1 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

2 FRAMEWORK FOR EDUCATION POLICY Governance Standards (Expectations) Assessment (How are we doing) Consequences Educational Capacity Education Finance Alignment

3 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

4 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

5 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 : 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

6 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

7 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

8 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 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

9 PENNSYLVANIA HISTORY 1971: State income tax established : State reimbursement at 54% 1977: Personal income valuation becomes a factor in determining district aid ratio (40%) : State reimbursement averages 46% per year 1982: All districts held harmless plus $72 million supplement for “Equalized Supplement for Student Learning (ESSL)

10 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

11 PENNSYLVANIA HISTORY 2002 Rendell Campaign Budget Debate Accountability Block Grants in 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

12 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.)

13 SUBSIDY PLUS “ADD-ONS” Poverty Density, Low-density Sparsity “Hold Harmless” Transportation Special education

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)

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)

16 PUBLIC K-12 SPENDING Amount Rank Amount Rank Per Pupil Amounts for Current Spending US $8, $5, PA 10,552 8 th $6,050 6 th Source: US Census Bureau April 2007

17 SO WHAT’S THE PROBLEM?

18 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”

19 GOAL OF 50% STATE SHARE ABANDONED (1983) STATEWIDE ED FUNDING FORMULA ABANDONED (1991)

20 SPECIAL EDUCATION FUNDING State paid 100% excess cost until 1991 New formula as of Assumes 1% and 15% incidence rates No consideration of district costs or wealth In , more than $1 billion non-reimbursed

21 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 , state will pay up to 30% Cyber charter schools

22 COST DRIVERS Retirement Costs Health Care Costs Construction Task Force on School Cost Reduction

23 STATE/LOCAL SHARES for Elementary/Secondary Public Education State Share Local Share PA National PA National % (47.0) 56.2% (43.9) % (47.1) 56.1% (43.9) % (49.0) 55.8% (42.7) % (49.4) 55.3% (42.8) % (49.9) 56.3% (43.0) % (49.8) 55.8% (43.1) % (49.5) 55.8% (43.6) % (49.0) 55.5% (44.4) % (48.8) 55.4% (44.8) % (48.1) 54.8% (45.5) % (47.5) 54.8% (46.0) % (45.9) 54.5% (47.6) % (46.4) 54.2% (47.0) % (47.3) 53.3% (46.2) Source: US Census Bureau April 2007

24 PUBLIC K-12 REVENUE PER $1,000 PERSONAL INCOME Source: US Census Bureau April Amount Rank US - Total$ $ PA - Total$ th $ th US Local $ $ PA Local- $ th $ th US State $ $ PA State- $ th $ th Differences to 100% come from federal sources. Source: US Census Bureau.

25 STATE FUNDING APPROPRIATED PER STUDENT Source: US Census Bureau April State $ per pupil RankState $ per pupil RankState $ 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, ,473 3,186 5,311 3,026 4,196 3,855 2,999 4, ,661 2,775 4,137 2,516 4,060 3,290 2,228 3,

26 RESULT: BURDEN ON LOCAL PROPERTY TAXES Total K-12 State-Local K-12% from wide RevenuesProperty Taxes Prop T US$488,452,878$138,562, % PA $21,519,566 $9,442, % in ooo’s Source: US Census Bureau April % Difference = more than $3.335 billion/year

27 RESULT: INEQUITY FOR STUDENTS ACROSS PA Great Inequity for Students Among 501 Districts In , “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

28 RESULT: INEQUITY FOR TAXPAYERS ACROSS PA Great Discrepancies in Local Effort and Resultant Burden on Local Taxpayers

29 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

30 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?

31 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

32 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

33 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

34 PRINCIPLES OF A SOUND STATE EDUCATION FINANCE SYSTEM Equity Adequacy Accountability Efficiency Predictability

35 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.

36 ADEQUATE FOR WHAT? Expectations for Student Performance Established by PA’s Academic Standards The Expectations of No Child Left Behind Law and Related Policies

37 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

38 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

39 Key Issues Should all children in PA have a “fundamental right” to a quality public education?

40 Key Issues What is “student success”

41 Key Issues Does Money Matter?

42 Key Issues Who should pay for the implementation of No Child Left Behind?

43 Key Issues State Mandates? Who Should Pay?

44 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?

45 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?

46 Key Issues Tension of Local Control of Funding vs. State Requirements/Conditions attached to some/all of the Funding

47 Key Issues 501 School Districts Structural Consolidation? Functional Consolidation?

48 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?

49 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?

50 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

51 Key Issues ACCOUNTABILITY For what? How do we measure? Who is held accountable? By Whom? What are the Consequences

52 Key Issues RESPONSIBILITY Will Governor Rendell and the members of the General Assembly accept responsibility to fix this problem?

53 FOR MORE INFORMATION Ronald Cowell The Education Policy and Leadership Center