s AV made significant changes to SB1, many of which undermine key parts of the evidence-based model Today’s webinar we will take you through the provisions of SB1, what the Governor changed, and procedurally what happens next

HIGHLIGHTS OF SB1 The new formula ties school funding to those evidence-based best practices the research shows enhance student achievement in the classroom.    Each school district is treated individually, with an Adequacy Target based on the needs of its student body. The greater the student need, the higher the Adequacy Target. New dollars go to the neediest districts first—those furthest from their Adequacy Target.  This will close the gaps in funding that exist in our current system. SB1 treats students in Chicago the same way it treats students in every other school district in the state by getting rid of Block Grants and reconciling pension payments. No district loses money. No exceptions. The starting point is the amount of funding the district has this year.  All new state funding going forward is on top of what districts currently receive.  Provides a long-term fix for our state’s worst-in-the-nation school funding formula.

80% of Districts Are Below Adequacy… New funding is required to get to adequacy Therefore, no district should lose funding As you can see,CPS is similarly far from adequacy to many downstate districts.

AMENDATORY VETO UNDERMINES EVIDENCE-BASED MODEL IN SB1 Changes Adequacy Target Removes protection for normal pension cost shift Caps regionalization factor Freezes costs at 2017 levels Modifies Local Contribution Skews calculation of local wealth, penalizing TIF and PTELL districts Affects Base Funding Minimum/Hold Harmless Moves from per district hold harmless to per pupil in 2020-2021 school year Reduces Equity in Distribution of Funding Removes minimum funding level which drives resources to neediest districts in low state funding years Negatively Impacts Students in Chicago Public Schools Cuts $200 million in existing funding from Chicago Public Schools Removes CPS unfunded liability credit from Local Capacity calculation Pays CPS Normal Pension Costs outside school funding formula

Overview Of The Model HOW DOES SB1 WORK? ADEQUACY TARGET How much does providing high quality education cost? 100% of Adequacy Target 2. PERCENT OF ADEQUACY How well-funded is the district? LOCAL CAPACITY How much can the district contribute? BASE FUNDING MINIMUM How much does the state currently contribute? The Evidence Based Model has been used as the basis for the development of a potential solution to the problem of inequitable funding in Illinois. The EBM is used to calculate the cost of a high-quality education, (research-based interventions that have a positive impact on student progress). The model has been used as the basis of funding models through-out the country. (Wyoming, Arkansas, Texas, North Dakota) It provides the basis for the distribution methodology being developed in Illinois. How does the model work? Go through 4 steps On first step, important to note that the dollar amounts for the adequacy target are progressive, as we saw in the bar graphs, NOT equal, but here we represent 100% of adequacy, rather than those dollar amounts GAP TO ADEQUACY District 1 District 2 District 3 3. DISTRIBUTION FORMULA How is new money from the state distributed?

STEP 1 Calculate Cost of 27 essential elements IEP STEP 2 Apply essential elements to individual districts based on demographics IEP Before we can equitably fund education, we need to calculate how much it actually costs. EBM does this in 3 steps: Step 1: Identifies 27 research-based activities that contribute to cost of education Some elements only apply to specific students, such as low-income students, English learners and students with special needs Step 2: Calculates Adequacy Target based on district demographics Step 3: Adjusts Adequacy Target for regional wage differences The more high-need students a district serves, the greater the cost of its Adequacy Target. Enrollment English Learners Special Needs Low-Income STEP 3 Adjust salary-based elements for regional wage differences = DISTRICT ADEQUACY TARGET

SCHOOL FUNDING COMPONENTS Calculating Adequacy GOVERNOR’S AV SB1 Pension Costs Shift Protection. SB1 provides security that the Adequacy Target will reflect normal pension costs as districts become responsible for them Costs Adjust Over Time. Adjusts salaries to keep pace with inflation so funding reflects reality for districts. Adjusts for Regional Wage Differences. Includes a floor so that downstate districts can compete for and retain high quality educators. No Protection for Pension Cost Shift. No accommodation in Adequacy Target for future normal pension cost shifts to school districts Costs Frozen in Time. Does not adjust salaries for inflation. Does not create an accurate accounting of cost of Adequacy. Caps regionalization. This would hurt districts in high cost areas by artificially deflating salary numbers. Key takeaway: undermines the long-term stability of the system and the very definition of adequacy For Regionalization: The regionalization cap would reduce the adequacy target for 313 districts. This includes every district in Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry, and Will counties.

Local Capacity Reflects Local Resources That Support Education To calculate how much a community can contribute to funding from local property taxes the model uses a Local Capacity Target (LCT). The LCT is the dollar amount a district would ideally contribute towards its Adequacy Target, based on a comparison of all districts in the state. Districts With Higher Property Wealth Are Expected To Contribute More

Local Capacity Calculation SCHOOL FUNDING COMPONENTS Local Capacity Calculation GOVERNOR’S AV SB1 Reflects Local Funds Districts Can Access. PTELL/ Tax Caps limit local funds districts can raise. SB1 uses only the taxes districts can access. All Property Wealth is Included, Even if Districts Can’t Access It. Taxes on a district’s full EAV are counted, even if the district doesn’t receive those dollars because of TIFs, PTELL or tax caps. Key takeaway—any tax capped district or any district that has TIFs will be penalized. The formula will assume you have local tax revenue that you don’t, and so you will qualify for less in state funding. At the same time, you don’t have access to the local resources. This is the same “double-whammy” that was fixed in the old GSA formula, but that is being taken away. A big step backward. This change impacts districts across the state. Many downstate communities use TIFs and now they are going to be penalized for this. Same for tax capped districts.

The Base Funding Minimum Ensures No District Loses Money Every district keeps the amount of state funding it received in FY17. This is the initial Base Funding Minimum. Going forward, no district will receive less state funding than it received the prior year. Each new dollar a district receives from the state in Year 1 becomes a part of its Base Funding Minimum in Year 2 and so on. If the state does not appropriate enough to cover the cost of the Base Funding Minimum, then funds are first removed from the Base Funding Minimum from the most adequately funded districts.  If that still isn’t enough, then further reductions are on a per pupil basis for all districts.

Base Funding Minimum: Hold Harmless SCHOOL FUNDING COMPONENTS Base Funding Minimum: Hold Harmless GOVERNOR’S AV SB1 District Hold Harmless. Districts are held harmless through the Base Funding Minimum (BFM). Funding will not go down year-over-year unless the appropriation is not enough to cover the BFM. Switch to Per Pupil Hold Harmless. Districts are held harmless through the BFM until the 2019-2020 school year. In 2020-2021 school year, shifts to per pupil hold harmless. Districts with dropping enrollment will lose funding, even if they are inadequately funded Districts that lose enrollment –and there were over 200 of them just last year alone—will see the funding cut in the future, even though we know districts won’t be adequately funded. Why should a district lose dollars due to declining enrollment when the dollars they have aren’t even adequate for the students that remain? The formula already took this into account—the adequacy target overall will drop. No need to double-penalize districts.

Minimum Funding Level: Equity for Neediest Districts SCHOOL FUNDING COMPONENTS Minimum Funding Level: Equity for Neediest Districts GOVERNOR’S AV SB1 More Funding for Neediest Districts. Automatically shifts more money to Tier 1 (neediest) districts if the state doesn’t appropriate above a minimum funding level. Ensures the most equitable distribution of funds. Eliminate Protections for Neediest Districts. Allows more funding to flow to less needy districts (Tier 2) if the state doesn’t provide minimum funding Key takeaway—this provision protected the neediest districts in a low state funding environment and now that protection is gone

$2.62B in Unfunded Liability Illinois taxpayers pay normal costs of pensions for all districts except Chicago Public Schools, but CPS taxpayers contribute to TRS funds that go to the rest of the state $2.62B in Unfunded Liability When the state underfunds the system, local districts have to be more reliant on local property taxes in order to make up the gap. $896M in Normal Cost $221M under SB1 $12M in Normal Cost

SCHOOL FUNDING COMPONENTS CPS Components GOVERNOR’S AV SB1 Sunsets CPS Block Grants. Requires CPS to submit claims like all other districts. Ensures no district loses funding by incorporating portion of block grant into the Base Funding Minimum. Recognizes CPS has to pay unfunded liability. Local dollars that go to pensions can’t also go to classrooms. SB1 subtracts this amount from CPS’ Local Capacity. CPS Receives Normal Cost. It is included in the Base Funding Minimum. Cuts $203 million in existing funding from CPS. Redistributes this funding to other districts. Removes the credit for CPS’ unfunded liability from the calculation of their Adjusted Local Capacity. CPS will continue to divert classroom dollars to pensions. CPS Receives Normal Cost. It is funded through a continuing appropriation like TRS. Costs $221M above what is included in the budget

WHAT HAPPENS NEXT Key additional point: This timing means that districts need to anticipate for missing one and likely two state aid payments. We are also likely to see new modeling from ISBE on the Governor’s AV. We want to make sure everyone understands the underlying changes and does not get confused as more numbers emerge.

What does an equitable system do? SB1 ALIGNS WITH THE FOLLOWING CORE VALUES. THE GOVERNOR’S AV DOES NOT. Recognizes individual student needs Accounts for differences in local resources Closes funding gaps & keeps them closed Provides a stable, sustainable system that gets all districts to adequacy over time. #norednumbers What does an equitable system do?  1.  It takes equity into account in the calculation of adequacy. In other words, an equitable system takes into account the different needs of diverse learners in order to calculate the cost of providing all students with a high quality education. 2. An equitable system takes into account the varying resources communities are able to provide from local resources, recognizing vast disparities in property wealth mean that some districts are able to contribute more than others. 3. An equitable system will close funding gaps, on average, between low-income and non low-income students, and keeps them closed. 4. Provides a long-term solution that works for at least the next ten years. (not a stop-gap solution or a formula with a shelf-life of a couple years, but a system that will continue to produce consistently equitable outcomes for an extended period of time. SB1 meets these four requirements for an equitable funding system, and does so while ensuring that no district loses funding.